The National Association of REALTORS has settled a lawsuit with homeowners, and will end the standard 6% commission on home sales. The association will pay $418 million in damages, paid over four years, and the change is expected to result in more competition among realtors and reduced commissions that sellers pay. Homeowner lawsuits against the industry claim the rules make home sellers pay artificially inflated costs to sell their homes, without reasonable alternatives.
Commissions for both Realtors in a transaction are typically paid by the home seller, who pays both the buying agent’s and the selling agent’s fee; a 6% commission would be split between the two at 3% each in a cooperative compensation arrangement.
A $500,000 home with a 6% commission ends up costing $30,000 to sell. For a $1 million home, that commission is $60,000. If another set of realtors accept 3% commission, it would lead to a considerable savings to the home seller.
The settlement, which is subject to court approval, says NAR admits to no any wrongdoing in connection with the Multiple Listing Service cooperative compensation model rule, introduced in the 1990s.
“NAR has worked hard for years to resolve this litigation in a manner that benefits our members and American consumers. 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 goals,” said Nykia Wright, Interim CEO of NAR.
The settlement releases most NAR members and many industry stakeholders from liability in these matters.
In addition to the financial payment, NAR will enact a new MLS rule prohibiting offers of broker compensation on the MLS. While offers of broker compensation could not be communicated via the MLS, they will continue to be an option consumers can pursue off-MLS through negotiation and consultation with real estate professionals.
Further, NAR has agreed to enact a new rule that would require MLS participants working with buyers to enter into written agreements with their buyers. NAR continues, as it has done for years, to encourage its members to use buyer brokerage agreements that help consumers understand exactly what services and value will be provided, and for how much. These changes will go into effect in mid-July 2024.
An excellent result. Sales commissions on homes have been far too high for far too long. I can’t think of another industry where barriers to entry are so low and the requisite skills and knowledge are so innate and/or easily acquired. Nowadays, most people do their own research on Zillow or Redfin, and use the Realtor only to let them in the door for viewing. Most of the paperwork is done by title companies, and to top it all off, Realtors often play one buyer off against another by claiming that other offers are imminent, thereby pushing buyers to act. Let’s say the you’re working in the hot San Francisco or San Diego markets where homes routinely sell for 3-4 million. At 6% commission, how many do you need to sell each year to make a living? Not many. These changes are welcome, and long overdue. Happily, no monopoly lasts forever.
Maybe we should sue lawyers for charging people $300/hr for answering phone calls and email.
No kidding! There is alot that Attorneys should do, like follow the constitution.
Ha ha. Hopefully it’s coming. Can you imagine the uproar???😆
For Sale by Owner is the only way to go unless the seller wants to get schystered.
You are right J Hancock. However, you overlooked the reality that most sellers are too intimidated by the process to proceed without a brilliant, all knowing, insightful realtor to guide and protect them. Imagine that. Its nothing more than yet another symptom of the overall dumbing down of America.
Can anyone explain what the new deal will be for both the buyer and the home seller?
What is my bottom line financial exposure?
Too bad for all of us who have been taken advatage of for the past 40+ years. I’m very happy to see reforms beginning with this incredibly corrupt industry. There should be lots more to come, especially with regard to lawyers.
Be honest Reggie. You were never “taken advantage of” by a realtor. If you utilized one it was your own voluntary choice. Any of us can easily educate ourselves how to sell our own real estate. I’m not saying it’s easy to go up against the MLS monopoly but it’s quite do-able.
Wayne, I agree with you in the main, however, on occasion one finds a realtor who actually earns their commission.
Rare, I agree, but it does happen!
More than what you have in this article is going to happen. I’m looking forward to the changes in the MLS, which is at the most basic problem and use of the real estate industry. It is designed to allow the real estate person to make any change they want on any property they add to the database. Lordy, Lordy have they had fun with your pocket book and the banks. Any real estate person can up or down prices on a home or property by the calculation system designed in the database. They can put pending on a house going through foreclosure and make it appear it for sale or has been sold. Wow! What a job has been done on our whole country. And, over the last few years the Real Estate National Association has bought and lobbied congress to the tune of 52 billion dollars against the middle class and lower income families purchasing property to have a home. Now, that is GREED!!! And, there is more in the settlement than meets the eye and what can be told at this stage of the settlement. So, hang on and see what transpires.
How about the 50,000 or more that the municipality forces you to spend to replace your functional,but outdated by new codes, septic systems in order to sell your home? They don’t include this in your assessment for taxes but it is definitely a liability that determines the value of your house.
Exactly! Thanks for pointing that out.
Now they will find other ways to scalp the seller with engineering fees and permitting fees just to sell a home.
Cant afford to buy keep or sell. Keep it up ASSembly.
Ya man God forbid the city protect the environment by making a home owner update their septic system from one designed and installed 30 or 40 or 50 years ago. It is not like technology or environmental science has advanced in the past 5 decades.
It’s not like anyone in anchorage is on a single home septic you moron.
Take a look at the hillside.
Guess we should put diapers on our livestock as well. Speaking of wells, if the septic system wasn’t working right, the well water would be undrinkable. No homeowner would risk this. The only reason for the municipality outlawing our septic systems is to generate revenue. A badly functioning septic system is self evident and will be found in the home inspection. Plus, who would buy a home if the toilet doesn’t flush?
So what exactly is the change here? If I’m selling a property I WANT my agent to work on commission – it gives them the same goal I have which is to sell it for the highest possible price. I’ll admit I never did understand the idea of the buyer’s agent working on commission; their goal should be to get me the lowest possible price yet they are financially penalized for doing so.
More information is needed here. Are commissions being eliminated entirely? Or are “cooperative compensation agreements” being done away with making buyers responsible for paying their own agents? Or is it something else entirely?
This is the best news I’ve read in ages! It’s always annoyed me just how wealthy realtors have gotten for the very small amount of work that they provide. All they ever did was make a listing and put it on MLS and maybe generate a simple, copy/paste contract. It’s the title agency who does the lions share of the work. I’ve always despised that 6% rule. Magnificent news!
Uh oh, I guess Kevin Cross is retiring from the Anchorage assembly at the worst possible time (for him).
FSBO has always been the solution to these Kooks.
Hmmm, buyers better get ready to pony up some cash to their agents. Never sat well with me that I had to pay the agent working for the buyer.
So who gets the money? I have a $500,000.00 pluss home for sale in Hawaii but will not sell through a local Realtor for exactly that reason! What else I don’t think is right is the Money in a sale held by Title insurance company holding sale proceeds from the seller until the buyer records their new title. When in closing the seller provides a Warranty Deed that money at closing should be given to the seller at that time not days later! That’s called “point of sale ” transfer of goods & payment, it works that way in any other consumer sales. This happened to me last year on the Kenai Peninsula without notice! Title insurance companies should not benefit from this kind of sales activity!
Simple solution folks, just don’t use a real estate professional. Simple! Do it yourself. Go for it. These same people who whine about paying a fee (usually a lot lower than 6%) that they agree to in contract are the same people who complain about all the wealthy state employees. Why do they make so much money? Class warfare socialists. “I want my share! It’s not fair!” Greed and envy aren’t good character traits folks.
Title insurance saved my bacon when a recent road expansion threatened my home. Turned out that the DOT was overstating their easement and told me that I had to tear down my house. The legal fees involved in proving them wrong would have been too much to bear, but the title company was obligated to represent me. The best money I ever spent was on my title insurance. I certainly didn’t feel this way when I bought the place.
I feel so terrible that the above comments are the only opinions shown about Realtors. I have been one for over 30 years and I would like to say a few words. Although there are some that would fit into these definitions, 90% of us are just trying to make a living as everyone else does. I am 77 and still doing some Real Estate because I love helping people and do have a lot of helpful knowledge to share – even though the majority of you don’t believe that. The first thing I would like to say is sales commissions have always been negotiable. Just because you may believe you overpaid, that is not our fault. Secondly, the commission is split with the selling licensee. We offer (generally half) of what we negotiate with a seller to all licensees representing buyers. That is part of our marketing. If we put a low commission for the selling office into MLS then how would that affect the sale of your house?. The average buyer is struggling to come up with a down payment and closing costs. Often they want to ask the seller to pay those. Coming up with funds to pay a Realtor to represent them is not as hard for a 2nd home buyer as it is for a first. The VA has solved this problem by allowing zero down loans. Not everyone is a vet. In paying local, State and National dues; to keep our licenses active with continuing education (required); to print marketing materials, write ads for different publications and keep track of it all takes our time and money. If you look at national statistics, we only bank about 1/2 of the commission as income. Since we are independent contractors, we have to pay for our own health insurance and other things that a company, union or employer would pay for you. To answer the one person’s question about Title holding funds, they only hold them until the existing loan is paid off by the new loan. Title companies are a necessary part of any transaction to obtain clear title.
Kevin Cross will do fine as he is a good Realtor. The last few years have been so different in the Real Estate Market. Properties are flying off the shelf with multiple offers. That is not always the case and newer agents have not learned all the tricks of selling properties in a down market. The market always goes up and down. It is either a buyer’s or seller’s market. If you choose a good Licensee, do your homework and ask questions, you may find that getting this type of help is a valuable part of buying a house.
Realtors commissions in the UK average about 1.5%. So why do agents in the US need 6%
Realtors commissions in the UK average about 1.5%. So why do agents in the US need 6%
Realtors commissions in the UK average about 1.5%. So why do agents in the US need 6%
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