As homes in the US become increasingly unaffordable, those who can afford to buy probably chafe at the insanely high commissions paid to agents and brokers, which can amount to 6% of the sales price.
And as more buyers balk at these fees, turning instead to 'iBuyers' like Open Door and Zillow (which will buy a home with the intention of flipping it), it appears the DoJ has finally taken an interest in the phenomenon.
According to Bloomberg, anti-trust authorities are looking into allegations that members of the Realtors Association conspired with brokerage companies like Realogy Holdings Corp and Re/Max Holdings to stop home sellers from negotiating their commissions. Bloomberg learned about the investigation from sources at CoreLogic, a data provider that offers real-estate data to government agencies, lenders and brokers.
CoreLogic spokeswoman Alyson Austin confirmed the company received a civil investigative demand "relating to an investigation of practices of residential real estate brokerages." CoreLogic is not the focus of the investigation, she said.
If anything, the investigation is long overdue. The DoJ has been trying to lower real-estate commissions for the past 10 years.
The U.S. residential real estate industry has long faced criticism that it stifles competition among brokerages, protecting agent commissions that are higher than those paid by sellers in many other countries. In 2008, the Justice Department reached a settlement with the National Association of Realtors, a trade group, that was designed to lower commissions paid by consumers by opening the industry to internet-based brokers.
While CoreLogic couldn't provide any specifics beyond disclosing that the investigative demand sought information about the ability to search real estate listings on multiple platforms, the DoJ declined to comment, and BBG noted that a lawsuit filed against real-estate broker franchisors and the Realtors association might hold a few more clues.
The investigative demand to CoreLogic, dated last month, follows a lawsuit filed against the Realtors association and real estate broker franchisors, including Realogy Holdings Corp., claiming they conspired to prevent home sellers from negotiating commissions they pay to buyers’ agents.
The Realtors association filed a motion to dismiss the lawsuit, arguing that it misunderstands the role of brokers. The trade group didn’t immediately respond to a request for comment on the lawsuit or the Department of Justice investigation.
"We believe this case has no merit and have moved jointly with the other corporate defendants to dismiss the case," Realogy spokesman Trey Sarten said in an email. "Additionally, we have joined in NAR’s motion to dismiss."
The Internet has made it easy for anybody to look up listings, so why have commissions for real-estate agents remained so high? Though, while lower commissions could lead to lower prices, for most millennials, a mere 6% differential likely won't be enough to revive the lost dream of homeownership.