The US and Canadian real estate industry faces significant challenges due to class action lawsuits related to buyer agent commissions. These lawsuits could affect the future of real estate commissions. The suits argue that agents have “forced” home sellers to pay their commission. However, isn’t the buyer paying the commission since it’s incorporated into the purchase price?
Key points regarding the future of real estate commissions:
Pending lawsuits could have far-reaching implications. It revolves around whether sellers should have an obligation to pay commissions to buyer agents or if homebuyers should bear this responsibility independently. How will the lender handle this if homebuyers pay their agent’s commission? Essentially, this will increase the buyer’s down payment and closing costs. In response to any changes in commission structures, lenders will likely need to review and adjust their lending policies. For example, if homebuyers must pay commissions independently, lenders may need to consider this additional expense in their loan approval process.
Canada is also grappling with a similar issue as a 2021 case progresses through its court system.
Late 2023 and 2024 may see initial judgments, but we expect appeals. This could lead to a prolonged legal process before reaching a definitive ruling. The outcome of these lawsuits could significantly affect real estate professionals, homebuyers, and sellers. The industry may experience uncertainty and potential shifts in commission practices until the matters are fully resolved.
The impact on first time home buyers if this goes through is tremendous since this would be their only transaction. The current system is so ingrained in the process I can’t believe it could be forced to change