Federal investigations, civil lawsuits challenge real estate industry practices

Investigations and efforts from the Justice Department and the Federal Trade Commission to address unfair or exclusionary practices in the real estate industry, on top of several civil lawsuits filed this year, pose a challenge to traditional residential real estate commissions and brokerage rules, according to The Wall Street Journal.  

The politically powerful real estate industry has survived past challenges to its commission structure, but consumer advocates say rising home prices have exacerbated concerns about excessive fees.

While no changes or new rules are on the table yet, at issue are the commissions real estate agents earn for the sale of a home, typically around 5% to 6% of the sale price. For a home sale at the recent national median price of about $375,000, a 5% commission would be $18,750—or for a $1 million home, it would be $50,000. 

The National Association of Realtors says a tight sales market and rising prices have made real estate agents more important than ever, and it says that commissions are fully negotiable and declining. NAR also says the practice encourages competition. However, The Justice Department says Americans paid more than $85 billion in home sale commissions last year, and that industry practices “may harm home sellers and homebuyers.”  Read the full story.

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