Major NAR Settlement In Real Estate Litigation: Are Commissions About To Get A Lot Lower?

Author: Michael Cohen | March 15, 2024 04:29pm

In a landmark decision, the National Association of Realtors (NAR) chose to resolve allegations through a settlement that claimed the organization was responsible for inflating real estate commissions.

This development is anticipated to have significant repercussions for costs associated with real estate transactions for consumers.

As part of the tentative agreement, NAR, which represents around 1.5 million real estate agents, committed to disbursing $418 million over a span of four years to address multiple lawsuits. Additionally, the organization agreed to amend certain regulations, which, according to the complaints, facilitated the maintenance of 5 to 6 percent commission rates typically borne by home sellers, The Washington Post reports.

Despite agreeing to this settlement, NAR maintains its stance of denying any misconduct.

Nykia Wright, the interim CEO of NAR, expressed that further legal battles would have adversely affected their members and their small-scale enterprises. “While there could be no perfect outcome, this agreement is the best outcome we could achieve in the circumstances,” Wright said.

Industry-related stocks like American Tower Cor (NYSE:AMT), Equinix Inc (NASDAQ:EQIX), and RE/MAX Holdings Inc. (NYSE:RMAX) traded lower on Friday.

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Should the settlement receive approval from a federal court, the proposed changes in regulations are expected to be implemented by July. These insights were shared by a source involved in the settlement discussions, who preferred to remain anonymous due to the lack of authorization to speak publicly.

Michael Ketchmark, a legal representative for Missouri homeowners involved in one of the lawsuits, expressed optimism about the settlement’s potential to revolutionize the real estate market, according to the Post. He believed the agreement will significantly reduce the expenses related to housing and home sales, thus providing considerable savings to homeowners.

For over a century, the realtor association’s commission model stipulated an even split of a fee, typically ranging between 5 and 6 percent of the home’s selling price, between the agents representing the seller and the buyer.

However, homeowners from Illinois and Missouri challenged this structure in lawsuits, arguing that NAR’s policies unjustly elevated commission rates by mandating that selling agents offer a fixed compensation to be listed on the Multiple Listing Service, an essential database for selling homes.

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This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

Image created using artificial intelligence with Midjourney.

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