(NEW YORK) — The cost of selling a home could soon go down after the National Association of Realtors agreed to a historic settlement.
The powerful trade group, which represents more than 1.5 million real estate agents, reached a nationwide settlement with groups of home sellers who accused the NAR of conspiring to keep broker fees artificially high.
In addition to paying $418 million in damages, the NAR agreed to stop requiring that sellers pay both their broker and a buyer’s broker. Housing experts say the longtime industry standard of a 6% commission is expected to fall 25% to 50%, according to TD Cowen Insights. That could mean significant savings for both buyers and sellers.
At today’s 6% commission, a homeowner selling a $400,000 property will spend about $24,000 on broker fees, a cost that is passed on to the buyer. Depending on how much the new rules reduce commissions, that same homeowner could see their broker’s fee fall to about $12,000.
While the new rules are expected to lower home prices, experts say supply and demand together with the level of mortgage rates, will continue to be the biggest factors impacting the cost of a home.
Among other things, the landmark settlement requires buyers’ brokers to enter into written agreements with their buyers and forbids a broker’s compensation from being included on listings placed on multiple listing services, a move critics say led agents to steer customers to more expensive homes.
The deal brings an end to a multitude of antitrust lawsuits against the group. Last year, a federal jury in Missouri found the NAR and two brokerages liable for $1.8 billion in damages for conspiring to keep agent commissions high. Before Friday’s agreement, the two brokerages settled, but the NAR had vowed to appeal the case.
In a statement, the NAR says, “Continuing to litigate would have hurt members and their small businesses. While there could be no perfect outcome, this agreement is the best outcome we could achieve in the circumstances.”
Housing experts call the settlement the biggest shakeup in the housing industry in nearly a century, offering more transparency and competition. Alternative business models including flat-fee and discount brokerages could become more widespread, realtors will be allowed to advertise their fees and compete on commissions, and buyers will be able to shop around and choose lower-cost agents.
It may also force some realtors out of the industry over time, if more buyers opt to save money and choose not to use an agent in their home search.
A federal judge is expected to approve the settlement in the coming weeks, and experts say sellers and buyers should see those broker fees reduced by mid-July.
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