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The 6% Commission for Home Sales Is Under Attack. Inside the Industry’s Fight to Keep It Alive.

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Illustration by Andrei Cojocaru

More than 3,000 brokers and other real estate industry professionals gathered in Midtown Manhattan last month for the annual Inman Connect New York conference, one of the largest industry gatherings since a Missouri court levied a $1.8 billion penalty against select brokerage firms and the National Association of Realtors, the industry’s top lobbying group.

The verdict has put brokers in an uncomfortable role of pushing to reform the same organization that helps to safeguard their golden goose, an industry-standard 5%-plus commission. The tension was evident throughout discussions at the conference.

NAR, founded in 1908, is part standards body, part Realtor advocate, and part industry lobbyist. But, ultimately, it is NAR’s role as a gatekeeper that has made it one of most powerful trade groups in the country. NAR owns the trademark to the word Realtor, with only dues-paying members permitted to use the title professionally. It sets standards for the regional databases known as Multiple Listing Services, or MLS. In much of the country, real estate brokers have to be a part of NAR to use MLS, making a membership all but required for anyone looking to market a home.

The group has more than 1.5 million members and $119 million in cash, with total assets of $1 billion. It spent $52 million on federal lobbying last year, behind only the U.S. Chamber of Commerce, according to data from OpenSecrets.

NAR has survived decades of disruptive forces, from internet advertising to complex algorithms designed to cut brokers out of the equation entirely. Through it all, real estate commissions have barely budged, even as technology pressured fees in most of the investing world.

In the U.S., the home seller traditionally pays the entire commission, with the buying and selling agent splitting the fee 50-50.

But now the group, and the status quo, seem to be facing its gravest challenge. The Missouri case—a jury verdict found defendants guilty of conspiring to inflate agent commissions—threatens to upend NAR’s role, or even push it toward insolvency.

The trade group has said it would appeal the ruling, but more legal challenges are under way.

News Corp, owner of Barron’s publisher Dow Jones, also owns Move, which operates Realtor.com under an agreement and trademark license with NAR. News Corp declined to comment on NAR and how the business could be impacted by industry changes.

NAR recently asked to consolidate 19 pending suits about buyers’ and sellers’ commissions in the Northern District of Illinois, which it says “has longstanding experience with NAR rules,” or the Eastern District of Texas, which it says has the largest number of defendants.

All the while, the association’s leadership is in disarray, with two presidents and a chief executive officer having left their posts within the past year. 

“The strain of monetary damages and legal fees, as well as the uncertainty of ‘copycat’ lawsuits, could put significant financial burden on NAR, MLSs, and brokerages,” KBW analyst Ryan Tomasello wrote in October. “We stress that this is more of a ‘worst case’ scenario, but one where even a small probability of playing out could wreak significant havoc on the industry at large and exacerbate uncertainty on the part of investors.” 

For consumers, the situation could play out very differently, including introducing the option to buy and sell a home with smaller commissions, or even flat fees. Broker commissions could be cut nearly in half as a result of the litigation, according to an analysis from KBW’s Tomasello.

The topic of commissions has become a sensitive topic throughout the industry. There’s no U.S. rate-setting body, though 5% to 6% has been a de facto national standard for decades. As of 2022, commissions averaged 5.3% across the industry, according to RealTrends, an industry trade publication.

“NAR does not set commissions,” Nykia Wright, NAR’s interim CEO, said in a statement posted to various social-media sites on Wednesday. “It never has, and it never will. Period. End of story.”

Commissions, though, were central to the Missouri case.

Illustration by Andrei Cojocaru

While NAR doesn’t establish commission levels, plaintiff attorneys argued in their complaint that the association requires sellers’ agents to set the rate a buyers’ agent earns from a sale, rather than allowing brokers to compete on price for a home buyer’s business.

In other countries, where buyers and sellers negotiate separately for brokerage services, commissions are much lower, the attorneys noted.

Even within NAR, the history of its role in commissions seems in question. A few hours after the firm posted Wright’s message to Facebook and other sites on Wednesday, it was deleted and then republished with one change: “NAR does not set commissions, and it never will—period, end of story.” Gone from the new version: “It never has.”

A NAR spokesperson noted to Barron’s that a footnote about the change had been added to the video. It states, in part, that “NAR’s rules have expressly prohibited anticompetitive behavior for decades.”

The $1.8 billion jury verdict found NAR and brokerages, including Keller Williams and HomeServices of America, guilty of conspiring to keep broker commissions high. Both companies and the trade group filed motions earlier this month asking for a new trial.

Two other national brokerages, Anywhere Real Estate and Re/Max, reached a settlement before the verdict. Anywhere agreed to pay $83.5 million, while Re/Max settled for $55 million. “We continue to deny the allegations made in the complaints and in no way acknowledge any wrongdoing,” Re/Max said in a statement at the time. Anywhere similarly said the settlement isn’t an admission of liability.

Keller Williams agreed to join the settlement this past week. The deal includes a payment of $70 million. As with the Anywhere and Re/Max settlements, Keller Williams agreed not to require NAR membership for its agents.

“This will not impact our ability to support our franchisees and agents,” a Keller Williams spokesperson told Barron’s.

As the challenges mount, NAR is facing its own broker-led rebellion. Some brokerage companies have relaxed requirements for NAR membership, opening the door for resignations and potentially dragging down its lucrative membership revenue. Membership dues at the national level are $156 per member in 2024, with local and regional associations charging additional fees. In 2022, about 90% of NAR’s revenue came from dues.

A group of prominent Realtors—led by Mauricio Umansky, founder of brokerage The Agency and known for his appearances on Buying Beverly Hills and Dancing with the Stars, and Jason Haber, an entrepreneur and broker at Compass—have founded a new group called the American Real Estate Association, or AREA.

Haber says 1,500 agents have signed up since the group launched late last month. AREA will eventually charge membership dues for agent access to its home databases but is “focused on building culture and community” at this point, Haber says.

“We as Realtors need better representation,” Umansky said at the Inman Conference, where he and Haber announced the trade group. “We need better advocacy, we need better lobbying, we need to make sure that we are being taken care of.“

“We welcome competition from anyone who can match our impact and deliver the kind of value we bring,” NAR’s Wright said in the recent video.

Not every broker is ready for big change. “We all have something we like to complain about in our industry, but do we really want to get rid of it or switch to something new? Not usually,” says Anthony Lamacchia, a Massachusetts-based Realtor who has spoken publicly in defense of NAR. “People like to make noise.”

At the housing market’s recent peak in 2021, agents collected $100 billion in commissions, says Stephen Brobeck, a senior fellow at the Consumer Federation of America who previously served as its executive director. Changes to the commission structure would save consumers between $20 and $30 billion dollars a year, he says.

NAR says that its role in the business creates a fair and efficient housing market that benefit consumers. Its compensation practice “makes efficient, transparent, and accessible marketplaces possible,” a NAR spokesperson told Barron’s in an email.

“Sellers can sell their home for more and have their home seen by more buyers, while buyers have more choices of homes and can benefit from professional representation in what for many will be the most significant and complex purchase of their lives.”

The Missouri judge has yet to issue his ruling on damages, which, under antitrust law, could be triple the jury’s amount. NAR has said it expects a ruling in March. If NAR’s motion to dismiss isn’t granted, the trade group said it would appeal.

NAR didn’t address a question about financing an appeal, which requires a sizable bond payment upfront, but Greg Hrabcak, the trade group’s treasurer, recently wrote in a letter posted on the Ohio Realtors website that “safeguarding NAR’s financial well-being is my top priority, and I am committed to preserving all assets under NAR’s ownership.”

Bob Goldberg, NAR’s CEO for six years, stepped down in November ahead of a planned retirement and two days after the jury verdict.

Wright, former CEO of the Chicago Sun-Times, was named interim CEO in November. She takes over at a volatile time for NAR management.

Two consecutive presidents have departed before the end of their one-year terms. Tracy Kasper, whose tenure began in August, resigned in early January, after an alleged blackmail threat. NAR told Barron’s that Kasper’s resignation “in no way affects the daily operations of the organization.”

Kasper said in a January statement that “as a result of the recent threat and given the significance of this moment for myself, my family, and the organization, it is again time for me to put the interests of NAR first.” 

Kasper was named to the post after Kenny Parcell stepped down in August after nine months as president, following a New York Times article about sexual harassment allegations. Parcell told Barron’s in an email that he has “repeatedly and consistently denied the sexual harassment allegations.”

Kevin Sears, a broker-owner of Sears Real Estate in Springfield, Mass., became NAR’s president last month.

NAR’s leadership team consists of eight members, including the CEO. The association’s board has roughly 1,000 members.

The Missouri lawsuit was the first commission-related litigation to reach a verdict. But more than a dozen lawsuits are challenging broker commission practices in courts across the nation, with numerous brokerages, multiple listing services, and Realtor groups named as defendants. The U.S. Department of Justice could also become involved, because it’s challenging a prior settlement with NAR.

The lawsuits come at a time when agents are already feeling pinched. There were 4.09 million existing homes sold in the U.S. in 2023, the lowest annual total since 1995, according to NAR. The group’s membership fell last year for the first time in more than a decade, to 1.55 million.

The decline in agents could impact NAR’s finances: 87% of its $328 million in revenue came from membership dues in 2022, according to the group’s latest tax filing.

The litigation also could result in more brokers leaving the trade group. As part of their settlements, Anywhere and Re/Max said they wouldn’t require their participating brokers to be NAR members.

Redfin separately said in October that it would require some of its agents to leave NAR, partly citing NAR’s rules around buyer’s agent fees.

But the firm added that wasn’t always possible: “In about half the U.S.,” it said, “we can’t quit NAR individually or en masse, because NAR membership is required for agents to access listing databases, lockboxes, and industry-standard contracts. It’s impossible to be an agent if you can’t see which homes are for sale, or unlock the door to those homes, or even write an offer.”

Redfin said it was asking NAR to allow agents access to tools like lockboxes and listing services without membership.

Redfin agents charge a 1% listing fee, though that doesn’t include commission for the buyer’s agent. The firm says its total commission is typically around 4%.

Anywhere Real Estate, Coldwell Banker’s parent company, previously mandated that its agents belong to the trade group. But that changed in late 2023 after the company’s settlement in the Missouri and similar cases. Under the terms, Anywhere said it wouldn’t require brokers to be NAR members. 

Dave Danforth, owner of Coldwell Banker Danforth in Washington’s Puget Sound area, says he has surveyed his 400 agents and two-thirds of respondents saw “poor or zero value” in membership. He says he let the brokerage’s membership lapse at the start of the year. 

“NAR has consistently evolved over the course of its history to meet the demands of an ever-changing real estate landscape,” a NAR spokesperson told Barron’s, adding that it offers education, networking opportunities, proprietary tools, legal support, and other benefits to participating agents. “We will continue to communicate the value of NAR to members.”

As real estate brokers debate the future of their industry, there’s one area of emerging consensus for brokers: untethering the financial relationship between buyers and sellers.

“It makes all the sense in the world for the seller to compensate the listing agent, [and for] the buyer to compensate the buyer’s agent,” says Brobeck, the Consumer Federation of America fellow.

NAR has said changes to the rule could result in a higher burden on first-time and low-income buyers.

Interim CEO Wright said in a November interview with Realtor, NAR’s in-house magazine, that the association will take “deliberate, thoughtful steps” in planning its next chapter. “There are challenges ahead, but there is also tremendous opportunity.”

Write to Shaina Mishkin at shaina.mishkin@dowjones.com