Are real estate agent fees a racket?

The Indicator from Planet Money

NPR

Business

4.7 • 9.5K Ratings

🗓️ 1 November 2023

⏱️ 11 minutes

🔗️ Recording | iTunes | RSS

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Summary

In the typical home sale, the home seller pays a commission, not just to their agent, but also to the buyer's agent. This fee-sharing arrangement is part of a decades-old practice involving what real estate agents call an "offer of compensation."

Others call it a conflict of interest.

That's the dispute at the center of a class action lawsuit that has the potential to upend the real estate business. Today on the show, we'll explain how real estate agents and the National Association of Realtors allegedly conspired to inflate home prices by pushing agents to share fees. And why the industry says the plaintiffs should be careful what they ask for.

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Transcript

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0:00.9	NPR.
0:11.8	A couple of years ago, Nick Krausen is
0:13.8	wife for looking to buy their first home.
0:16.5	How much did you know about the home buying process before going into it?
0:20.5	Basically nothing.
0:22.0	Yeah, I knew I knew vaguely what a mortgage was.
0:25.4	We watched some like, you know, Instagram reels and some YouTube videos about like
0:29.2	what to look for and then visiting homes and stuff like that.
0:32.6	That doesn't sound like nothing to me.
0:33.9	No, I mean, it sounds like you really did his research.
0:36.2	Where else are you supposed to turn for information?
0:38.7	So like almost 90% of people who buy homes nowadays,
0:42.1	Nick and his wife decided to enlist the help of a real estate agent.
0:46.1	Someone to help them scope out properties, set up walkthroughs,
0:49.6	negotiate the sale and handle the contracts.
0:52.2	And despite doing all this work,
0:54.4	Nick and his wife were a little surprised that their agent didn't charge them a dime.
0:58.8	I think she just kind of mentioned that they would get paid by the seller.
1:01.5	We didn't have to worry about it.
1:03.2	Do you think it's weird that the seller pays your agent?
1:07.9	Because the buyer's agent is supposed to represent the buyer's interest,
1:12.2	but the seller is the one who pays your agent.
	...

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