What you should know about the $418 million NAR settlement on home-sale commission
Is massive change coming to the real estate industry? It’s unlikely. Will sellers drop their listing price because they’re no longer responsible for paying the buyer’s side of the commission? Almost certainly not. Will it be cheaper for buyers to purchase a home? We doubt that, and it might even become more expensive.
Now that we have all that out of the way, let’s rewind the clock back two weeks to the $418 million settlement in the class action lawsuit between the National Association of Realtors (NAR) and several large Realtor organizations and home sellers.
A federal jury found the National Association of Realtors and several large Realtor organizations guilty of conspiring to artificially conflate sales commissions. The $418 million settlement, to be paid out over four years, requires the National Association of Realtors to eliminate the offer of buyer’s compensation from their multiple listing service websites.
This verdict follows on the back of the $1.8 billion verdict in the Sitzer-Burnett case, which was handed down in October 2023. It covered the same basic ground but had an even bigger award. The National Association of Realtors has said it will appeal the verdict.
We’ve been reading with bemusement all of the articles claiming that the settlement will change the way homes are bought and sold. In particular, we’ve watched pundits claim, strangely, that home prices will fall. That buyers will pay less. That somehow over a million real estate agents will give up their full or part-time livelihoods and disappear from the business of helping people buy and sell homes.
Given the more than 30 years since Ilyce started writing this column, and the 20-plus years since Sam, a real estate attorney, joined her as co-columnist, this strikes us as living in the land of magical thinking.
What will the settlement change? Basically, local multiple listing services (MLSs) are no longer able to advertise the amount sellers will pay to the buyer broker upon the sale of their properties.
Legal platitudes aside, let’s look at how this sort of marketing plays out in the real world.
Usually, a seller hires a real estate agent to help them sell their home. The real estate agent presents the seller with a listing agreement. The listing agreement spells out what the agent will do and how much the seller will pay the listing agent at the closing. This commission is usually somewhere between 5% and 6%. In the thousands of closings Sam has done for his clients over the years, he has seen amounts range higher and lower.
Many people (buyers, sellers, homeowners) tend to think that the commission amount is 6%. They also believe that fee is non-negotiable.
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