Your Home Selling Costs To Fall Following NAR Settlement
The standard 5% to 6% broker commission on home sales is about to become a thing of the past as the National Association of Realtors agrees to change rules.
The National Association of Realtors (NAR) has agreed to pay $418 million over four years and change certain rules to settle a series of lawsuits over the industry’s sales commission fees, a move expected to greatly decrease home-selling costs.
“No longer will homeowners be required under NAR rules to offer compensation to buyers agents," Michael Ketchmark, lead attorney for the plaintiffs in the case, told Kiplinger in an interview. The new rules "will return the sale of homes to the free market and allow technology to benefit sellers of homes."
Those changes will provide a huge opportunity for the cost of selling a home to drop dramatically, he added.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Under the settlement, which is pending court approval, NAR agreed to stop requiring homeowners to pay buyers agents commissions when they sell their homes, a practice in the U.S. that has been around for nearly 100 years, Ketchmark said. The average total commission rates in the U.S. — split between buyer and seller brokers — are 5% to 6% of the sale price, according to court documents.
NAR, which admits no wrongdoing in the case, has also agreed to draft new rules that prohibit broker compensation offers on its Multiple Listing Service (MLS) property database and that require MLS participants working with buyers to put their agreements in writing. These changes are set to become effective in mid-July.
The MLS has been used “as a vehicle for propping up and inflating commissions," Ketchmark said. “Probably the most significant part of the settlement is the changes to the way that homes are sold."
NAR, whose 1.5 million members make up the nation’s largest trade group, did not respond to a request for comment. In a statement, NAR sad it continues to encourage members to use buyer brokerage agreements that help consumers understand the services and value that will be provided.
“Ultimately, continuing to litigate would have hurt members and their small businesses,” Nykia Wright, interim CEO of NAR, said in the statement. “While there could be no perfect outcome, this agreement is the best outcome we could achieve in the circumstances.”
The settlement follows NAR’s loss in a district court case last October involving a conspiracy to artificially inflate commissions on home sales. A jury in that case ordered NAR and several real estate brokerages — including Berkshire Hathaway Energy-owned HomeServices of America — to pay about $1.8 billion in damages to roughly 500,000 home sellers in Missouri.
Non-negotiable commission rule challenged
In their suit, the home sellers challenged NAR’s rule requiring them to make non-negotiable commission offers to brokers to list their homes on MLS databases. A separate case involving similar charges and covering 14 states was also filed in Illinois.
NAR’s proposed settlement will resolve the Missouri and Illinois cases for all of those defendants — except for HomeServices of America, which is still litigating the Missouri judgement, Ketchmark said.
Wright said that NAR has worked hard for years to resolve the litigation “in a manner that benefits our members and American consumers.” The goal has been to preserve consumer choice and protect the group’s members to the greatest extent possible, she said, adding that the settlement achieves both of those goals.
The settlement is currently unavailable for the public to view but is expected to be filed next week. For more on the Missouri case, you can view the District Court for the Western District of Missouri Western Division filing here.
RELATED CONTENT
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
Esther D’Amico is Kiplinger’s senior news editor. A long-time antitrust and congressional affairs journalist, Esther has covered a range of beats including infrastructure, climate change and the industrial chemicals sector. She previously served as chief correspondent for a financial news service where she chronicled debates in and out of Congress, the Department of Justice, the Federal Trade Commission and the Commerce Department with a particular focus on large mergers and acquisitions. She holds a bachelor’s degree in journalism and in English.
-
A Modern Guide to Money Etiquette: Gifts, Tips, Splitting Bills and More
What is modern money etiquette? The customs for splitting a restaurant check, purchasing a wedding gift, tipping and more have evolved. These guidelines can help.
By Emma Patch Published
-
Want to Give Money to Your Adult Children? 10 Things You Should Know
It’s less taxing to give money to your adult children than you might think. A good plan can help you avoid certain pitfalls — and drama.
By Jeremy Greenfield Published
-
Succession Musts: Thoughtful Planning and Frank Discussions
When it comes to passing on the family business, you don't want anyone to be surprised about who will control or inherit the business after the owner's death.
By David Handler, J.D. Published
-
Is Harris’s $25k Down Payment Assistance Good or Bad for Homebuyers?
Democratic Presidential candidate Kamala Harris plans to offer $25,000 in down payment assistance for first-time homebuyers. But is this good or bad for the housing market?
By Erin Bendig Published
-
Electing to Be an S Corporation: Benefits You Need to Know
Entrepreneurs who meet the requirements and choose to be an S corporation could see lower taxes and experience several other advantages.
By Derek A. Miser, Investment Adviser Published
-
How to Spot a Contractor Who's Not Playing by the Rules
Being a general contractor is not a game, yet some misrepresent what they're licensed to do. Here's a cautionary tale, plus some signs to watch for that something's off.
By H. Dennis Beaver, Esq. Published
-
How to Create a Retirement Plan That Checks All Your Boxes
You might consider starting with a model retirement plan that has already been assembled and is ready to be refined to meet your objectives.
By Jerry Golden, Investment Adviser Representative Published
-
FTC Cracks Down: Fake Reviews Officially a No-No
Companies can no longer buy and post online reviews that aren't by actual customers — and there's a hefty fine involved. Here's what to watch for.
By H. Dennis Beaver, Esq. Published
-
Election Could Reshape Opportunity Zones and 1031 Exchanges
Trump and Harris have divergent approaches to qualified opportunity zones and 1031 exchanges. See how each could fare under their administrations.
By Daniel Goodwin Published
-
What Buyers and Sellers Need to Know About New Real Estate Rules
Buyers and sellers have more room to negotiate commissions, and that could reduce home prices over the long run.
By Sandra Block Published