William Brangham: The Fed expects up to three rate cuts next year.
That could lower mortgage rates, which are at a 20-year high this year, and make homeownership more affordable for many people.
Some experts also point to a landmark jury decision that could change the cost of buying and selling a home.
Economics correspondent Paul Solman reports from Missouri.
Tom Ferry, Realtor: If you think I’ll cut down on beeping commissions… Paul Solman: A senior real estate agent shares his favorite commission strategy.
Tom Ferry: Take this home and push it up. I’m sure it will be a good fit.
Paul Solman: This clip from a real estate podcast doesn’t make a lot of noise, but it does show that the National Association of Realtors and its members have illegally colluded for decades to fix commissions on home sales and money. It helped convince a federal jury in the state. It is paid to the distributor, who always splits it 50-50 with the buyer’s agent.
Plaintiff’s attorney Mike Ketchmark.
Attorney Mike Ketchmark: Why is this the only system in this country where if you want to sell something, you pay the other person?
Paul Solman: Or as one of the Ketchmark plaintiffs, former police officer Jerrod Bright, put it: Jerrod Bright, Plaintiff: A company that I’ve never met and who has done absolutely nothing for me as a consumer. What a strange system it is, where the person who received the loan gets a percentage of the total amount.
Paul Solman: 3%, exactly half of the typical total fee.
To make matters worse, large companies have come to dominate the industry and have a strong incentive to maintain the system, says Ketchmark, the winning attorney.
Mike Ketchmark: Half the time, these companies make money on behalf of the seller, and the other half of the time, they make money on behalf of the buyer.
And they support this system and benefit each other.
Paul Solman: But assuming the verdict survives appeal, that’s a no-no.
So far, Ketchmark has won $1.8 billion in judgments on behalf of approximately 500,000 home sellers in Kansas, Missouri, and Illinois alone.
Mike Ketchmark: We did 100 depositions from top companies in the real estate industry, and there was training material that said, “Fix your commission at 6%.”
Man: When a home seller sees me include a 6 percent commission on the contract and asks, “Gino, isn’t the commission negotiable?” I always feel confident. The answer was, “Yes, the fee is negotiable, but I can only raise it.”
Mike Ketchmark: So what we’ve done is we’ve started to uncover this.
Paul Solman: So this test exhibit was not surprising.
From 2015 to 2022: Mike Ketchmark: We looked at actual closing documents for 110,000 homes sold in the Kansas City area. In 98% of cases, the commission was set between 2.5% and 3% of the buyer’s commission. 94% of the time, the value was 3%.
Paul Solman: 3 percent paid by the seller’s agent to the buyer’s agent.
So in addition to the recent sky-high mortgage rates, the median home price in America is at an all-time high of $430,000, of which about $26,000 goes to real estate agent commissions. , it costs each agent $13,000 regardless of labor, which is how much it costs to build a house. Complaints about fixing commissions across the industry and brokers colluding with the national association that owns the term real estate agent, as the video clip so blatantly suggests, because they are more expensive than market prices. is occurring.
To call yourself a member, you must be a member who has paid your dues.
What was the reaction from industry groups?
KIPP COOPER, CEO, Kansas City Area Association of Realtors: Fees have always been fully negotiable and always will be fully negotiable.
And these are set up long in advance between the listing agent and the seller.
Paul Solman: Look, a small number of individual brokers could be doing bad things, says Kip Cooper, CEO of the Kansas City Area Association of Realtors: Kip Cooper: National Association of Realtors has always made that clear — and it’s included in all of our guidance documents.
In every meeting I have attended over the past 23 years, commission rates have never been discussed or set.
Paul Solman: Well, when it comes to negotiating commissions, the term mother applies to most of us.
Stephanie Green, Kansas City homeowner: I’ve never heard anyone talk about fees as part of the buying experience.
Paul Solman: First-time homebuyer Stephanie Green put a contract on this Kansas City home last spring to house her extended family.
Stephanie Green: High five?
Paul Solman: For Greene, purchasing was all about price.
It never occurred to her or Plaintiff Bright to negotiate a commission.
Jerrod Bright: As a first-time homebuyer in this experience, I thought 6 percent is 6 percent, 6 percent.
Paul Solman: But then, please bear with me as I untangle this web of laws. Why would the seller’s agent split the commission instead of keeping the full 6%?
says real estate economist Norm Miller.
Norm Miller, University of San Diego: The general feeling in the industry is that if you don’t offer competitive buyer co-op rates, no one will show your home.
In other words, they move away from it.
Paul Solman: Okay, it’s a seemingly rigged system, as the jury found.
Still, Stephanie Green likes the current system, even though she knows homebuyers like her end up paying hefty hidden fees as part of the final price.
Stephanie Green: It was really helpful to be able to roll it into my mortgage instead of paying it all upfront.
TENESIA BROWN, Keys Realty Group: This is an exclusive board game. Therefore, this is the path to home ownership.
Paul Solman: And buyers’ agents certainly provide a lot of value to first-time homebuyers, especially like Tenesia Brown.
(LAUGHTER) TENESSIA BROWN: Get a job.
Paul Solman: I have a job.
Tenesia Brown: You can’t imagine how many people contact us who are interested in buying a home but don’t have a job or a source of income.
PAUL SOLMAN: Her agency explains the basics to clients.
TENESSIA BROWN: Now that we have a baby, we have to buy a house.
Now you are thinking.
You are thinking about its functionality.
Tialynn Beauvoir, homeowner: I have two children.
I have an autistic son.
I wanted to write a letter so whoever I was buying a house with would know a little about me.
PAUL SOLMAN: Tialynn Beauvoir says one of Brown’s agents guided her through inspections, title searches and even financing.
Tirin Beauvoir: She was like, if you’re going to write a letter, tell them why and make it personal if you want it.
So she put it on every offer after that and I put it on.
Paul Solman: Beauvoir received the house from someone who was moved by her appeal.
Mr. Brown, who runs a securities company, is concerned about the ruling.
Will her primarily low-income clients be able to afford upfront buyer fees if her agents are no longer paid as part of the price?
Will they want to negotiate fees?
Tenesia Brown: The journey of homeownership and home selling can be a roller coaster.
So adding a new layer of difficulty to negotiating what has long been the norm will only make negotiations even more difficult.
Paul Solman: The positive side of this ruling is probably fewer agents on what Brown calls night shifts.
There are approximately 2 million real estate agents in America, 1.6 million of whom are real estate agents, but only 5 million homes were sold last year.
Economist Miller estimates that 1 in 100 American workers has a real estate license, but 80% of them sell very little or not at all.
Norm Miller: If commissions are going down and good agents are selling more homes, that means there are going to be a lot of part-timers and mediocre agents who are out of the industry.
Paul Solman: So should the jury’s decision be upheld and what is the final economic verdict likely to be?
Norm Miller: We should move in a direction similar to what we’ve seen in other developed countries, such as the UK, Israel and Singapore.
This suggests fees will drop from 5-6 percent to 3-4 percent.
Paul Solman: Once the seller and buyer start negotiating.
Will Jerrod Bright negotiate now?
Jerrod Bright: Absolutely, 100 percent.
Paul Solman: All told, every 1 percent reduction in fees saved buyers and sellers more than $20 billion last year, down 3 percent to more than $60 billion, or $13,000 per home. Become.
And to increase the pressure, Mike Ketchmark is currently filing lawsuits against the industry across the country in the name of lowering agent fees and lowering home prices; Large-scale haggling may begin.
On “PBS NewsHour,” Paul Solman of Kansas City, Missouri.