While the American market is often held up as a shining example of what agents could be charging and earning, all is not well over the pond.

Big class-action lawsuits are under way and there is also an official investigation, according to a new article in the Economist.

It does not spell out which are the lawsuits under way. However,  in Moerhl v National Association Realtors (NAR), home sellers claimed that multi-listing practices where brokers allegedly demand blanket commission fees are a violation of anti-trust law.

Realogy Holdings, RE/MAX and Keller Williams were also named in the suit.

The class action has been inviting sellers to join it: “Did you sell your home within the last five years? You likely overpaid by thousands of dollars in real-estate broker commission. You could be entitled to reimbursement for price-fixing.”

A second action to which the Economist could be referring involves website Trulia. The lawsuit, which seeks to represent all real estate brokers in New York, claims that Trulia channels buyer enquiries to high-paying ‘premier agents’ rather than the actual listing agent.

But then there are those commissions. According to The Economist, they are “jaw dropping” at 5-6%, three times the level in other countries.

Despite online platforms such as Zillow and Refin allowing buyers to do much of the property searching themselves, fees have not budged. And there are still some 2m realtors in the US.

The Economist article says: “At the heart of the problem is a knot of obsolete practices that seem to favour insiders rather than the buyers and sellers of property.

“Unlike the practice in most countries, the seller usually pays fees to both their own agent and the buyer’s.

“Agents acting on behalf of buyers thus have an incentive to steer their clients away from properties with low fees.”

Most transactions are listed on 800 Multi Listing Services platforms and the Department of Justice has now subpoenaed some of the private firms that run these to establish whether agents are hiking their fees, and whether access to data is being unfairly restricted.

According to the article, the ‘anti-trust police are right to intervene and should enforce two principles: first, fees must come down; and secondly, any firm that wants to access industry data should be able to do so.

Competition, says the Economist, “can make America’s market work better”, and the market share of new entrants needs to rise. Which is a bit late for Purplebricks. And also, possibly, for Fine & Country and Foxtons, which also tried their hands in the US.

The full article is below – while behind a paywall, you can read it free on a limited trial.

https://www.economist.com/leaders/2020/02/13/the-cost-of-buying-and-selling-homes-is-too-high