End of the 6% Commission Era: NAR’s Landmark Settlement

In a groundbreaking development poised to reshape the landscape of home buying and selling, the National Association of Realtors (NAR) reached a pivotal settlement on Friday, putting an end to longstanding antitrust lawsuits and fundamentally altering commission rules.

Sweeping Changes Ahead

The settlement, amounting to $418 million in damages, signals a significant departure from the traditional 6% commission structure. Under the new agreement, NAR, representing over 1 million Realtors, will implement a series of transformative measures. These include prohibiting agents’ compensation from being listed on local centralized portals, eliminating requirements for broker subscriptions to multiple listing services, and mandating written agreements between buyers’ brokers and their clients.

Impact on the Market

The ramifications of this agreement are profound. The prevailing model, where sellers cover both their broker’s and the buyer’s broker’s commissions, faces imminent dismantling. Real estate commissions are expected to plummet by 25% to 50%, paving the way for alternative selling models like flat-fee and discount brokerages to gain traction.

Market Response

The news triggered a sharp decline in shares of real estate firms Zillow and Compass, reflecting concerns over reduced commission rates potentially curbing business for real estate platforms. Conversely, homebuilder stocks surged, indicating optimism about the settlement’s potential to lower transaction costs.

Future Outlook

Norm Miller, a real estate professor, hailed the settlement as the most significant housing market shift in a century. While the full implications remain uncertain, Miller anticipates increased homebuying activity as costs plummet, fostering a more competitive market where buyers can shop around for favorable rates.

Reforming the Industry

Benjamin D. Brown, managing partner of Cohen Milstein Sellers & Toll, underscored the settlement’s transformative impact, heralding it as a victory for millions of Americans affected by anticompetitive real estate practices. The agreement empowers future home sellers and injects much-needed fairness into the system.

Continued Challenges for NAR

While the settlement marks a significant milestone, the NAR continues to grapple with ongoing leadership turmoil and scrutiny from the US Department of Justice. Tracy Kasper’s resignation as president and Bob Goldberg’s departure as CEO underscore the turbulent times faced by the association.

Moving Forward

As the real estate landscape undergoes unprecedented change, the settlement sets the stage for a more transparent and competitive market, benefitting both consumers and industry professionals alike.