The National Association of Realtors (NAR) is set to cough up $418 million in damages and eliminate commission rules in a landmark deal experts say will significantly shake up the real estate industry.
“This will blow up the market and would force a new business model,” Norm Miller, a professor emeritus of real estate at the University of San Diego, told The New York Times.
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The NAR agreed to settle after a series of lawsuits accused the organization of conspiring to artificially inflate home sale commissions.
Ryan Tomasello, an analyst for investment banking firm Keefe, Bruyette & Woods, published a report in October prior to the settlement. In it, he predicted changes to the commission structure could lead to a 30% reduction in the $100 billion Americans pay in real-estate commission fees each year.
What’s more, Tomasello says, it could drive more than half of the nation’s 1.6 million realtors out of the industry.
The end of the 6% commission fee?
Real estate agents across the U.S. typically charge a commission between 5-6% — one of the highest rates in the world — that is often divided equally between the buyer’s agent and the seller’s agent.
However, recent lawsuits argued the NAR stifled competition among real estate brokers and violated antitrust laws by requiring the seller’s agent to make an offer of payment to the buyer’s agent and implementing rules that led to steep standard commission fees.
This settlement means the NAR can no longer set any rules that would allow a seller’s agent to set compensation for a buyer’s agent. The association’s Multiple Listing Service (MLS) — which buyers and sellers use to view for-sale properties — will no longer feature any fields offering broker compensation either.
Experts say the agreement — and potential slide in commission fees — could revive the sluggish housing market.
“This will be a really fundamental shift in how Americans buy, search for, and purchase and sell their housing. It will absolutely transform the real estate industry,” said Max Besbris, an associate professor of sociology at the University of Wisconsin-Madison, according to The New York Times.
However, others warn the possibility of lower commission fees and demand for buyer agents could deter folks from pursuing careers in the real estate industry.
Read more: Generating ‘passive income’ through real estate is the biggest myth in investing — here’s how you can do it in as little as 5 minutes
DOJ still investigating
The Department of Justice’s antitrust division is continuing to investigate NAR practices — particularly whether the organization’s rules have led to price-fixing on commission fees and whether MLS databases have been constraining competition.
The Realtor group continues to deny any wrongdoing.
“Ultimately, continuing to litigate would have hurt members and their small businesses,” Nykia Wright, the interim CEO of NAR, said in response to the lawsuit agreement.
“While there could be no perfect outcome, this agreement is the best outcome we could achieve in the circumstances.”
The agreement must still receive approval by a federal judge before it can take effect.
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CBRE Holds Top Spot for Major Global Property Types
DALLAS, March 12, 2024–(BUSINESS WIRE)–CBRE was the top-ranked firm for global commercial real estate investment sales during 2023, according to MSCI Real Assets—the 13th consecutive year that CBRE has claimed the top spot.
MSCI Real Assets credited CBRE with a 24% market share across all property types on a global basis in 2023—an 800-basis point lead over the nearest competitor.
CBRE held the global top spot last year across the four largest asset classes—office (23% market share), industrial (29%), retail (22%) and multifamily (22%).
“CBRE Capital Markets facilitates considerable cross-border investment by leveraging our global platform and diverse sector expertise,” said Chris Ludeman, global president of Capital Markets for CBRE. “Through integrated, comprehensive services spanning assets and regions, we provide holistic real estate solutions for investors worldwide. As market dynamics evolve, our teams remain committed to providing practical guidance that helps investors to maximize value.”
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2023 revenue). The company has more than 130,000 employees (including Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com. We routinely post important information on our website, including corporate and investor presentations and financial information. We intend to use our website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD. Such disclosures will be included in the Investor Relations section of our website at https://ir.cbre.com. Accordingly, investors should monitor such portion of our website, in addition to following our press releases, Securities and Exchange Commission filings and public conference calls and webcasts.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240312023847/en/
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