Real Estate Settlement Will Change the Way Americans Buy and Sell Homes

By: Julia Mehalko | Published: Mar 26, 2024

The National Association of Realtors (NAR) has agreed to settle a lawsuit and pay $418 million in damages after being found liable for conspiring to boost agents’ compensations.

If this settlement is approved, this could completely change the way all Americans buy and sell homes. It could also change the housing market and how many real estate agents do their job.

A $418 Million Settlement

The National Association of Realtors agreed to pay $418 million after home sellers sued the organization. NAR was found liable for boosting real estate agents’ compensations. According to the court case, NAR worked to keep agents’ commissions unnaturally high.

An aerial view of many homes in a neighborhood, with a circular intersection in the road.

Source: Avi Waxman/Unsplash

Now that NAR has agreed to pay this settlement, it will have to be approved. If this settlement indeed goes through, then the real estate market could effectively change for both buyers and sellers.


How This Settlement Changes Commission

This settlement could completely change how real estate agents’ commission works when buying and selling a house. Currently, agents get a standard commission, no matter what.

A close-up view of a house key on a dark surface.

Source: Kelly Sikkema/Unsplash

However, once this settlement is approved, that could all change. Instead, an agent’s commission could become negotiable.

Selling Your House Before This Settlement

This lawsuit was brought by home sellers who realized that NAR was boosting up an agent’s commission on the sale of a house unnaturally. These artificially high commissions resulted in many sellers having to pay higher costs just to sell their homes.

Two people looking at white paperwork on the table in front of them, with one woman writing down information in a notebook.

Source: Gabrielle Henderson/Unsplash

This settlement will change this, which will likely result in sellers now being able to deal with lower costs when they set out to sell their property.

What Sellers Pay

On average, sellers have to pay about 5% to 6% commission based on the sale of the price of their home. This commission is often split between both a seller’s agent and a buyer’s agent.

An aerial view of a neighborhood with cars parked outside homes.

Source: Lesia/Unsplash

As brought up in this lawsuit, this working relationship — and the shared commission — leads to the buyer’s agent seemingly working for the seller. This can quickly become a huge conflict of interest.

Sellers Advertise Commissions

NAR rules currently require home sellers to advertise their buyer agent commission in the Multiple Listing Service database. This database allows agents to find the commission rate easily. However, buyers often don’t see these numbers.

An inside look at a new home’s marble white kitchen.

Source: Aaron Huber/Unsplash

This has led to the worry that agents are only seeking out higher-fee homes, which will put more money in their pockets.


Selling After the Settlement

If this settlement is passed, then this requirement would no longer exist. Sellers will not have to promise a standard commission for a buyer’s agent.

An older lady outside an old home watering flowers in her window.

Source: Ian MacDonald/Unsplash

Therefore, this means that a buyer’s agent will now no longer be paid as they once were — a move that will no doubt completely shake up the real estate industry. However, there are other ways a buyer’s agent could be paid, other than from the seller’s sold house.


How a Buyer’s Agent Could Get Paid

Instead of getting paid through a sold house, a buyer’s agent may instead get paid through a fee from the buyer themself. Other deals or negotiations could also occur between the buyer and their agent.

Two men walking together in an office building in the daytime.

Source: LinkedIn Sales Solutions/Unsplash

For example, the buyer could pay an hourly rate upfront as their agent searches for a house for them. A buyer could also agree with their agent to pay some type of a percentage of the sale price to their broker, once the sale goes through.


Buyers Don’t Need an Agent Now

However, this settlement could also allow many home buyers to not use an agent. Now, if you find a home online that you want to buy, you won’t have to pay a buyer’s agent commission as homebuyers did previously.

A close-up of a person holding keys in their hand in front of a door with locks.

Source: Maria Ziegler/Unsplash

This change could shift the entire real estate industry, especially as many people scroll through new homes to buy already on platforms like Zillow or Trulia.


Broker Fees May Drop

This settlement could end up allowing broker fees to drop quite a lot, all of which would only create more competition in a market that never really had it before.

A man and a woman sitting on a couch looking at a laptop together.

Source: LinkedIn Sales Solutions/Unsplash

Already, many analysts believe that online real estate brokerages may be able to thrive with a business model that offers low commission rates. “You’ll probably see a cottage industry of no-frills Realtors,” Marty Green, a Dallas real estate lawyer, said.


Sellers Could Still Cover a Buyer Agent’s Commission

Though many believe this settlement will disrupt the tradition of how a buyer’s agent’s fees are paid, many in the real estate industry say that a seller could still pay this agent’s fees.

A close-up of a man signing white papers.

Source: Scott Graham/Unsplash

According to the industry, a negotiation would have to be made when a home is in the process of being sold. This fee could therefore be negotiated as a type of concession.


Home Sellers Benefit From This Settlement

Home sellers can greatly benefit from this NAR settlement. If it’s passed, sellers will no longer have to pay more money to both their agent and their buyer’s agent.

The front steps and front door of a modern-looking home in a Utah neighborhood.

Source: Brian Babb/Unsplash

Instead, sellers will be able to keep more money from their sold house to themselves. As a result, without these fees attached, there is the chance that the price of homes could go down, as well.