(CNN) — The 6% commission typically charged on home buying and selling transactions no longer exists.
In a sweeping change that is expected to lower the cost of buying and selling a home, the National Association of Realtors (NAR) made a historic deal this Friday by agreeing to pay $418 million in damages and eliminate rules on commissions. Announced settlement of antitrust cases.
NAR, which represents more than one million real estate agents, also agreed to implement a set of new rules. One prevents sellers’ brokers from setting the compensation of buyers’ agents, which critics say leads brokers to offer more expensive properties to clients. Another requirement ends up requiring that brokers subscribe to multiple listing services, many of which are owned by NAR subsidiaries, where homes have broader visibility in the local market. Another new rule will require buyers’ brokers to have written agreements with their buyers.
The deal would effectively destroy the existing home buying and selling business model, in which sellers pay both their broker and the buyer’s broker, which critics say has artificially inflated home prices.
“Although this agreement comes at a significant cost, we believe the benefits it will bring to our industry are worth that cost,” NAR President Kevin Sears said in a statement.
In November, a federal jury in Missouri found NAR and two brokerages liable for $1.8 billion in damages for conspiring to keep agent commissions artificially high. Because this was an antitrust case, NAR was potentially forced to pay triple those damages: $5.4 billion.
NAR had promised to appeal the case, but other brokers reached a settlement and finally, NAR did the same this past Friday.
“NAR has worked hard for years to resolve this lawsuit in a way that benefits our members and American consumers,” NAR interim CEO Nikia Wright said in a statement. “Our goal has always been to preserve consumer choice and keep our members as safe as possible. This settlement achieves both goals.”
NAR required home sellers to pay a flat 6% commission which is typically split equally between the seller’s agent and the buyer’s agent. Although the NAR said the fees were negotiable and helped make homes more affordable for buyers, critics have long argued that the fees were effectively fixed and made homes more expensive. Had made it.
Compromise can reduce the cost of buying a home
Home sellers who filed suit against NAR have argued that in a competitive market, the cost of buyer’s agent commissions should be paid by the buyer receiving the service, not by the seller. The sellers who filed the lawsuit against NAR and the brokers said buyers should be able to negotiate the fee with their agent and sellers should not have to pay it.
The agreement, which is subject to a judge’s approval, opens the door to a more competitive real estate market. Real estate agents can now compete on commissions, allowing potential buyers to compare prices before purchasing a home. Brokers may begin advertising their rates, allowing clients to choose between low-cost agents. NAR did not set any new suggested rates in its announcement.
Although most real estate agents have been included in the settlement, agents associated with brokerage HomeServices of America will continue to fight the case in court and keep their 6% commission, NAR said.
NAR said it had encouraged HomeServices of America to join the agreement, but was pleased that its more than one million members were in favor.
“Ultimately, continuing the litigation will harm members and their small businesses,” Wright said in a statement. “Although there may be no perfect outcome, this agreement is the best outcome we can achieve under these circumstances.”
Years of problems for NAR
NAR has been dealing with US antitrust authorities and litigation related to alleged anti-competitive practices for years. But the November decision dealt the association its biggest blow yet and ultimately saw its rate fall by 6%.
The association also faces investigation by the US Justice Department and it is unclear whether the deal with vendors will affect government regulation of the brokerage industry.
The trade group has also been going through a serious crisis regarding its leadership in the last year.
In January, former NAR President Tracy Casper resigned, saying she was threatened to disclose a past non-financial personal matter unless it compromised her position at NAR. Sears replaced Casper earlier this year.
Casper only took office in August 2023, after former President Kenny Parcells resigned amid sexual harassment allegations, which were first reported by The New York Times. The people, who were NAR employees, reportedly said Parcells touched them inappropriately and sent them obscene photos and text messages. Parcells denied the allegations in the Times article.
In November 2023, NAR Executive Director Bob Goldberg also resigned and was replaced by Wright. Goldberg resigned two days after the $1.8 billion judgment against NAR.
CNN’s Anna Baini contributed to this report.
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