Price Fixing in Real Estate

On today’s show we are looking at the result of a lawsuit that has been decades in the making. I’ve wondered for a long time why real estate commissions in the US have remained solidly anchored at 6% when in other markets real estate commissions seem to fluctuate much more widely. For example, where I live in Canada, it’s much more common in high priced markets like Toronto to see commission structures where the selling agent is charging 1%-1.5%, and the buyer agent who has a lot more work to do in many cases charging 2.5% for a total of 4% or 4.5%. 

In most professions there are two separate industry bodies. The first is a professional association that acts on behalf of the members. The second is a quasi government body that serves to regulate the industry and to enforce the licensing requirements. They also serve to protect the public. You see this dual structure in most professions whether we are talking about doctors, lawyers, psychologists, and also real estate agents. 

The body that represents real estate agents is an industry body in the US called the National Association of Realtors. 

A Kansas City jury last month delivered a $1.8 billion verdict to home sellers in Missouri against the National Association of Realtors and several major brokerages, finding they had conspired to keep commission rates high.