The cost of selling a home could soon go down after the National Association of Realtors agreed to a historic settlement.
The powerful trade group, which represents more than 1.5 million real estate agents, reached a nationwide settlement with groups of home sellers who accused the NAR of conspiring to keep broker fees artificially high.
In addition to paying $418 million in damages, the NAR agreed to stop requiring that sellers pay both their broker and a buyer’s broker. Housing experts say the longtime industry standard of a 6% commission is expected to fall 25% to 50%, according to TD Cowen Insights. That could mean significant savings for both buyers and sellers.
At today’s 6% commission, a homeowner selling a $400,000 property will spend about $24,000 on broker fees, a cost that is passed on to the buyer. Depending on how much the new rules reduce commissions, that same homeowner could see their broker’s fee fall to about $12,000.
A ‘For Sale’ sign is posted on the lawn in front of a home on March 15, 2024, in Miami, Florida.
Joe Raedle/Getty Images
While the new rules are expected to lower home prices, experts say supply and demand together with the level of mortgage rates, will continue to be the biggest factors impacting the cost of a home.
Among other things, the landmark settlement requires buyers’ brokers to enter into written agreements with their buyers and forbids a broker’s compensation from being included on listings placed on multiple listing services, a move critics say led agents to steer customers to more expensive homes.
The deal brings an end to a multitude of antitrust lawsuits against the group. Last year, a federal jury in Missouri found the NAR and two brokerages liable for $1.8 billion in damages for conspiring to keep agent commissions high. Before Friday’s agreement, the two brokerages settled, but the NAR had vowed to appeal the case.
In a statement, the NAR says, “Continuing to litigate would have hurt members and their small businesses. While there could be no perfect outcome, this agreement is the best outcome we could achieve in the circumstances.”
Housing experts call the settlement the biggest shakeup in the housing industry in nearly a century, offering more transparency and competition. Alternative business models including flat-fee and discount brokerages could become more widespread, realtors will be allowed to advertise their fees and compete on commissions, and buyers will be able to shop around and choose lower-cost agents.
It may also force some realtors out of the industry over time, if more buyers opt to save money and choose not to use an agent in their home search.
A federal judge is expected to approve the settlement in the coming weeks, and experts say sellers and buyers should see those broker fees reduced by mid-July.
When it comes to selling a home, one of the biggest concerns for homeowners is the cost associated with the process. From real estate agent fees to closing costs, the expenses can quickly add up and eat into the profits of the sale. However, there is a historic settlement that can help lower these costs and make the selling process more affordable for homeowners.
The historic settlement in question is known as the Real Estate Settlement Procedures Act (RESPA), which was passed by Congress in 1974 to protect consumers from unscrupulous practices in the real estate industry. One of the key provisions of RESPA is the requirement for lenders and real estate agents to provide homebuyers and sellers with a Good Faith Estimate (GFE) of the costs associated with the transaction.
By providing a GFE, homeowners can get a clear breakdown of the fees and expenses they can expect to pay when selling their home. This transparency allows homeowners to shop around for the best deals and negotiate lower costs with their real estate agent and other service providers.
In addition to the GFE requirement, RESPA also prohibits kickbacks and referral fees between lenders, real estate agents, and other service providers. This helps to ensure that homeowners are not being steered towards higher-cost services in exchange for financial incentives.
Overall, RESPA has been instrumental in helping to lower costs for selling a home by promoting transparency and competition in the real estate industry. By being informed about their rights under RESPA, homeowners can take control of the selling process and save money in the long run.
In conclusion, the historic settlement of RESPA has been a game-changer for homeowners looking to sell their homes at a lower cost. By providing transparency and prohibiting kickbacks, RESPA empowers homeowners to make informed decisions and negotiate better deals with their real estate agents and service providers. So if you’re thinking about selling your home, be sure to take advantage of the protections afforded by RESPA to lower your costs and maximize your profits.
