The National Association of Realtors agreed Friday to settle a series of lawsuits from home sellers who alleged the trade association violated antitrust laws to hike up commission rates. File photo by Rishichhibber/Wikimedia Commons
March 15 (UPI) — The National Association of Realtors on Friday agreed to settle a series of lawsuits by paying $418 million in damages and eliminating its rules on commissions.
The deal, which still needs to be approved in federal court, would mark and end to all litigation claims against NAR from home sellers who argued the rules forced them to pay excessive commissions.
The rule changes would take effect in July if the deal is approved.
The lawsuits alleged NAR and its members violated antitrust laws by requiring seller’s agents to make an offer of payment to the buyer’s agent to be able to show the home on the Realtor’s Multiple Listing Service and setting rules that led to an industrywide standard commission.
Home sellers typically pay their agents a commission of 5% to 6%. If the buyer has an agent, the two agents split the commission among themselves. For a $400,000 home, that means an extra $24,000 tacked on to the final sales price of that home.
NAR praised the settlement in a statement Friday and continued to deny any wrongdoing regarding the rule.
“NAR has worked hard for years to resolve this litigation in a manner that benefits our members and American consumers,” Nykia Wright, Interim CEO of NAR, said in a release. “It has always been our goal to preserve consumer choice and protect our members to the greatest extent possible. This settlement achieves both of those goal.”
Without a guaranteed commission rate, agents could have to lower their commissions as they compete for business. Jaret Seiberg of TD Cowen Washington Research Group, in a note per Politico, speculated the agreement could bring down commissions by 25% to 50% later this year.
NAR said commissions will not fall significantly as they are set by the 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,” Max Besbris, an associate professor of sociology at the University of Wisconsin-Madison, told the New York Times. “It will prompt one of the biggest transformations to the housing market since New Deal-era regulations were put in place.”
Michael Ketchmark, lead attorney for the plaintiffs, said their victory “will bring about tremendous benefits to anyone who owns a home or dreams of owning one.”
“NAR is finally out of the business of forcing homeowners to pay inflated commissions,” he said.
The settlement would release NAR, along with Keller Williams and Re/Max from an $1.8 billion guilty verdict the suit reached in October.
Berkshire Hathaway, the country’s largest brokerage, which was also implicated in the case, has not settled.
Even with a guilty verdict dodged, the Justice Department’s antitrust division is continuing its investigation into NAR’s practices, including its oversight of MLS sites. The Justice Department has questioned whether these databases stifle competition and whether NAR’s rules beget price-fixing on commissions.
NAR has insisted it does not own MLS sites, but most of them are owned by Realtor associations that operate as NAR subsidiaries.
The Justice Department under former President Donald Trump agreed to end an investigation into NAR in 2020. President Joe Biden withdrew from the deal a year later, but a court rejected the withdrawal. The Justice Department now is challenging that ruling.