The Demise of the Middleman


Nov 06, 2023


Sarah Parsons Wolter


Nov 06, 2023


Sarah Parsons Wolter


In the opaque world of the American housing market, buyers and sellers usually conduct their property transactions with the assistance of two types of real estate agents: one representing the buyer and the other representing the seller. Even with the advent of online platforms such as Zillow, StreetEasy, and Trulia, which enable buyers and sellers to find each other and negotiate deals directly, these agents continue to “make bank.” Collectively earning $100b in commissions each year by charging fees ranging from 5% to 6% of the headline sales price.

However, a recent ruling from a Missouri federal court may put a spanner in the works of this well-oiled practice. After a brief period of deliberation this week, a jury found that the National Association of Realtors (NAR) and major brokerage firms colluded to maintain inflated commission fees. As a result, the court awarded $1.8b in damages. This amount might triple to $5b due to antitrust legislation.

The plaintiffs argued that NAR and its co-defendants conspired to keep commission rates high and that the system prevents sellers or buyers from negotiating the fees down. In a world of heightened consumer protection, significant changes could come soon. One broker report predicted that the ruling could lead to a 30% reduction in the $100b annual fee pool and push well over half of the 1.6m agents out of the industry. Others are predicting that the long-term upshot could be home prices falling, as right now, the fee paid to a homebuyer's agent is baked into the home's sale price. If that fee goes away or is reduced, the sale price will be lower.

This all comes at a time when America finds itself in the middle of a housing shortage and with home affordability at its lowest levels in a generation, thanks to the combination of record-high home prices and the highest mortgage rates in years. Youngsters trying to get onto the property ladder for the first time might not have to deal with this response (below) for too much longer.

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Portfolio News

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Minka founder profile: the Colombian-Croatian behind the real-time payment system - Minka is the technology that supports the Transfiya processes in the case of Colombia. This project became a reality a few years ago when ACH Colombia was looking for an interoperable real-time payment system. Read more

Plaid weighs IPO nearly 3 years after walking away from Visa sale - Plaid has been busy since walking away from its $5.3b sale to Visa in January 2021. In January 2020, Visa announced plans to buy Plaid, which provides APIs that help startups connect to users’ bank accounts, for $5.3b. But a DOJ lawsuit to block the deal caused the companies to call off the merger one year later. Read more

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The Demise of the Middleman

Home sellers win $1.8b after jury finds conspiracy among realtors - A federal jury ruled on Tuesday that the powerful National Association of Realtors and several large brokerages had conspired to artificially inflate the commissions paid to real estate agents, a decision that could radically alter the home-buying process in the United States. The realtors’ group and brokerages were ordered to pay damages of nearly $1.8b. The verdict allows the court to issue treble damages, which means they could swell to more than $5b. Read more

The way you pay to buy or sell a home is about to change - Changes could range from commission system tweaks to more radical restructuring of the residential real-estate industry. Home buyers and sellers face the prospect of major changes to the amount and the ways they pay their real-estate agents, following Tuesday’s historic verdict against the National Association of Realtors and large residential brokerages. Read more

Industry News

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Select Financings

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Atom Bank - UK based digital challenger bank raised £100m in new funding led by inside investors. Read more

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Boundless Rider - Boston based insurtech company focusing on motorcycle and other powersports riders raised $4.25m in Series A funding led by American Family Ventures. Read more

Charlie - Los Angeles based banking company focused on retirees raised $16m in Series A funding led by TTV Capital. Read more

Cowbell - Palo Alto based provider of cyber insurance for SMEs raised $25m in new funding led by Prosperity7 Ventures. Read more

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Fero Payment Science - Amsterdam based online checkout startup raised $3m in Seed funding led by Coatue, Volta Ventures and Antler. Read more

Layr - Atlanta based small business insurtech company raised $10m in Series A funding led by Cota Capital. Read more

Modulus Labs - California based crypto project raised $6.3m in Seed funding led by Variant and 1kx. Read more

Next Insurance - San Francisco based SMB insurance company raised $265m in new funding led by Allstate and Allianz X. Read more

Omnidian - Seattle based provider of asset management software for commercial and residential solar raised $25m in new funding led by Activate Capital. Read more

Payroll Integrations - California based SaaS for building financial wellness tools raised $20m in Series A funding led by Arthur Ventures. Read more

QI Tech - Brazil based BaaS startup raised $200m in Series B funding led by General Atlantic. Read more

Radius Agent - San Francisco based vertically integrated real estate brokerage platform raised $13m in Series B funding led by NFX. Read more

Railsr - UK based embedded finance startup raised $24m in new funding led by D Squared Capital and Moneta Venture Capital. Read more

Sprout.ai - London based insurance claims automation company raised £5.4m in Series A funding led by Amadeus Capital Partners and Praetura Ventures. Read more

Tabby - Riyadh based BNPL startup raised $200m in Series D funding led by Wellington Management. Read more

Verqor - Mexico based lender targeting the agricultural sector raised $7.5m in Seed funding led by Yara Growth Ventures. Read more


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