The residential real-estate industry is bracing for a challenge to the commissions charged by its sales agents, one that could put downward pressure on the fees paid by home buyers and sellers, The Wall Street Journal reported. The Justice Department is investigating home sale commissions, and in a wide-ranging executive order President Biden asked the Federal Trade Commission to adopt rules to address unfair or exclusionary practices in the real-estate industry. Several civil lawsuits challenging industry rules and practices around commissions have survived initial procedural challenges and drawn support from the Justice Department, putting added pressure on traditional broker fees. The politically powerful real-estate industry has survived past challenges to its commission structure, but consumer advocates say rising home prices have exacerbated concerns about excessive fees. At issue are the commissions real-estate agents earn for the sale of a home, typically around 5% to 6% of the sale price. For a home sale at the recent national median price of about $375,000, a 5% commission would be $18,750 — or for a $1 million home, it would be $50,000. Very high-end properties tend to have somewhat lower commission rates. Home buyers end up contributing to these commissions as part of the purchase price, but often have little room to negotiate since it is the home sellers who generally set the commissions for agents on both sides of the deal. Consumer advocates say this contributes to excessive commissions and point to the National Association of Realtors’ rules as the biggest roadblock to change. Those rules require sellers to offer commissions to would-be buyers’ brokers, which consumer groups say encourages sellers to offer high rates for buyer agents as a way to attract more potential buyers. Industry critics also say that the fees are opaque to most buyers, and say the advent of online home search engines has diminished the traditional role buyers’ agents play in connecting buyers and sellers.
