$418M payout: NAR changes home selling landscape amid settlement
As a real estate trade giant worth more than $1 billion in assets, the National Association of Realtors announced Friday in a press release that it would pay $418 million in damages and also adopt a new set of rules in response to a lawsuit against the group claiming homeowners have had to pay unfair and inflated broker commissions.
“The original lawsuit, filed in April 2019 by a group of Missouri home sellers, ended in a verdict of $1.8 billion in October. Because the suit included accusations of antitrust violations, plaintiffs could have been eligible for triple damages of up to $5.4 billion,” according to The New York Times. “Under the settlement, tens of millions of home sellers will likely be eligible to receive a small piece of a consolidated class-action payout.”
The results of the lawsuit have created copycat lawsuits across the United States.
The National Association of Realtors announced a policy modification stating that agents listing a property on a multiple listing service can no longer use the platform to propose a commission to agents representing prospective buyers. Now, the amendment allows home sellers to discuss and negotiate commission deals with the buyer’s agent directly outside the MLS system.
“NAR has worked hard for years to resolve this litigation in a manner that benefits our members and American consumers. It has always been our goal to preserve consumer choice and protect our members to the greatest extent possible. This settlement achieves both of those goals,” Nykia Wright, NAR’s interim CEO, said in the press release.
What this means for home buyers and sellers
The national association has set the terms on home sales for years. In the United States, real estate brokers often require a 6% automatic commission payment for houses sold, whereas, in places like the UK and Israel, brokers require 1%-2% for the same business, Norm Miller, a professor emeritus of real estate at the University of San Diego told CNN.
“I’ve been waiting 50 years for this,” he added, mentioning that while the direction of the housing market remains uncertain, he anticipates a slight increase in homebuying activity due to significantly reduced buyer costs.
“‘There are all kinds of models we might see in the future, and no one knows what they are,’ he said, suggesting some brokers may charge, say, a $3,000 fee for selling a home, while others will offer a competitive commission,” per CNN.
If the settlement were to be approved, which it is looking to do, it would make it simpler for homebuyers to negotiate fees if they opt to work with a broker. However, specialists suggest that this new system could encourage more buyers to avoid brokers altogether.
Once in effect, the changes would go into effect in the coming months.
While the revised broker payment terms benefit homebuyers by reallocating half of the broker fees away from their agent, with the buyer’s agent receiving the other half, the high cost of home ownership in the U.S. remains steep for numerous Americans.
According to Forbes, the average price for a home in the United States was $412,000 as of September 2023. As of March 14, Freddie Mac reported that the 30-year fixed mortgage rate for a house was 6.74%, making the monthly payment for a $412k home $2,669.
