Realtors' 6% commission on buying, selling homes eliminated: Here's why
The National Association of Realtors (NAR) has announced a groundbreaking court settlement that will revolutionize the landscape of home sales in the United States. In a move expected to bring significant savings to home sellers nationwide, the trade group has agreed to pay $418 million in damages and eliminate its rules on commissions, meaning goodbye to the standard 6% commission for real estate agents in the U.S.
Here's what you need to know about this groundbreaking change:
Increased Competition and Lower Commissions:
With the elimination of the standard commission, real estate agents will now face heightened competition for business. As a result, many agents are expected to lower their commissions to remain competitive in the market.
Potential Reduction in Commissions:
Experts predict that this change could lead to a substantial reduction in commissions, potentially by as much as 30%. This decrease in commission rates has the potential to drive down home prices across the board.
Impact on Home Buyers and Sellers:
Real estate commissions in the United States total approximately $100 billion annually. With commissions potentially dropping by 30%, this could translate to tens of billions of dollars in savings for American home buyers and sellers each year. For example, a seller of a $500,000 home could save $9,000 or more on a 3% commission instead of the previous 6%.
Significant Impact on Housing Market:
The elimination of the standard commission is expected to have a profound effect on the U.S. housing market. Housing experts predict that this change could trigger one of the most significant transformations in the market in the past century, driving down housing costs and reshaping the dynamics of buying and selling homes.
Advice for Home Sellers:
If you're planning to sell your home soon, it may be beneficial to consider waiting to list until new lower-commission models emerge. Alternatively, you can negotiate commission rates aggressively with your real estate agent to maximize savings.
Home prices in the US could drop following realtors' settlement: Here's how much
Here's how much you could save if real estate commissions drop by 30%, as some experts are predicting after today's National Association of Realtors settlement.
The settlement, announced Friday, follows a series of lawsuits against NAR alleging antitrust violations in the real estate industry. The lawsuits, brought forth by plaintiffs including 500,000 home sellers in Missouri and border towns, accused NAR and residential brokerage companies of conspiring to keep commissions for home sales artificially high.
Industry experts anticipate that the elimination of NAR's commission rules will disrupt the market and usher in a new business model for real estate agents. Michael Ketchmark, one of the attorneys representing the plaintiffs, highlighted the significant financial impact, estimating that excessive real estate commissions have been costing Americans approximately $60 billion.
A Missouri jury's verdict in November found NAR and several brokerage companies guilty of violating federal antitrust laws, resulting in a collective $1.78 billion in damages owed. However, following appeals, the parties reached the settlement announced Friday.
Under the terms of the settlement, NAR agents listing homes for sale on Multiple Listing Services (MLS) will no longer be permitted to offer to pay commissions to agents representing potential homebuyers through the service. This rule change opens the door for individual home sellers to negotiate commission offers with buyer's agents outside of MLS platforms.
Additionally, NAR has agreed to implement a rule requiring written agreements between MLS agents or other participants and homebuyers, ensuring transparency regarding service charges. The settlement mandates the removal of broker compensation fields from MLS databases, a move with significant implications for the future membership of NAR.
The rule changes are slated to take effect in mid-July, impacting over one million NAR members, affiliated Multiple Listing Services, and brokerages with a NAR member as a principal. Notably, agents affiliated with HomeServices of America are exempt from the settlement terms.
FOX Television Stations and the Associated Press contributed to this report.