National Association of Realtors Settlement: Outcomes for Buyers and Sellers

National Association of Realtors Settlement: Outcomes for Buyers and Sellers

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On March 15th, 2024, The National Association of REALTORS® (NAR), representing over 1.5 million real estate professionals, announced a settlement to resolve complaints from a collection of home sellers who claimed that current NAR rules inflated the cost of real estate agent commissions.

Per the agreement, NAR will pay $418 million in damages over four years and amend commission rules. The agreement also releases over one million NAR members and industry stakeholders from liability, ceasing further litigation from home sellers related to broker commissions.

Per the settlement, home sellers involved in cases like “Moehrl v. NAR,” “Umpa v. NAR,” and “Gibson vs. NAR” can now receive payouts. Cases like “March v. REBNY” remain in progress. NAR maintains that the settlement does not admit any wrongdoing and they believe that competition helps buyers and sellers conduct real estate transactions.

The Road to Settlement

The settlement comes after nearly six months of antitrust lawsuits in which NAR, along with other brokerages and real estate groups, was named as a defendant.

In the October 2023 Sitzer/Burnett federal case, home sellers in Missouri sued the NAR for conspiring to inflate commission rates through its existing rules and practices. The jury sided with the homeowners, and the NAR was ordered to pay $1.8 billion in damages.

Sellers argued that the current method of advertising the buyer’s commission on NAR-controlled multiple listing services (MLSs) led to steering, where buyer’s agents encouraged buyers to purchase homes that earned them a higher commission. Burnett found the group responsible for fostering a noncompetitive market that increased the cost of buying and selling property for consumers.

In a series of subsequent copycat lawsuits, NAR found itself on the receiving end of accusations regarding antitrust violations and cooperative competition. The recent settlement addresses nationwide calls to level the playing field for buyers and sellers.

Seller’s Agent vs. Buyer’s Agent

In a typical real estate transaction, each party uses a real estate agent to act in their best interest. The party selling the property hires a seller’s agent, also known as the listing agent. Prospective buyers use their agent, the buyer’s agent, to find properties and assist in the homebuying process.

Agent Commissions

Both real estate agents work on commission. When the real estate transaction closes, the sellers previously paid the commission for both the listing agent and the buyer’s agent. Typically, they paid between five and six percent of the purchase price, split between the agents. For a median-priced home in Los Angeles, that’s $41,970 for each agent or a cost of nearly $83,940 for the seller.

Subject to court approval, the settlement means buyers will now pay their buyer’s agent’s commission, effective July 2024.

Open Competition

As part of the settlement, NAR also agreed to create a new rule requiring MLS participants who work with buyers to submit a written agreement outlining their working relationship beginning mid-July 2024. While NAR previously urged members to enter into written agreements, the new rule ensures that both parties understand the roles and responsibilities of their respective agents throughout the real estate transaction.

Additionally, listing agents can no longer advertise commission rates to buyers’ agents on MLSs. Buyers will now pay their agent’s commission and have room for negotiation. Sellers can still communicate concessions, such as lower closing costs, on the MLS, so long as they do not relate to the payment the buyer pays their agent.

Looking Forward

Over time, the settlement could uproot the housing market and increase transaction volume. Additionally, home prices and commission rates should decrease as agents compete with each other to acquire clients browsing a more transparent marketplace.

According to some experts, as buyers foot the additional cost of an agent’s commission, sellers will need to adjust their housing prices accordingly. However, housing prices may stagnate in markets with lower inventory and higher demand.

What Does This Mean for Consumers?

The settlement could create lasting effects for home sellers and buyers nationwide.

Home Sellers

Per the settlement agreement, tens of millions of past home sellers may be eligible for compensation from the class-action payout.

Future sellers will only pay their listing agent’s commission and no longer cover the buyer’s agent commission during closing. This move decreases the upfront costs the sellers pay during the transaction, giving them a larger budget for their next move.

Home Buyers

Future home buyers will now pay their buyer agent’s commission, which could affect Americans’ budgets. First-time homebuyers may specifically feel the weight of this settlement, as they must now save additional money on top of their first down payment.

While those looking to purchase property in the near future may feel the burden of this additional cost, buyers will have the power to negotiate.

Resources for First-Time Homebuyers

Saving for a 20% down payment on a home is a significant financial barrier for prospective first-time homebuyers. Homebuyers must also save for closing costs, which typically amount to an additional 2% to 5% of the purchase price. For new homebuyers who will need to save for a 2% commission, that adds a substantial $13,000 in Miami, where the median list price is $650,000.

First-time homebuyers should consider the following tools and options to help them save money and budget accordingly.

Work With New Agents

NAR membership peaked during the COVID-19 pandemic when many Americans sought flexible working conditions. While some real estate agents have left the industry, many agents still pay their NAR membership dues without closing deals. The settlement will negatively impact newer NAR members who do not have a robust client base, as they must quickly adapt to new market conditions and meet buyers in the middle.

First-time homebuyers may consider working with a newer agent to negotiate a lower commission. Newer agents with fewer clients may be more willing to accept a smaller commission in hopes of closing a deal and building up their careers. First-time homebuyers with lower budgets can use this to their advantage during the home-buying process.

Mortgage Calculator Tools

Starting July 2024, buyers must factor in agent commissions as part of their closing costs. This is in addition to inspection fees, attorney’s fees (depending on if the state requires an attorney for real estate transactions), and other financing-related costs such as appraisal and mortgage origination fees. For a home of $400,000, a 2% buyer’s agent commission fee would mean another $8,000 check at closing.

Prospective homebuyers can build a budget with a mortgage calculator. After considering the cost of the down payment, property taxes, and interest, buyers will know how much they can expect to pay each month. Those in the early stages of their homebuying process can also use RealtyHop’s cost calculator to learn how much they can afford to spend on a home, given their current rental behavior.

To help budget for the cost of the agent commission, homebuyers can use the tool to adjust their down payment amount and see how that affects their monthly mortgage payment. The mortgage calculator shows how this change increases the monthly cost of homeownership.

First-Time Homebuyer Programs

First-time homebuyers should research programs in their state and local community that provide additional funds for new homeowners. Different programs offer various benefits, like a mortgage tax credit, down payment assistance, or funds for closing costs. Closing cost assistance could help offset the cost of the agent’s commission.

Learn more: First-Time Homebuyer Programs in Your Area



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