Forget Realtors? NAR Settlement Could Save You Money

The National Association of Realtors (NAR) has agreed to change its commission rules to settle allegations that its practices stifled competition, potentially lowering consumer costs.

This settlement, pending court approval, could significantly impact the housing market by reducing agent commissions, traditionally 5% to 6% of the home sale price. Critics argue that the current model, which requires listing agents to offer compensation to buyer’s agents, has kept commission rates high and limited competition.

The settlement will see NAR pay $418 million and prohibit compensation offers on its multiple listing services, aiming to increase competition and lower costs.

This could lead to various new payment models between buyers, sellers, and agents, potentially reducing overall commission rates and affecting real estate agents’ income. The changes are seen as a way to increase market efficiency and lower home prices by allowing more homeowners to afford to sell their properties.

The settlement could lead to lower home prices. Changing the commission structure and increasing competition among real estate agents could decrease the costs associated with buying a home.

This is because the current system, where buyer agent commissions are indirectly passed on to buyers through higher home prices, might be altered. If buyers start paying their agents directly, or if there are more flexible payment models, it could increase the number of homeowners able to afford to sell their homes.

This increase in supply could help put downward pressure on home prices, making them lower than they would have been under the previous commission rules.

Yes, the settlement could significantly impact real estate agents’ income. Since agents typically earn a commission based on the sale price of the homes they help buy or sell, a reduction in commission rates could decrease their earnings.

The traditional model, where sellers pay a 5% to 6% commission split between the listing and buyer’s agents, might see changes that drive down these percentages. Additionally, with the possibility of buyers directly negotiating fees with their agents or choosing not to use an agent at all, the overall commission pool could shrink.

This could be particularly challenging in a market where home sales are declining due to higher mortgage rates, as noted with the loss of NAR members in California. Agents who cannot demonstrate their value to clients might find it especially difficult to maintain their income levels.