How the Real-Estate Fees Verdict Will Affect Home Buyers, Sellers
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What is the main topic discussed in this episode?
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Hey, your money briefing listeners. This is J.R. Whelan. Here at YMB, we're all about bringing you important personal finance and career news to help you make better decisions about your money. But we want to learn more about you. What kind of financial stories would you like to hear on the show? If you're listening on Spotify, look for our poll under the episode description. Or you can send us an email to ymb at wsj.com. That's ymb at wsj.com. Now on to the show. Here's your Money Briefing for Monday, November 6th. I'm J.R.
What verdict did the jury reach against the National Association of Realtors and brokerages?
Whelan for The Wall Street Journal. The real estate world was rocked last week by a historic verdict against some realtors and brokerages regarding commissions and fees. That's likely to change the math in the home buying equation.
There's likely to be some kind of what we call decoupling of the seller's and the buyer's agent's commission. So that in some way, the seller is no longer going to, as a matter of course, offer to pay the buyer's agent's commission up front.
We'll talk to Wall Street Journal reporter Laura Casisto after the break.
How does the current system route seller-paid commissions to buyer agents?
Listen at schwab.com slash washingtonwise.
A jury's decision against the National Association of Realtors and large residential brokerages could mean changes in how much homebuyers and sellers pay in commissions and fees. Wall Street Journal National Legal Affairs reporter Laura Casisto joins me. So, Laura, refresh us for a moment. Tell us about this case and the recent verdict.
What changes could 'decoupling' of seller and buyer agent commissions create?
It's been building for a number of years, and this was a case brought by home sellers in a few Midwestern states against the National Association of Realtors and some national brokerages. And the essence of this case is that the current system for commissions, one in which the seller's agent pays the buyer's agent's commission, is an antitrust violation. It amounts to a collusion, a conspiracy between real estate agents around the country to keep fees high and to hurt consumers.
How might buyers be affected if sellers no longer pay buyer-agent fees upfront?
Now, the NAR says it plans to appeal this decision, but under the current system, when a home is sold, what's the cash flow in terms of fees and commissions paid to brokers?
So the essence of the way that the system works is if I'm listing my home on a multiple listing service, which is the way the vast majority of people advertise their homes, market their homes, if I'm listing my home on most of these listing services, then I have to advertise up front. This is the commission that I sort of as the seller am going to, in effect, pay to the buyer's agent. Essentially, the money flows from the seller to the buyer's agent, and the buyer never actually has to write a check to their own agent.
How is that likely to change?
That is, of course, well, the $1.8 billion question, as they say, right? This is the big question. How is this going to change? And we don't really know yet.
What negotiation solutions are proposed to handle buyer-agent fees if sellers stop paying?
We're waiting to see what a judge might order. So the jury really just found that NAR had violated antitrust law. They kind of determined the size of what the damages that they think are owed, but they didn't get into the sort of nitty-gritty of how could these rules actually change. And so we're waiting to see how a judge might approach that. But the essence of what we're imagining will happen is that there's likely to be some kind of what we call decoupling of the seller's and the buyer's agent's commission. So that in some way, the seller is no longer going to, as a matter of course, offer to pay the buyer's agent's commission up front. And we could see that play in a number of different ways, but that's the essence of what we imagine.
But if a seller can no longer pay a buyer's agent, what kind of position does that put the buyer in?
This has been really at the crux of NAR's defense, certainly from a policy standpoint. They say this is not consumer friendly. This means that essentially you have buyers who are already having to put up money for a down payment, who aren't about to sell their home and get the proceeds from that. You're pushing this cost onto them up front at the beginning of the transaction when they have the least money to play with.
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Chapters
8 chapters
1
What is the main topic discussed in this episode?
0:01–1:03
2
What verdict did the jury reach against the National Association of Realtors and brokerages?
1:03–1:44
3
How does the current system route seller-paid commissions to buyer agents?
1:44–2:32
4
What changes could 'decoupling' of seller and buyer agent commissions create?
2:32–3:01
5
How might buyers be affected if sellers no longer pay buyer-agent fees upfront?
3:01–3:49
6
What negotiation solutions are proposed to handle buyer-agent fees if sellers stop paying?
3:49–4:55
7
How could this ruling impact low-commission real-estate startups and industry innovation?
4:55–6:18
8
What other lawsuits and larger national cases could amplify changes to real-estate commissions?
6:18–8:53
Speakers
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