The National Association of Realtors agreed Friday to settle an antitrust lawsuit accusing brokerage firms of inflating sales commissions, a settlement that could bring major changes and lower costs for Americans buying and selling homes.
The $418 million settlement requires NAR to roll back decades-old commission rules, making it easier for buyers to negotiate fees with their own agents or not use an agent at all.
The changes could spur more home sales by lowering typical commissions by thousands of dollars, a benefit for less affluent people and families struggling with inflationary pressures or being priced out of neighborhoods.
But it could also reduce revenue for traditional real estate brokerages and make employment less profitable and attractive to the more than 1 million agents NAR represents.
The settlement was announced 4 1/2 months after a federal jury in Kansas City, Missouri, ordered NAR and several brokerage firms to pay $1.78 billion in an antitrust case involving agents in the state.
A judge there is considering a request from the plaintiffs to triple the damages.
Several similar lawsuits have been filed across the country.
Defendants in the lawsuit include HomeServices of America, part of Warren Buffett’s Berkshire Hathaway.
Anywhere Real Estate, Compass, Douglas Elliman, Keller Williams and Re/Max are among the brokerage firms sued.
Shares of many brokerages fell after the settlement was announced, with some falling by double digits. Shares of some homebuilders, including Lennar and Toll Brothers, rose on the news.
The agreement requires court approval. It resolves claims against NAR agents, state and local realtor groups, and most small brokerage firms. Home services are not part of the settlement.
Reform first
Sellers object to the long-standing practice of paying commissions of 5% to 6% to their own agents and the buyer’s agent, with their own agents setting the fees for both.
Critics argue that sellers should be allowed to list their homes on various databases without paying a buyer’s agent, with both parties shopping around for the best price.
They also say the current setup encourages agents to steer clients toward homes with higher commissions.
Under the settlement, home listings on the NAR Multiple Listing Service will no longer tell buyer’s agents how much they can expect to receive in fees.
A buyer’s agent must also have a written agreement with his or her client. The changes will take effect in mid-July.
Cohen Milstein Sellers & Toll, which helped broker the settlement on behalf of opponents of the industry practice, said sellers who use multiple listing services will no longer have to pay a buyer’s agent.
Expect chaos
Not everyone welcomes these changes.
“It creates confusion for every buyer, seller, broker and agent,” said Judi Desiderio, CEO of Town & Country Real Estate in East Hampton, New York. Homes often sell for millions of dollars.
Desiderio said some buyers may end up paying more for the home.
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