Real Estate

4 Ways a Settlement Could Change the Housing Industry

In the early hours of Friday morning, the National Association of Realtors agreed to a global settlement deal that would resolve several lawsuits against the trade group.

A group of Missouri home sellers sued N.A.R. over their policies on agent compensation, arguing that a N.A.R. rule requiring home sellers to pay commissions to their agents and the agents of their buyers led to inflated fees and price fixing. The lawsuit also called into a question another rule requiring agents to list homes on N.A.R.-affiliated databases in order to sell them. In October, a jury agreed that both practices were anticompetitive, and a judge ordered damages of at least $1.8 billion.

More than a dozen copycat cases, all accusing N.A.R. of stifling competition and violating antitrust laws, have followed.

With the settlement agreement, N.A.R. will pay $418 million in damages, but more important, it has agreed to rewrite a number of rules that have long been central to the U.S. housing industry. Here’s how things stand to change, pending court approval.

Home prices will drop.

In the United States, most agents specify a commission of 5 or 6 percent, paid by the seller. That means that someone with a $1 million home should expect to spend up to $60,000 on real estate commissions alone, with $30,000 going to his agent and $30,000 going to the agent who brings a buyer. Even for a home that costs $400,000 — close to the current median for homes across the United States — sellers are still paying around $24,000 in commissions, a cost that is baked into the final sales price of the home.

With the settlement agreement, sellers’ agents will no longer be required to make offers of commission to buyers’ agents, a practice called decoupling. This will save homeowners billions.

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