Commission crackdown: Realtor fees in North America are under attack

If it seems like everybody is becoming a realtor these days, it’s easy to imagine why: North American real estate agents are raking in some of the highest commissions in the world.

Driving the news: 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.

• In Missouri, a real estate association and several brokers were ordered to pay $2.5 billion in damages after being found guilty of conspiring to inflate commissions.
• In Ontario, a similar class action, alleging price-fixing and anti-competitive behaviour among several brokers, was given the green light to proceed back in September.
• In Illinois, home buyers have also stepped up to file a class action over allegations that artificially inflated commissions are resulting in elevated home buying costs.

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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 agent’s experience or the desirability of a home.

• Though it’s possible to pay less in commission in Canada, a CBC investigation found some real estate agents (illegally) steer buyers away from low-commission homes.

Bottom line: 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.

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