Homeowners may soon pay less to sell their homes as a real estate trade group has agreed to reduce commissions to settle lawsuits against it.
The National Association of Realtors (NAR) has agreed to pay $418 million over approximately four years to resolve all claims by home sellers regarding broker commissions. The settlement is still subject to court approval.
Nearly 9 out of 10 home sales are managed by real estate agents associated with NAR. The organization, the largest trade association in the country, mandates that home sellers offer a fixed commission, typically 6%, before listing their homes on the Multiple Listing Service (MLS).
The lawsuits contended that this structure restricts competition and results in higher prices.
"NAR has made significant efforts over the years to address this litigation in a way that benefits our members and American consumers. Our aim has always been to maintain consumer choice and safeguard our members as much as possible," stated NAR interim CEO Nykia Wright in a press release on Friday. "This settlement accomplishes both of those objectives."
Impact on Real Estate Commissions
The recent landmark deal is set to reduce realtors' standard 6% sales commission fee, potentially resulting in substantial savings for homeowners. The group was found responsible for inflating agent compensation, which could have a significant impact on the earnings of 1.6 million real estate agents. Analysts at Keefe, Bruyette & Woods anticipate that the $100 billion annual commission pool for agents could decrease by about one-third.
This change is expected to affect the standard commission rates in the U.S., which are currently among the highest globally. Real estate agents typically earn money by receiving a percentage of a home's sale price.
Potential Savings for Homeowners
Homeowners are likely to benefit from this development, as they are usually responsible for paying the 6% commission when selling their property, although the fee may sometimes be divided between the buyer and seller.
For example, a homeowner selling a $1 million property could spend up to $60,000 on agent fees. With a 30% reduction in commissions, that same homeowner would pay a commission of approximately $42,000.
Impact on the Housing Market
Industry experts are anticipating that the agreement will disrupt the housing market and lead to a decrease in home prices across the market.
