The nation’s largest real estate trade group agreed to a landmark deal that would change how Americans buy and sell their homes.
Under the agreement reached on Friday, the National Association of Realtors (NAR) would pay $418 million over four years to settle nationwide claims brought by home sellers over the group’s long-standing commission rules. The lawsuits claimed the rules have forced people to pay artificially inflated costs to sell their homes.
Under NARS’ current commission structure, home sellers are locked into a brokerage fee for listing their property on the Multiple Listing Service (MLS) database, which is typically between five to six percent. After the property is sold, the fee is split between the listing agent representing the seller and the buyer’s agent.
Under the new rules, home buyers and sellers would be able to negotiate fees with their agents upfront.
“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,” according to a statement by Nykioa Wright, interim CEO of NAR.
Real estate agents will now have to compete for business and likely lower their commissions as a result, according to banking veteran and author Andrew Laukenoth.
“This could lead to a 30 percent reduction in commissions, driving down home prices across the board,” Mr. Lokenauth said in a statement.
Daniel Zia, real estate professional and CEO of Zia Group, argues that although the settlement may prevent a cooperating commission amount from being advertised in MLS: “It is a guarantee that in most markets, and for most transactions, there will remain both a listing agent and a buyer’s agent, both of which will be receiving commission.”
Mr. Zia told New Tang Dynasty Television how that commission is negotiated and communicated between parties will change.
“The recent NAR commission settlement is not the end of 5 to 7 percent real estate commissions like many in the media would lead the average consumer to believe,” Mr. Zia said. “America has tried selling real estate without buyer agency in the past and has already concluded that is not in the best interest of the consumer—either the buyer or seller.”
Other real estate professionals agree that, under a proper buyer agent incentive, a seller will receive the highest number of competing offers and the highest sales price possible.
While a settlement has been reached, the NAR denies any wrongdoing.
“Ultimately, continuing to litigate would have hurt members and their small businesses,” said Ms. Wright. “While there could be no perfect outcome, this agreement is the best outcome we could achieve in the circumstances. It provides a path forward for our industry.”
A preliminary hearing to approve the new agreement is scheduled to take place in the next several weeks. If a federal court approves the settlement, the new rules will take effect in mid-July.
