Commission crackdown: Realtor fees in North America are under attack
If it seems like everybody is becoming a realtor these days, itās easy to imagine why: North American real estate agents are raking in some of the highest commissions in the world.
Driving the news:Ā But now, a string of class-action lawsuits has arrived to ruin the real estate party by cracking down on those sky-high sale commissions (average commissions in Toronto are now $62,000) that home buyers and sellers say are making homes pricier.
- InĀ Missouri, a real estate association and several brokers were ordered to pay $2.5 billion in damages after being foundĀ guilty of conspiringĀ to inflate commissions.
- InĀ Ontario, a similar class action, alleging price-fixing and anti-competitive behaviour among several brokers, was given theĀ green lightĀ to proceed back in September.
- InĀ Illinois, home buyers have also stepped up to file aĀ class actionĀ over allegations that artificially inflated commissions are resulting in elevated home buying costs.
Why it matters: Canadian home sellers pay realtors between 4% and 5% for each sale. In Australia and the UK, total commissions are much lower, at about 2%. In other parts of the world, fees are influenced by things like an agentās experience or the desirability of a home.
- Though itās possible to pay less in commission in Canada, aĀ CBCĀ investigationĀ found some real estate agents (illegally) steer buyers away from low-commission homes.
Bottom line:Ā A successful verdict in Canada could upend decades-long practices that have allowed sale commissions to rise despite a massive oversupply of real estate agents.
Get smarter about what matters. Sign up for The Peak, a free five-minute daily email on Canadian business, tech, and finance that you’ll actually enjoy reading.