The National Association of Realtors has agreed to pay $418 million to settle antitrust lawsuits alleging inflated real estate commissions, leading to changes in how homes are bought and sold. Under the settlement, home sellers would pay smaller commissions and buyers would decide how much buyer's agents are paid. The lawsuits challenge NAR's cooperative compensation rule, and if approved, the new rules would affect anyone using a multiple listing service. The settlement could lead to more complex negotiations and changes in how buyer's agents are compensated, potentially impacting buyers and sellers in the real estate market.
Americans pay about twice as much commission to real estate agents compared to other countries due to the controversial 'bundled' commission system. Under this system, buyer's and seller's agents are paid equal commission, usually between 5 and 6 percent, which is paid for by the seller. This system incentivizes agents to keep fees high and has led to a higher percentage of home buyers being represented by an agent in the US compared to countries where buyer's agents are less common. Recent lawsuits have brought attention to the issue, and it is predicted that the system may change, with buyers potentially paying agents directly, leading to a decline in the use of buyer's agents.
The real estate industry is facing potential upheaval as a federal civil case in Kansas City found the National Association of Realtors (NAR) and major brokerages guilty of conspiring to keep commissions artificially high. The judge overseeing the case has the power to break up the century-old commission structure, which could lead to significant changes in the industry. A settlement is also possible, but regardless of the outcome, experts predict a radical reorganization of the commission system in the US. Changes could result in lower commissions, more transparency, and increased competition among buyers' agents. However, there are concerns that breaking up the commission system could lead to higher upfront costs for buyers and lower listing prices for sellers.
