Housing Market Upended By Commission Lawsuit

The National Association of Realtors on Friday agreed to pay hundreds of millions of dollars to settle cases brought against the organization over commissions and agreed to change the way real estate agents charge fees on home sales, a move that could transform the housing market.

The cases involved claims that the NAR, which boasts more than 1.5 million members, had been part of a system that disadvantaged sellers, overburdening them with high costs of selling homes and questioning the structure of multiple listing services that allegedly lacked clarity.

On Friday, the organization denied any wrongdoing but said it would pay $418 million over the next four years to end the cases and that it plans to change the rules of how agents charge for home sale transactions.

NAR said that it will place new multiple listing services rules that will forbid the offers of brokers of compensation on those platforms which could now be negotiated independently. It will also institute requirements of written agreements with buyers to provide more transparency through the housing sale process when it comes to fees. These rules are planned to come into effect in July.

“It has always been our goal to preserve consumer choice and protect our members to the greatest extent possible. This settlement achieves both of those goals,” Nykia Wright, interim CEO of NAR, said in a statement shared with Newsweek.

The settlement needs to be approved by the court to take effect.

The shift in the commission structure could remove the typical 6 percent fee that agents secure upon the sale of a home, which experts say could be the biggest disruption in the real estate sector in a century.

“This will blow up the market and would force a new business model,” Norm Miller, a professor emeritus of real estate at the University of San Diego, told the New York Times.

The fees total as much as $100 billion a year, according to an analysis by investment Keefe, Bruyette & Woods, whose experts say the new rules may cut that down by 30 percent, reported the Wall Street Journal last year.

On Friday, NAR acknowledged the shifts that will come into the sector as a result of the changes.

“NAR exists to serve our members and American consumers, and while the settlement comes at a significant cost, we believe the benefits it will provide to our industry are worth that cost,” Kevin Sears, NAR president, said. “We are committed to innovation and defining the next steps that will allow us to continue providing unmatched value to members and American consumers.”