A groundbreaking settlement regarding realtor commissions fees has the potential to save Americans tens of thousands of dollars during home transactions. On Friday, the National Association of Realtors (NAR) disclosed the settlement of various lawsuits filed by home sellers, alleging collusion within the real estate industry to maintain artificially high realtor Commissions, typically around 5% to 6% of the home’s price.
NAR Agrees to Pay Damages and Increase Transparency
As part of the settlement, NAR agreed to pay $418 million in damages, despite denying any wrongdoing. Additionally, the trade group committed to revising its guidelines to enhance transparency regarding real estate commission fees for consumers. These changes are anticipated to result in lower fees for both buyers and sellers, potentially decreasing by 1% to 2%. Given the current high cost of real estate, this reduction could translate into substantial savings.
For instance, for a median-priced home valued at $417,700, lowering the commission from 6% to 4% could mean savings of $8,354 for either the buyer or the seller. Typically, commissions are divided between the seller’s and buyer’s agents, paid out by the seller from the sale proceeds. However, sellers often overlook the actual amount paid, as it is integrated into the sale price, known within the industry as “cooperative compensation.”
Under the current practice, seller’s agents are mandated by NAR to advertise the buyer’s realtor commissions on the Multiple Listing Service (MLS), a listings database utilized by real estate agents. Yet, the precise fee breakdown is typically visible only to real estate agents.
Real Estate JUST Changed FOREVER: Realtor Commission Settlement.
Changes to MLS Advertising and Buyer Agent Agreements
In response to the settlement, NAR will eliminate the requirement to advertise commission fees on MLS sites. Furthermore, buyers will now need to sign formal agreements with buyer’s agents, ensuring they are informed about the agent’s service charges.
These adjustments are slated to take effect by mid-July, pending court approval. Stephen Brobeck, senior fellow at the Consumer Federation of America, believes these rule changes will “decouple” buyer and seller commissions, potentially leading to easier negotiations and cost savings for homeowners during home sales.
The specifics regarding how buyer’s agents will be compensated remain unclear. Cooperative commissions may persist as a separate contract negotiated by the buyer and seller. Alternatively, options such as flat fees, “a la carte” pricing, or hourly rates based on service level could emerge. Brobeck emphasizes the importance of fair compensation for buyer’s agents, especially for those who invest additional effort in finding suitable homes for their clients.
In conclusion, while the settlement promises increased transparency and potential savings in real estate transactions, the exact impact on buyer’s agent compensation and negotiation dynamics awaits further clarification.
