As two class-action lawsuits continue to work their way through the court system, investment firm Keefe, Bruyette & Woods has produced a 75-page report examining the likely impact that a change to the National Association of Realtor’s Clear Cooperation rules would have on the real estate industry. Center to all the concern is the practice of cooperative compensation. Analysts at KBW believe that a court-ordered injunction could “unbundle” commissions nationally by early 2024, eliminating the longstanding practice of listing agents and sellers setting and paying buyer agent commissions.
Should the courts ban cooperative compensation, the annual $100 billion commission pool could shrink by 30 percent over time. KBW put the odds of a ban at 50 percent for the Sitzer/Burnett lawsuit and 75 percent for the Moehrl suit.
The KBW also found that that based on conversations with industry participants, agent count as a whole could decline drastically under a new commission system.
“We believe agent participation in the industry could decline materially with a complete unbundling of commissions and ensuing reduction in the annual commission pool,” the KBW report noted.
Analysts found that in the U.S., the top 20 percent of agents are responsible for 80-90 percent of transactions, while the top 10 percent of agents are responsible for approximately two-thirds of transactions. Tipping the power balance toward seller agents, the report suggests that the agent count in the U.S. could theoretically decline to approximately 300,000-600,000 over time, or by 60-80 percent based on current NAR membership of 1.6 million.
“What [this] shows us is that theoretically, the U.S. should only have like 500,000 agents,” Ryan Tomasello, a managing director with KBW who was also the primary author on the report, told Inman.