National Association Of Realtors Settle Lawsuit Upending Decades-Long Commission Policy

The National Association of REALTORS® (NAR) announced a settlement deal that could alter the cost of hiring real estate agents and upend a decades-old policy that helped determine broker commissions.

The proposed agreement is anticipated to resolve multiple class action lawsuits brought on behalf of home sellers across the United States. The litigation accused the industry group of artificially inflating real estate commissions that home sellers have traditionally paid 5 to 6 percent of the sale price.

According to consumer advocates, the policy change has the potential to lower home sellers’ fees, aligning closer to the “true value” of real estate agents’ services.

Though NAR continues to deny any wrongdoing, the Association has agreed to pay $418 million over four years.

“NAR has worked hard for years to resolve this litigation in a manner that benefits our members and American consumers,” said Nykia Wright, Interim CEO of NAR. “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.”

A common fear has emerged among industry insiders that this new change may persuade some homebuyers to skip using an agent altogether. Radius Agent Richard Szerman, however, is doubtful home sellers will shift away from using an agent, but rather Szerman predicts more use of cut-rate “you get what you pay for” realtors.

NAR has disputed initial media reports that the group sets commissions and that they have always been “negotiable.” According to NAR officials, the new agreement requires listing brokers to communicate an offer of compensation, which could be any amount, including zero.

The policy change gives the consumer greater insight into setting an agreed-upon number prior to rendering any services.

After the initial “chaos” settled, Szerman raised an impending issue for buyers.

“My concern is most buyers, especially first time and minority buyers, will not be able to afford good representation,” said Szerman. “So there’ll be a lot of lawsuits over agent conduct and misrepresentation of buyers.”

Szerman also raised the red flag for the possibility of “do-it-yourself” or “write-your-own-offer” websites.

“My wife is a real estate attorney so I expect her practice to get very busy over the next 12-18 months,” said Szerman.

The settlement deal still needs approval from the court, if approved, the deal would go into effect by July of this year.

NAR is America’s largest trade association, representing more than 1.5 million members involved in all aspects of the residential and commercial real estate industries. The term REALTOR® is a registered collective membership mark that identifies a real estate professional who is a member of the National Association of REALTORS® and subscribes to its strict Code of Ethics.

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