Understanding the Impact of the NAR Lawsuit on Real Estate Commissions: What Buyers and Sellers Need to Know

Get the inside scoop on how the NAR lawsuit is changing real estate commissions! Don't miss out on what this means for buyers and sellers.

The mainstream media isn’t lying to you. 

They’re just headlining inaccurate information. Regardless of your politics, I have seen headlines from the major news outlets with something along the lines of “The Standard 6% Commission Is Gone” or “Sellers Will No Longer HAVE to Pay 6%”. 

One thing that needs to be made clear is that there is NO standard commission, and there hasn’t been. Sellers have ALWAYS been able to negotiate the commission that they pay their agent. More on this later.

Whether you are in the market to buy or sell a house, or not, knowing what the NAR (National Association of Realtors) settlement that would end the litigation claims can provide insight as to what the future might hold for you, or your friends and family.  

The Background on the NAR Lawsuit

Last year, a lawsuit argued that the NAR had violated antitrust laws by mandating that the seller’s agent (listing agent) make an offer of payment to the buyer’s agent, which led to an industrywide standard commission. The claimants won, indicating that the jury agreed that commissions were inflated due to the violation of antitrust laws.

RELATED: The $1.8 Billion Lawsuit That Could Change EVERYTHING In Real Estate

What’s This Realtor Lawsuit Have To Do With Me?

The NAR continues to deny any wrongdoing, and the settlement was proposed to achieve the goal of providing a resolution for the plaintiffs and reducing the strain on its members. The settlement will release liability of as many members, associations, and MLS (Multiple Listing Services) as they could. The changes outlined in the settlement are proposed to take place in July of this year in which how business is conducted will change and $418 million will be paid out over the course of approximately 4 years.

The (Near) Future

We could unpack this and discuss this lawsuit literally all day. But most of the discussion would be speculation – since the courts haven’t even approved the settlement yet. This approval could be relatively quick or could take several months. 

But here’s how business is conducted now. To list a property in the MLS an offer of compensation is required. Remember above when I said that headlines indicated there was/is a standard commission and sellers were required to pay it? Assuming the settlement is approved, and July is the start timeframe, commissions offered to a buyer’s agent will no longer be required in the MLS, and commissions offered to a buyer’s agent are prohibited from being listed at all. 

That’s okay! 

The commission will continue to be negotiable as it always has been. Just as repair costs and other items of a real estate contract are negotiated, the buyer’s agent commission will be part of that equation. Sellers can still offer to pay compensation to a cooperating broker who brings a buyer to their listing agent. It will just look different on the contract. 

The other requirement is that buyers will need to sign an agreement with their agent to find them a home and get them to closing. This agreement already exists! 

Some of you may have already had an agent have you sign one. Just as a seller enters into a written agreement with a listing agent. Now, buyers will do the same thing with an agent helping them buy a home. There are other components to the settlement, but these couple of points help to describe the overall scope: Who/how commissions are paid and entering into an agreement with your agent to buy a home.

RELATED: The Housing Market In 2024

Speculation. 

Talking heads have begun to speculate that the changes resulting from the lawsuit might drive home prices down now that the seller can negotiate or will not be paying the buyer’s agent. 

Time will tell on on whether or not the changes will bring price differences, but with supply, demand, and inflation, home sellers probably won’t reduce their prices.

This is good news for the consumer, home sellers and buyers, and good for agents as agents will need to do a great job of articulating their value to the buyer. Buyers will still want an agent to work on their behalf providing value and working on their side of the deal and cooperating with the listing agent.

Everything will be okay. Consumers will get to work with outstanding agents, and agents will be able to continue to be compensated for their work for their customers. More information will continue to come out, and there will be a learning curve, but being able to own real estate will still be a fantastic part of living in this country. Hug your real estate agent. Ask them questions. And, if they don’t know the answer, it’s okay because these are significant changes, and new and updated information will continue to pour out over the next several months.

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