Real Estate Expert Forecasts that 60-80% of the Nation's 1.6 million Realtors May Leave the Industry

Recent lawsuits alleging price fixing in the real estate industry have raised questions about the future of agent commissions. While commissions may face downward pressure, experts say talented agents will remain crucially important through turbulent times ahead.

Missouri Lawsuit Verdict

In October 2023, a jury in Missouri found that the National Association of Realtors (NAR) and two large real estate brokerages, Keller Williams and HomeServices of America, had violated federal antitrust laws by conspiring to keep commission rates artificially high. The jury awarded $1.78 billion in damages to home sellers who had been forced to pay the traditional 6% commission on their home sales.

Appeal

The NAR and the two brokerages have appealed the verdict. They argue that the jury's decision was based on a flawed legal theory and that there was no evidence of wrongdoing. The appeal is currently pending before the 8th Circuit Court of Appeals.

Additional Lawsuits

In the wake of the Missouri verdict, two additional lawsuits have been filed against major real estate brokerages. In November 2023, a class action lawsuit was filed against Douglas Elliman, Redfin, and Compass, alleging that they had conspired to keep commission rates artificially high. In addition, a class action lawsuit was filed against Realogy Holdings Corp., the parent company of Coldwell Banker and Century 21, alleging that it had engaged in anticompetitive practices.

Modest Industry Changes Expected

Industry analysts say sweeping changes are unlikely in the near term. "Commissions may dip slightly, but talented, hardworking agents will still be valued and compensated well," said Ryan Tomasello of KBW, a real estate research firm.

Tomasello predicts commission rates could decline around 10-15% over the next 5-10 years. He also forecasts that 60-80% of the nation's 1.6 million realtors may leave the industry if commissions drop significantly. Having fewer agents could make it harder for consumers to find representation and access services.

Rather than abandoning the profession, most agents will adapt to the changing market. They may expand their service offerings to provide more value beyond just home sales.

Why Good Agents Will Still Thrive

Real estate veterans emphasize that buying or selling a home is still an incredibly complex process requiring expert guidance. "Consumers deserve advice from a knowledgeable professional they can trust," said Bob Goldberg, former NAR president.

In most markets, there are more home buyers than available inventory. Skilled listing agents can market homes competitively to maximize sales prices. On the buying side, agents tap their extensive networks to connect clients with off-market listings.

During negotiations, agents advocate fiercely for their clients' interests in what is typically the largest financial transaction of their lives. They also coordinate and oversee the entire transaction process, including inspections, financing, title, and closing complexities.

While new technology and business models may change parts of the process, the human judgment of a qualified real estate advisor remains invaluable. Having fewer agents could reduce options and service levels for consumers.

"The role of agents is only growing more important as markets become more competitive," Goldberg said. "There is too much at stake for consumers to go it alone."

What About Alternative Models?

Industry observers do expect alternative brokerage models to gain some ground. These include flat fee listings, fee-for-service, discount brokers, and rebate options.

However, these options also come with tradeoffs for consumers. For example, limited service discount brokers leave clients to carry out showings, open houses, negotiations, and transaction management themselves - no easy feats for amateurs.

Meanwhile, tech solutions can automate certain tasks but not replace human expertise and relationships. Online listing platforms like Zillow often deliver lower sale prices.

That's why traditional full service agents will continue solving the biggest pain points for consumers buying and selling homes. Their local expertise has no substitute.

Advice for Real Estate Consumers

Although major industry changes seem unlikely soon, consumers still have power in the equation. Buyers and sellers should discuss commissions with potential agents and negotiate to find win-win solutions.

Asking about an agent's specific services, marketing plan, and previous track record can illuminate their value. Discount brokers may charge less upfront but leave you to fend for yourself. Paying a reasonable commission to the right agent often yields better financial outcomes in the end.

Home sellers offering 2.5-3% commissions can still attract quality buyer agents to procure the highest possible sale price. Savvy buyers can negotiate rebates while still leveraging a skilled agent’s services.

The real estate industry may be evolving, but professionals focused on client service will always be needed. The peace of mind provided by trusted advisors remains a smart investment for navigating the largest financial transaction of your life.