The latest breaking updates, delivered straight to your email inbox.
A powerful real estate trade association has agreed to pay $418 million and change its rules to settle lawsuits claiming homeowners have been unfairly forced to pay artificially inflated agent commissions when they sold their home.
Under real estate rules used for decades, when a home is sold, the seller uses a portion of the proceeds, typically about 6 percent, to pay both their own real estate agent and the buyer’s agent.
But in more than a dozen lawsuits across the country, sellers sued the National Association of Realtors saying it’s unfair to force them to pay agents on both sides of the deal and that doing so drives up prices.
“It’s one of the only areas in our country where you’re actually paying somebody who was actually working on the opposite side of a transaction. That’s no longer going to be the case. Now when you go to sell a home, you’re not required to do that,” said Michael Ketchmark, plaintiffs’ attorney.
The National Association of Realtors said Friday that its agents who list a home for sale on a Multiple Listing Service, or MLS, will no longer be allowed to use the service to offer to pay a commission to agents that represent potential homebuyers. The rule change leaves it open for individual home sellers to negotiate such offers with a buyer’s agent outside of the MLS platforms, however.
Video: Massive settlement changing real estate business
Some real estate experts predict they could lead to homebuyers and sellers negotiating lower commissions, and therefore, cheaper housing. But a former president of the Massachusetts Association of Realtors predicts the impact will be limited.
“I think that people have been forever involved in home purchases. The realtors are going to have to be a little more defined about the process. But I think with the proper training, everybody’s going to be just fine,” said Laurie Cadigan, Barrett Sotheby’s International Realty.
NAR also agreed to create a rule that would require MLS agents or other participants working with a homebuyer to enter into written agreement with them. The move is meant to ensure that homebuyers know going in what their agent’s service will charge them for their services.
The rule changes, which are set to go into effect in mid-July, represent a major change the way real estate agents operate.
The NAR faced multiple lawsuits over the way agent commissions are set. In October, a federal jury in Missouri found that the NAR and several large real estate brokerages conspired to require that home sellers pay homebuyers’ agent commission in violation of federal antitrust law.
The jury ordered the defendants to pay almost $1.8 billion in damages — and potentially more than $5 billion if the court ended up awarding the plaintiffs treble damages.
The NAR said the settlement covers over one million of its members, its affiliated Multiple Listing Services and all brokerages with a NAR member as a principal that had a residential transaction volume in 2022 of $2 billion or less.
The settlement, which is subject to court approval, does not include real estate agents affiliated with HomeServices of America and its related companies, the NAR said.
Video: Mass. real estate prices starting to drop in sought-after towns
Hearst Television participates in various affiliate marketing programs, which means we may get paid commissions on editorially chosen products purchased through our links to retailer sites.
