While apparently intended to give an incentive to sellers’ brokers to negotiate higher prices, the plan works too well. With industry rules requiring sellers’ brokers to split their commission with buyers’ brokers, an inflated price tag means a bigger payday for both, leaving the buyer to eat the cost as both brokers shave more off the seller’s increased earnings. It’s no wonder that the arrangement has become nothing more than a commission‐pumping scheme among members of the National Association of Realtors (NAR).
With the help of ten states that prohibit commission rebates, NAR uses its control over Multiple Listing Services (MLS) to keep commissions high. Unless these brokers follow NAR’s byzantine rules, their agents’ lower‐commission homes are excluded from the local MLS and made practically invisible to buyers. The commission rules have paid dividends—at least for those brokers who don’t stir the pot. Commissions in the United States hover around 5.5 to 6 percent, more than double or even triple those in Australia, Ireland, and the United Kingdom.
Online brokerage Real Estate Exchange, Inc. (REX), which uses groundbreaking machine‐learning to bypass MLS and match potential buyers and sellers with a precision unimaginable before the digital age, has been leading the fight to reduce commissions and put money back into consumers’ wallets. It recently sued Oregon for abetting NAR by prohibiting brokers from rebating a part of their NAR‐set commissions, preventing intrepid brokers from effectively lowering their rates on the back end. REX’s latest lawsuit in a Seattle‐based federal court claims that NAR, Zillow, and Trulia have extended the former’s nationwide monopolistic scheme, though without official assistance in every state.