The NAR agreed to settle after a series of lawsuits accused the organization of conspiring to artificially inflate home sale commissions.
However, many economists and real estate agents are concerned about the burden this will place on first-time homebuyers — especially moderate- to middle-class people, many of whom are Black and Latino families. According to the New York Times report, buyers and sellers are now responsible for paying their own agents (versus expecting the seller to pay a single commission).
Coming up with the additional funds to cover these costs, in addition to the down payment and closing costs, may inevitably push some families out of the housing market before they could even get in.
The end of the 6% commission fee?
Ryan Tomasello, an analyst for investment banking firm Keefe, Bruyette & Woods, published a report in October prior to the settlement. In it, he predicted changes to the commission structure could lead to a 30% reduction in the $100 billion Americans pay in real-estate commission fees each year.
What’s more, Tomasello said it could drive more than half of the nation’s 1.6 million realtors out of the industry.
Real estate agents across the U.S. typically charge a commission between 5-6% — one of the highest rates in the world — that is often divided equally between the buyer’s agent and the seller’s agent.
However, recent lawsuits argued the NAR stifled competition among real estate brokers and violated antitrust laws by requiring the seller’s agent to make an offer of payment to the buyer’s agent and implementing rules that led to steep standard commission fees.
This settlement means the NAR can no longer set any rules that would allow a seller’s agent to set compensation for a buyer’s agent. The association’s Multiple Listing Service (MLS) — which buyers and sellers use to view for-sale properties — will no longer feature any fields offering broker compensation either.
Experts say the agreement — and potential slide in commission fees — could revive the sluggish housing market.
“This will be a really fundamental shift in how Americans buy, search for, and purchase and sell their housing. It will absolutely transform the real estate industry,” said Max Besbris, an associate professor of sociology at the University of Wisconsin-Madison, according to The New York Times.
