In response to lawsuits that say the restrictions drove individuals to pay unreasonably high prices to sell their houses, a key real estate trade association has agreed to eliminate legacy agent commission policies. The National Association of Realtors agreed to pay $418 million to compensate U.S. home sellers under the Friday deal.
Home sellers who sued the NAR and several big brokerages claimed that the trade group's guidelines for homes listed on its affiliated Multiple Listing Services unjustly boosted agent commissions. They further claimed that the restrictions encouraged purchasers' agents to avoid viewing listings where the seller's broker offered a lesser commission.
Following the settlement, the NAR no longer requires brokers promoting MLS homes to pay buyer's agents upfront. The regulatory change allows individual house sellers to discuss proposals with a buyer's agent outside of MLS platforms, but the broker must disclose any pay arrangements.
The trade organization also required agents and others working with homebuyers to sign a formal agreement. That ensures homebuyers know their agent's fees. In mid-July, the regulation changes will revolutionize how real estate brokers have worked since the 1990s and potentially lead to cheaper agent commissions for consumers and sellers.
Agents representing buyers and sellers receive 5% to 6% compensation from sellers. Home listings contained “cooperative compensation” between agents on both parties, making this practice common.
The regulation modifications the NAR agreed to in the settlement may encourage property sellers and buyers to negotiate cheaper agent commissions.
“It may take some time for the changes to impact the marketplace, but our hope and expectation is that this will put a downward pressure on the cost of hiring a real estate broker,” said Robby Braun, an attorney in a 2019 Chicago federal lawsuit on behalf of millions of house sellers.
The NAR regulation changes may cut agent commissions and encourage some homebuyers to bypass an agent, according to Keefe, Bruyette & Woods analysts.
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