3 Major Impacts of the Lawsuit Against the Realtor Association 
In recent weeks, the real estate world has been abuzz with news of a landmark legal settlement between the National Association of Realtors (NAR) and homesellers. This groundbreaking agreement marks a significant turning point in the industry, promising to reshape the dynamics of home buying and selling. But what does this mean for homebuyers now, and when can they expect to see the effects of this historic settlement? We summarize the 3 major impacts below but first, here’s what happened:
Understanding the March 2024 Settlement
The NAR legal settlement stems from antitrust lawsuits brought on by homesellers, alleging that the association’s practices artificially inflated real estate commissions, ultimately driving up costs for buyers. In response to mounting pressure and facing the prospect of having to pay out even higher damages, the NAR has agreed to pay $418 million in damages and waive their right to appeal the decision.
The settlement also dismantles the standard 6% commission model, where sellers traditionally foot the bill for both their broker and the buyer’s broker but understandably, price their homes to incorporate these additional fees. This significant change is expected to dramatically reduce the costs associated with purchasing a home, potentially saving buyers thousands of dollars. With the current average home price of $417,000 and real estate commissions projected to decrease by 25% to 50%, American homebuyers could see savings ranging from $6,000 to $12,000.
1. Impact on Homebuyers
While the full effects of the settlement are yet to unfold, homebuyers can anticipate these key changes:
- Reduction in home prices.
Up to this point, sellers have generally been expected to pay the 6% commission to be split between the listing agent and buyer’s agent. Each agent usually receives 3% of the final sale price although the specific commission split may vary depending on the agreement between the agents and their brokerage. As expected, the seller’s home is priced to reflect the commissions they will have to pay once the home has been sold but after this NAR settlement, since sellers will need to pay less commissions, the price of the home will reflect their net gain. - Buyers can negotiate their agent’s commission rate.
The commission rate will no longer be included in the price of the home and buyers will be able to negotiate what their brokers will receive prior to beginning their home search. - Increased transparency on what you’re paying your agent.
Buyers will have greater flexibility to negotiate commission rates with their agents and explore alternative brokerage models, such as flat-fee, discount, and a la carte services. This newfound transparency empowers buyers to make more informed decisions and select agents that align with their budget and preferences.
2. Impact on Real Estate Brokers
With the elimination of the standard 6% commission model which has been the industry standard for the past several decades and the expected reduction in real estate commissions, Realtors are facing a shifting landscape that demands adaptability, innovation, and demonstrated service. This settlement opens the door to increased competition among brokers, as buyers gain greater flexibility to negotiate commission rates and have the options to choose real estate services based on their specific needs and comfort level with the homebuying process.
The emphasis on transparency and consumer choice also highlights the need for brokers to differentiate themselves based on the quality of their service, expertise, and value proposition. While the settlement presents challenges for brokers accustomed to traditional commission structures, it also offers opportunities for those who have built a reputation of exceptional service and have a network of reliable resources.
3. Impact on Homesellers
So, where is the $418 million dollars being paid by the NAR going anyways? If you sold a home during the timeframe outlined in the class action lawsuit, it could be you. To learn more and find out if you might be eligible, visit: RealEstateCommissionLitigation.com
The settlement will be paid by the association over four years and placed in a trust controlled by the court. It will mainly be distributed to homesellers identified in the antitrust lawsuits against the association to compensate them for alleged overcharges resulting from the association’s practices related to real estate commissions through a court approved distribution plan.
In addition to compensating homesellers, some of the funds may also be put towards covering the legal fees, administrative costs, and other expenses associated with resolving the lawsuits. Any remaining funds after distribution and expenses may be put towards other purposes outlined in the settlement agreement or as determined by the court overseeing the case.
Timeline for Effects
The legal settlement is expected to be implemented by mid-July 2024 with the new compensation rules going into effect several weeks thereafter. The exact timeline for these changes will depend on a number of things, including the legal approval process for the settlement and the implementation of new regulations by NAR. While the full effects may take time to materialize, buyers can look forward to a more competitive and consumer-centric industry in the near future.
The Future of Homebuying
As we look towards the future, one thing is clear: the days of the traditional commission model are numbered, and a new era of empowerment and opportunity awaits homebuyers nationwide. It has never been more important to find trustworthy home buying partners who understand your specific needs and have a track record of proven dedication.
This blog post is for informational purposes only and is not intended as financial or real estate advice. Consult with a professional advisor before making any significant financial decisions.