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The National Association of Realtors said it will reduce agent commissions as part of a $418 million lawsuit settlement.The NAR’s previous rules set a standard commission rate of 5% to 6% of a home’s purchase price.Cut commissions could lead to lower home prices, but may also force some agents out of the industry.
The entire real-estate industry could shift in homeowners’ favor, thanks to a settlement by one of the most powerful groups of real-estate agents in the country.
In a wave of class-action lawsuits, homeowners have accused the National Association of Realtors (NAR) of conspiring to rip off both buyers and sellers by charging unfairly high commissions.
On Friday, the NAR said it would pay $418 million in damages to settle those suits. In a major win for consumers, it also agreed to amend its rules on commissions, according to The New York Times, which obtained a copy of the signed agreement.
The plaintiffs also argued that the standard 5% to 6% that most real-estate agents charge violates antitrust laws and keeps home prices expensive. Experts have said that if homebuyers and sellers no longer need to pay their brokers so much, home prices could go down across the country as a result.
In other countries, the Times noted, realtors’ commission fees are much lower, typically ranging from 1% to 3%.
The settlement is poised to impact home sellers, who will no longer be forced to pay such high commissions to their real-estate agents — who usually split the commission with their buyers’ agents.
It’s not great news for brokers themselves, who some experts said might be forced to leave the industry entirely.
“There are going to be real-estate agents who are not able to articulate, let alone demonstrate, their value,” Brian Boero, the CEO of 1000watt, an agency that advises real-estate brokerages and mortgage companies, previously told Business Insider. “Those folks will probably be out of the business very quickly.”
The NAR declined to comment but referred BI to its press release.
“NAR exists to serve our members and American consumers, and while the settlement comes at a significant cost, we believe the benefits it will provide to our industry are worth that cost,” NAR President Kevin Sears said in the statement.
