Historic Legal Agreement: NAR Eliminates Real Estate Commissions

If adopted, a legal agreement by the National Association of Realtors, according to consumer advocates, could save thousands of dollars for both buyers and sellers and result in many purchasers choosing not to use brokers at all.

TFD – Discover how a landmark legal agreement by the National Association of Realtors is set to revolutionize real estate commissions, benefiting consumers and reshaping the industry.

In a historic agreement, the National Association of Realtors agreed to do away with the commissions that real estate agents have traditionally received, which can amount to as much as 6% of the sale price.

Alternatively, purchasers and sellers of real estate could settle costs up front with their agents. Consumer activists anticipate that if a federal court approves the $418 million legal arrangement, the number of real estate brokers will decline, further lowering commission costs.

“The real estate industry has suffered financial harm due to anti-competitive regulations for years,” stated Benjamin Brown, a managing partner at Cohen Milstein Law Firm and a negotiator for the settlement. “This settlement bring sweeping reforms that will help countless American families.”

In a statement released on Friday, the NAR confirmed the impending settlement while refuting any misconduct.

Nykia Wright, the acting CEO of NAR, stated, “NAR has worked hard for years to resolve this litigation in a manner that benefits our members and American consumers.” The organization’s prior CEO resigned from NAR late last year due to the consequences of a federal lawsuit.

“We have always aimed to safeguard our members as far as we can and maintain consumer choice. Both of those objectives are met by this settlement,” Wright stated in the release.

At the moment, listing a property on a multiple listing service, or MLS, essentially locks in a house seller to pay a brokerage fee (often 5% or 6%, depending on their geographic location). A listing agent acting on behalf of the seller receives half of the selling price, with the buyer’s agent receiving the remaining half.

Allegations surfaced that certain buyers’ brokers were pressuring potential purchasers toward more expensive homes as a result of the practice, which has been commonplace in the real estate sector in recent decades. A federal jury convicted the NAR and other large brokerages guilty in October of conspiring to inflate commission rates, and the trade association was forced to pay a record-breaking $1.78 billion in penalties.

Regarding the commission-splitting deals, prominent real estate industry consumer advocate and attorney Doug Miller called them “bribes.” “You’re paying someone to engage in negative negotiation. Sellers have no justification for paying buyer-brokers.”

Among many other changes, brokerage commissions would no longer be listed on MLS sites and would instead be up to negotiation with sellers if the settlement is accepted. If they decide to work with a broker, homeowners would also have easier access to fee negotiations; however, some speculate that this new arrangement may encourage more purchasers to avoid brokers completely.

The new brokerage-fee changes would begin to take effect within months of the settlement’s approval. A preliminary hearing to approve the deal is slated to take place in the coming weeks.

EDITED (March 15, 2024, 2:27 p.m. Eastern Time): The date on which a federal jury found the NAR and a few large brokerages accountable for conspiring to inflate commission fees was incorrect in an earlier version of this article. Not in November, but in October.