$1.8 Billion Verdict May Mean Rise in Real Estate Bankruptcy
Real estate bankruptcy may be on the rise because on Tuesday the 31st a lawsuit in Missouri found the National Association of Realtors (NAR) and two brokerage firms (HomeServices of America and Keller Williams) liable for $1.8 billion in damages after it was determined that the NAR was forcing home sellers to pay an inflated commission price that would be split between their agent and the buyer’s agent. According to home sellers, the seller typically offers the broker a set commission, which has hovered at about 5-6% of the sale price of the house. In response, the NAR made a point to say that their commission has always been negotiable, the jury’s decision shows that they agreed with the sellers on this issue. The NAR reports that they do not expect the income of real estate agents to change anytime soon as they are looking to appeal the verdict and are speculating that the issue won’t be resolved for years.
Long Term Impact
In the long term, it is likely we will see a dissipation of the practice of pairing the buyer’s and seller’s agent commissions. This will make the cost of housing lower as the commission cost is often bundled into the price of the home. The major concern is that buying a house is already a confusing process for most consumers and adding the negotiation of seller commission to the laundry list of housing costs will dissuade consumers from buying houses altogether.
Effect on Real Estate Agents
There is a chance this will mean bankruptcy. According to the NAR, the average salary of Real Estate Agents in America in 2022 was $56,400, a small raise from the year previous. This lawsuit may mean real detriments to the income of Real Estate Agents across America though, as the NAR is a country-wide representative. The average real estate agent sells just 12 homes a year, meaning they make around $4,700 per home currently. If this lawsuit is upheld, they could be looking at significant cuts in their income. According to the US courts, the median income of someone filing for bankruptcy is $35,736, or $2,978 a month. This means that if Real Estate Agents see just a 37% cut in their income, they will soon be seriously looking at bankruptcy as an option.
If you are a realtor in need of relief or simply just a regular person caught up by the turbulent real estate market, contact The Law Offices of Dax J. Miller, LLC today.