I can't say I really care, because I'll be gone from this business soon enough — at most, this will just hasten that move

The 6% (sic) commission on buying or selling a home is gone after Realtors association agrees to seismic settlement

CNN — 

The 6% commission, a standard in home purchase transactions, is no more.

In a sweeping move expected to dramatically reduce the cost of buying and selling a home, the National Association of Realtors announced Friday a settlement with groups of homesellers, agreeing to end landmark antitrust lawsuits by paying $418 million in damages and eliminating rules on commissions.

The NAR, which represents more than 1 million Realtors, also agreed to put in place a set of new rules. One prohibits agents’ compensation from being included on listings placed on local centralized listing portals known as multiple listing services, which critics say led brokers to push more expensive properties on customers. Another ends requirements that brokers subscribe to multiple listing services — many of which are owned by NAR subsidiaries — where homes are given a wide viewing in a local market. Another new rule will require buyers’ brokers to enter into written agreements with their buyers.

The agreement effectively will destroy the current homebuying and selling business model, in which sellers pay both their broker and a buyer’s broker, which critics say have driven housing prices artificially higher.

By some estimates, real estate commissions are expected to fall 25% to 50%, according to TD Cowen Insights. This will open up opportunities for alternative models of selling real estate that already exist but don’t have much market share, including flat-fee and discount brokerages.

When buyers’ agents go, buyers will be at the mercy of sellers agents, who by law must only represent their principle: the homeowner, so buyers won’t be getting objective advice on, say, the merits of one neighborhood or street compared to another, the owner’s motivation for selling, help negotiating a deal, and on, and on and on. And there’s no way they’ll find a competent person willing to spend 8 weekends in a row with them showing them houses they’re merely curious about.

Of course there will still be agents willing to work for a commission of, say, 1/2 of 1% — Uber drivers are always looking for work — and sellers can list their homes on internet sites like Craig’s List and Facebook, where fake buyers and con men don’t exit, and “buyers” are always legitimate, financially-qualified people. Even the Nigerian princes.

Again: I don’t care, because this transformation will take at least a couple of years and probably longer to complete, and I don’t intend to stick around for it. One thing I can guarantee: it will not reduce a buyer’s cost, because sellers, like any other human, will always want to maximize their profit (or, in a declining market, minimize their loss), and prices are determined by the market, not what a seller would “like to get” — try telling your stock broker that you “need” to sell your GE stock for $90 a share, when it’s trading at $30), and buyers will be competing with other buyers who want the same house. If a seller is paying a 3% commission instead of 5%, will he really reduce his price to reflect the “extra” money he’ll be putting in his pocket? Just to be nice? I think not.

So, these are just some preliminary, top-of-the-head thoughts tossed up in response to today’s NAR capitulation. Deeper analysis can come from others, and everyone will just have to wait a few years to see how the industry changes.

(I do look forward to my former colleagues in the legal profession eliminating their standard 1/3 contingency fees for even the simplest, slam-dunk cases. Hooray!)