Real Estate Commissions

Wapo

Finally the real estate broker trust has been busted, likely lowering house buying costs significantly.

https://www.washingtonpost.com/business/2024/03/15/nar-real-estate-commissions-settlement/

Realtors’ proposed settlement could lower cost of home sales

The proposed agreement with the National Association of Realtors could dramatically change how much consumers pay during real estate transactions By Julian Mark and Aaron Gregg Updated March 15, 2024 at 12:15 p.m. EDT|Published March 15, 2024 at 10:44 a.m. EDT

A home is on the market near Atlanta. The National Association of Realtors has agreed to pay $418 million in damages and revise its fee structure under a proposed settlement announced Friday. (Mike Stewart/AP) Listen 2 min

Share

Comment 975 Add to your saved stories Save The National Association of Realtors has agreed to settle litigation that accused the real estate group of artificially inflating real estate commissions, a move that could dramatically change how much consumers pay during real estate transactions.

Get a curated selection of 10 of our best stories in your inbox every weekend. Under the proposed deal, the group representing 1.5 million real estate agents would pay $418 million over four years to settle several cases, and change rules that plaintiffs alleged supported 5 to 6 percent commissions paid by home sellers. The association said it continues to deny wrongdoing.

“Ultimately, continuing to litigate would have hurt members and their small businesses,” said Nykia Wright, interim CEO of NAR. “While there could be no perfect outcome, this agreement is the best outcome we could achieve in the circumstances.”

If a federal court approves the settlement, the new rules will take effect in July, according to a person close to the settlement talks who spoke on the condition of anonymity because they were not authorized to discuss it publicly.

Michael Ketchmark, a plaintiff attorney representing Missouri home sellers in one of the cases, said he was confident that agreement would fundamentally change the real estate market and help lower the cost of housing and home sales.

Share this article No subscription required to read Share “There’s no doubt in my mind that this is going to bring about tremendous savings to homeowners,” he said.

The realtor association’s century-old commissions structure provided that sellers’ and buyers’ agents split an amount that typically ranges between 5 and 6 percent of the home sale price. Home sellers in Illinois and Missouri alleged in a pair of class-action lawsuits alleged that NAR’s rules artificially inflated commissions by requiring sellers’ agents to make a nonnegotiable compensation offer to list on the Multiple Listing Service, a home selling database.

In October, a jury ruled in favor of the Missouri plaintiffs, awarding them $1.8 billion. The case in Illinois had been moving toward a trial. The agreement announced Friday, if approved by a judge, would resolve those cases and end the long-standing commissions structure, said Ketchmark, who represented the Missouri plaintiffs.

Since the October verdict, experts predicted the commissions system was poised for change. Not only was it threatened by the class-action cases, but the Justice Department had been asking the U.S. Court of Appeals for the District of Columbia Circuit to reopen an antitrust investigation into NAR’s commissions rules that it had settled in 2020.

Aaron Gregg contributed to this report.

NYT

Current spend on commissions is $100B, and this result will save home buyers $20-50B annually on transaction fees.

https://www.nytimes.com/2024/03/15/realestate/nar-realtors-settlement-takeaways.html