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  • Writer's pictureKenneth Cochrane

Change is Coming from the National Association of Realtors Settlement

Last Friday, the National Association of Realtors reached an agreement to settle several lawsuits. They agreed to no longer hold their membership to the standard 6% commission imposed on residential real estate sales. The settlement must be approved by a federal court, but appears likely to happen. This agreement brought to mind several thoughts as it relates to the financial services market.


Perhaps this settlement could move realtors down a similar path financial advisors have traveled. Could real estate sales become more transparent? Will realtors be held to a higher standard of conduct than in the past? Will supervisory organisations arise? Will a national data base of realtor behaviour become available? Will realtor marketing organisations arise? Potentially lower commissions may force realtors to embrace a different business model. Many marginal players may be forced out of the business.


Overall, this appears to be a better deal for the seller and buyer of real estate. Lower commissions are forecast to drop the price of real estate. Agents will have to compete based on the services they provide and the commission they charge. Many agents will partner with home services such as insurance, home inspection, home repair, among others to augment their income. Adding consulting to their services may also prove to be an option.


As we’ve seen in the past, whenever an event such as this occurs, the markets become fragmented. Eventually, markets sort out accepted and best practices. In a digital age, this will probably occur sooner than later. The efficient transfer and sharing of information will force realtors to work more efficiently and demonstrate greater value. It’ll be an interesting time for realtors and hopefully benefit homeowners.

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