The next time you buy a house, your costs might be a bit lower, thanks to a landmark settlement.
On Friday, the National Association of Realtors agreed to pay $418 million to settle numerous lawsuits and to end the practice of automatic commissions on home sales. For many years, real estate brokers collected up to 6% of the purchase price in such fees, split between the buyer’s and seller’s agents.
Going forward, buyers and sellers will be able to negotiate commissions with real estate agents prior to the sale of a home.
Recently, groups of home sellers had contended that the NAR — a trade group for the real estate industry — was working to keep the commissions paid to agents high.
Last November, a Missouri jury found that the NAR and other residential brokerages owed $1.78 billion in damages as part of a class-action lawsuit filed by a half-million home sellers, most of whom live in Missouri.
The real estate groups appealed the ruling, which led to Friday’s settlement.
Experts say the end of automatic commissions is likely to chase many real estate agents out of the business, which could push commission prices even lower, according to a CNBC report.
In fact, The New York Times reports that some experts now expect commissions could drop by about 30%. That would result in lower home costs for buyers.
In addition, more buyers might decide to skip using real estate agents altogether, according to a Wall Street Journal report. Or, buyers might use agents in a more limited capacity — such as paying an agent to put together an offer, but not asking the agent to accompany them when they look at homes.
In a statement issued after the settlement, Kevin Sears, president of the National Association of Realtors, said:
“NAR exists to serve our members and American consumers, and while the settlement comes at a significant cost, we believe the benefits it will provide to our industry are worth that cost.”
Friday’s $418 million settlement will be distributed nationwide to those who have recently sold homes, according to the WSJ.
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