The National Association of Realtors has reached a nationwide settlement of claims that the industry conspired to keep agent commissions high, it said Friday, a deal set to usher in the biggest changes to how Americans buy and sell homes in decades.
The $418 million agreement will make it easier for home buyers to negotiate fees with their own agents and could lead more buyers to forgo using agents altogether, which has the potential to drive down commission rates and force hundreds of thousands of agents out of the industry.
NAR agreed to abandon longstanding industry rules that have required most home-sale listings to include an upfront offer telling buyers’ agents how much they will get paid. Under a system in place for a generation, sellers have typically set buyers’ agents fees. Consumer advocates say the arrangement has prevented buyers from negotiating to save money and kept commissions in the U.S. higher than in most of the world.
NAR has said the current model helps buyers benefit from an agent’s advice even if they can’t afford to pay an agent out of pocket.
If the settlement is approved by a federal court, listings of homes for sale in most parts of the country would no longer include upfront offers to buyers’ agents starting in mid-July, and buyers would be able to negotiate compensation upfront with their agents.
Buyers are likely to be more price conscious when selecting an agent and might opt to save money by not using an agent at all, or by paying their agent a smaller fee in exchange for limited services. For example, a buyer could pay an agent to put together an offer and review an inspection report, but not to accompany the buyer on home tours.
The agreement is the answer to months of uncertainty and mounting legal threats to the residential real-estate industry. NAR, one of the nation’s most powerful trade groups, has been facing crippling antitrust liability since a Kansas City, Mo., jury delivered a $1.8 billion verdict against the organization and two national brokerages in October. The jury found that industry rules for how buyers’ agents are paid were keeping commission rates artificially high.
The settlement will resolve wide-ranging legal exposure for the industry, which has been facing a series of antitrust lawsuits similar to the Kansas City case. Separate litigation in Chicago, which appeared headed for trial later this year, could have threatened a damages award of more than $40 billion. State and local Realtor associations, some brokerage firms and Realtor-owned multiple-listing services are covered by the agreement.