Real estate commission fees in the U.S. are likely to fall next month as the result of class action lawsuits, according to one expert who says the development could have downstream effects on Canada’s real estate market.
Walter Melanson, co-founder and market analyst at PropertyGuys.com, said in an interview with BNN Bloomberg on Monday that historically, U.S. real estate markets have had commissions for buying and selling agents. He added that Canada’s real estate market has operated similarly. However, Melanson said that class action lawsuits in the U.S. have spurred a change and new rules will come into effect across the U.S. next month.
“On Aug. 17, the big changes that real estate agents (face is) when you hire one, they will no longer be listing the amount of commission payable to the buyer agent, which is generally half of the real estate commission,” he said, adding that the new changes will give buyers the upper hand to negotiate commissions with agents.
The Consumer Federation of America has estimated the change could drive commission costs down in the country by between 20-30 per cent in price-competitive markets.
“We’re tracking against that number and what that means in the big scheme of things (is) if we look at the market a year out…let’s say Aug. 17, it’s our prediction that real estate commissions will have fallen from the five (to) six per cent mark down to the three to four per cent (range),” he said.
Given the similarities between the U.S. and Canadian real estate markets, Melanson is predicting commission to also fall in Canada but says certain things need to happen first.
“So we’ve got two Canadian class action suits in the works that look a lot like the American actions, they’re similar in a lot of ways. Our systems are so similar that we need to believe that a result of these class actions will inevitably be something that helps change the Canadian landscape for the better,” Melanson said.
He also highlights that if similar changes happen in Canada, there could be a reduction in the number of real estate agents operating in the market.
