How real estate brokerage could change

A federal jury this week dealt the biggest blow to the U.S. home-buying industry in perhaps a century, finding that the powerful National Association of Realtors and several major real estate agents had conspired to keep agents’ commissions artificially high.

Brokers, analysts and consumer advocates called the decision — which awarded plaintiffs nearly $1.8 billion in damages — a “game changer.” More antitrust lawsuits against the association and brokers await, as federal regulators do as well looking to intervene also.

These are the changes that could be in store for the residential real estate brokerage industry, which rakes in an estimated $100 billion in commissions annually.

Real estate experts say the current system won’t last. Currently, home sellers essentially pay fees for both their own agent and the buyer’s agent, with a typical commission of about 5 to 6 percent split between the two agents.

That structure is largely maintained by the National Association of Realtors, which has about 1.5 million dues-paying members. If a seller does not agree to these terms, the listing will not appear on the multiple listing services that underlie most home sales.

This week’s decision may have changed that. “The industry can no longer believe that a jury will rule in favor of their pricing system,” Steve Brobeck, a senior fellow at the Consumer Federation of America, told DealBook.

Experts identified a range of potential shifts, including:

• Make commission sharing optional so that sellers’ agents who don’t want to pay buyers’ agent fees can still be listed in databases.

• Negotiating to have the buyer’s real estate agent fees covered by the home seller as part of the transaction price. Or, if banks and federal regulators agree, home lending rules could be changed to allow mortgages to directly fund buyers’ real estate agent fees.

• Have buyer’s agents charge a flat fee, bill by the hour, or offer a menu of services for home buyers to choose from.

• The complete abandonment of buyer’s agents, as buyers do in most countries.

According to analysts at investment bank Keefe, Bruyette & Woods, as much as 30 percent of commissions in the sector could disappear.

Startups are trying different business models. Some, including CoStar’s Homes.com, promote home listings instead of selling buyer leads to agents, as Zillow and Realtor.com do. (Agents can pay Homes.com to promote their listings more prominently.) And companies known as iBuyers, such as Opendoor and Offerpad, try to remain independent of multi-listing services by advertising homes they own. Shares in those companies have risen sharply since the brokers’ verdict.

The real estate industry could shrink. Lower compensation could reduce the number of U.S. agents by as much as 80 percent, according to KBW analysts. Among those at risk are part-time brokers or underperformers. “We’ll find out who the real professionals are,” said Jason Haber, an agent at Compass.

Such a decline could have disastrous consequences for the National Association of Realtors, which collects about $150 annually from each member. According to the nonprofit most recent annual tax returnit earned $79 million in net profit on $327 million in revenue.

That’s what the group said it will be appealed the court’s ruling. – Michael J. de la Merced

IN CASE YOU MISSED IT

Sam Bankman-Fried was found guilty on all counts. The founder of cryptocurrency exchange FTX was convicted on seven counts of fraud and conspiracy and faced a maximum prison sentence of 110 years. The verdict confirms the fall of the former poster child of the crypto industry.

There have been attempts to regulate artificial intelligence on both sides of the Atlantic. President Biden issued an executive order requiring companies to test AI tools that could pose a threat to national security and share the results with the government. At the first Global AI Safety Summit, hosted by Rishi Sunak, the British Prime Minister, 28 governments agreed to work together on risk management.

Autoworkers ended their strike. General Motors reached a tentative agreement with the United Automobile Workers, the last of Detroit’s three major manufacturers to do so, after weeks of labor disputes. The concessions were seen as a major victory for the union.

An old trade rule is causing new problems for American retailers

US retailers have faced an existential crisis since e-commerce disrupted the industry’s traditional business models. But their latest threat, a group of retailers and policymakers say, stems from a nearly age-old trade rule, reports Jordyn Holman of The Times for DealBook.

The rule exempts packages shipped to the United States from de minimis duties and fees if they are worth less than $800.

Critics of de minimis point out that because Chinese-founded online retailers such as Shein and Temu deliver goods directly from their overseas warehouses to shoppers’ homes, few of their packages are worth at least $800. But products made abroad and shipped in bulk to the United States — where retailers store them in warehouses before shipping them to customers — are less likely to fall below the threshold.

US retailers want this rule changed. If not, they argue, American jobs are at risk.

De minimis “played a significant role” in the financial tensions that led to the bankruptcy of David Bridal in April, That was the second in five years, company CEO Jim Marcum told DealBook. The company said it paid about $20 million in fees to U.S. Customs last year, while its China-based competitors that ship dresses directly to shoppers paid nothing, Marcum said. Over six years, that amounted to about $100 million in rights that could have been invested in modernizing the company, he added.

Temu and Shein are likely responsible for 30 percent of the packages shipped under this facility every dayaccording to a report of the House Select Committee on the Chinese Communist Party. A Shein spokeswoman said de minimis “is not critical to the success of our business,” and in July, Shein’s vice chairman said the company was “eager” to work with lawmakers to help change the rule. A Temu spokeswoman said its “growth is not dependent on de minimis policies” and that the company “supported all policy adjustments made by lawmakers that align with consumer interests.”

A group of American retailers wants Congress to expand de minimis so it applies to U.S. distribution centers in foreign trade zones. In these zones, companies do not immediately have to pay import duties for imported products. Instead, they pay the fees when they ship those products to customers. That delay helps them manage cash flow, but unlike packages shipped from a warehouse abroad, packages shipped from warehouses in foreign trade zones are not exempt from fees if they are worth less than $800. “What we want is equality,” said Ron Sorini, a lobbyist and trade expert who works with the group.

Some prefer other approaches. Kim Glas, president of the National Council of Textile Organizations, said it would be better to limit the use of de minimis to fewer retailers. She supports a bill introduced in Congress in June that would exclude “non-market economies” such as China and Russia from using the exception, although she would like to see the legislation ban all e-commerce shipments from using making the de minimis exception.

“We don’t want to have a law that creates an incentive to move your distribution abroad,” Sorini said. “And that is the incentive that exists today.”

Dissecting the American Dream

In ‘Our future was the bright future’ The Times’ David Leonhardt examines the rise and fall of the American dream and advocates for progressive policies aimed at economic improvement for the working class. In a recent interview, Leonhardt answered questions from Andrew. His answers have been condensed and edited.

You write that the US lost its way in the early 1980s when wages stagnated. What do you make of the argument that the period between World War II and 1980 was a historical anomaly – the rest of the world was largely bankrupt – and that it was global competition that led to wage stagnation?

I think that’s partly true. But the United States has also made a series of decisions that have damaged the economic prospects of most people. We used to be the most educated country in the world, and we’ve fallen behind. That wasn’t necessary. We used to have some of the best transportation infrastructure in the world, and we’ve fallen behind. We used to spend more government money on scientific research than we do now. Our economy is much more unequal than it used to be. And that didn’t have to happen.

The book advocates for stronger unions, something we are now seeing happening in the US. However, some automakers – and even workers – believe that auto unions have historically extracted so much money that the industry ultimately fell into decline. bankruptcy. Do you agree with that?

I think there have been particular cases in the past of unions overreaching, and I think the car industry, especially in the 1970s, could be a good example. But the bigger problem in the United States is low wages for too many workers. Inequality has definitely increased. And historically, there has been a very strong relationship between unions and the wages of most workers. Can unions sometimes be too strong? Yes. Has that been the biggest problem in the American economy in recent decades? No. The biggest problem is that we’ve had weak unions, weak wage growth for most workers, and really high inequality.

It appears you are praising Franklin D. Roosevelt’s entitlement programs. Given the country’s debt problem, how would you feel about overhauling these entitlement programs?

I understand why Roosevelt made them universal. It was a political decision. But I think there’s a very good argument that they should no longer be universal. The United States today sometimes spends more public money on prosperous old people than on poor children. One way to address our long-term debt problems, which are real, is to cut spending on affluent retirees. And I don’t just mean the very rich. I also mean upper-middle-class people, who outnumber the very wealthy, many of whom do not need benefits as generous as they receive. There is also room in our economy to raise taxes, and there is room to cut some other benefits that largely flow to wealthy people, such as the mortgage interest deduction.

Thank you for reading! We’ll see you Monday.

Send your ideas and suggestions by email to dealbook@nytimes.com.