{"id":3834,"date":"2024-03-19T11:03:02","date_gmt":"2024-03-19T15:03:02","guid":{"rendered":"https:\/\/www.deeds.com\/articles\/?p=3834"},"modified":"2024-06-16T23:12:03","modified_gmt":"2024-06-17T03:12:03","slug":"legal-update-nars-ready-to-settle-its-lawsuit-heres-what-home-sellers-and-buyers-stand-to-gain","status":"publish","type":"post","link":"https:\/\/www.deeds.com\/articles\/legal-update-nars-ready-to-settle-its-lawsuit-heres-what-home-sellers-and-buyers-stand-to-gain\/","title":{"rendered":"Legal Update: NAR\u2019s Ready to Settle Its Lawsuit. Here\u2019s What Home Sellers and Buyers Stand to Gain."},"content":{"rendered":"\n
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Sellers could soon be spending less to sell their homes. This month, after previously vowing to fight<\/a>, the National Association of REALTORS\u00ae (NAR) gave in and made a major change, in order to release itself from lawsuits.<\/p>\n\n\n\n

NAR and several brokerages were claimed to have colluded to keep agent commissions high. But soon, if a new settlement agreement goes through, there\u2019ll be no more \u201cagent commission\u201d box in the listings at all. NAR also agreed to pay out $418 million in the settlement signed on March 15, but not yet filed with the court. The New York Times<\/em> first got a copy of the document.<\/p>\n\n\n\n

Assuming the court approves the settlement agreement, how will things change for anyone involved in a home sale?<\/p>\n\n\n\n

Let\u2019s unpack this story, Q&A-style.<\/p>\n\n\n\n\n\n\n\n

Q. How Many Sellers and Buyers Could This Affect?<\/h2>\n\n\n\n
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  1. Many. As of now, NAR-affiliated agents handle nine in ten home sales. From now on, instead of baked-in 6% broker fees, buyers and sellers will be negotiating for lower costs. Across millions of transactions, imagine the amount of money that\u2019s freed up, changing the dynamics of a deal. As The New York Times <\/em>put the point: \u201cHousing experts said the deal, and the expected savings for homeowners, could trigger one of the most significant jolts in the U.S. housing market in 100 years.\u201d<\/li>\n<\/ol>\n\n\n\n

    Q. What Practice Did NAR Agree to Stop?<\/h2>\n\n\n\n
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    1. NAR has long expected home sellers to agree to a commission (5-6% of the home sale price, to be split by the seller\u2019s and buyer\u2019s agents) when listing homes for sale through the Multiple Listing Service (MLS) database. Based on the new settlement document, NAR will delete that charge from the fill-in form. This means sellers won\u2019t have to sign up to cover both sides\u2019 commissions up front.<\/li>\n<\/ol>\n\n\n\n

      Q. What\u2019s the Matter With Expecting Sellers to Cover Commissions?<\/h2>\n\n\n\n
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      1. When there\u2019s no negotiation, professional fees can be set artificially high. This is why U.S. brokerages and agents have high fees, compared to their counterparts in other countries. Current practice also leads to a type of steering, in which agents might skip showing their clients homes that aren\u2019t NAR-affiliated.  <\/li>\n<\/ol>\n\n\n\n

        Q. So, Fees Could Drop for Home Sellers?<\/h2>\n\n\n\n
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        1. Yes, that\u2019s likely. If brokers can\u2019t embed a 6% fee into the listing, agents will have to negotiate rates, and this could bring about substantial savings for sellers. Fees could be slashed by up to 30%, The New York Times<\/em> has reported. Say the seller puts a home on the market for $250,000. This would mean signing up to pay some $15,000 in agent fees. And what seller wouldn\u2019t want to see that price get a 30% haircut?<\/li>\n<\/ol>\n\n\n\n

          Q. Will Agents Feel an Impact?<\/h2>\n\n\n\n
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          1. Yes. Agents will not need to belong to (pay fees to) a local MLS in order to function. That opens up more opportunities and creates more competition. Some agents will cheer the change. Buyers, they\u2019ll say, should be paying for their agents directly. Some say clients should pay on a per-service basis so the agent doesn\u2019t have to deal with no-shows.  <\/li>\n<\/ol>\n\n\n\n

            Q. Does This Mean Agents Aren\u2019t Worth What We Pay Them?<\/h2>\n\n\n\n
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            1. No. Agents can save deals. Good agents bring immense value to their clients. But this is not what the lawsuit\u2019s about. A buyer\u2019s agent will now have to explain that value to the client; it won\u2019t be presumed. If this settlement agreement goes through, buyers will starting talk fees with their agents \u2014 and what the buyer will get for those fees!<\/li>\n<\/ol>\n\n\n\n

              Note: <\/em><\/strong>Agents\u2019 commissions, even though they are tied to the MLS today, are already negotiable. Yet many buyers have been paying 5-6% commission because it\u2019s an industry standard, and written into the listing.  <\/p>\n\n\n\n

              Q. If There Were No Commissions, How Would We Pay Our Agents?<\/h2>\n\n\n\n
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              1. Richmond Federal Reserve Bank economists recently proposed a per-service or what they call \u00e0 la carte<\/em> pricing method for buyers\u2019 agents. They say it would cut total commissions paid to brokers some $30 billion. Buyers and sellers would each pay their agents independently, and it could be a standard fee for a particular service, without being linked to the home price. Perhaps commissions would get paid to good agents in that new normal, too. Some agents might choose  to set hourly or per-service rates.<\/li>\n<\/ol>\n\n\n\n

                Q. How Will the Seller\u2019s Experience Change?<\/h2>\n\n\n\n
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                1. If the agreement goes through, some homeowners could become interested in putting their homes on the market. The change to the MLS would essentially be a discount for selling. But we need to say more. Because this, in turn, could add to the supply of starter homes for sale. In general, when fees are lower, more deeds get conveyed!   <\/li>\n<\/ol>\n\n\n\n

                  Q. How Will the Buyer\u2019s Experience Change?<\/h2>\n\n\n\n
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                  1. Buyers will have to cover their own agent\u2019s fees! Yikes! But seriously, we know buyers ultimately cover those fees, when buying the home and taking on a mortgage. So, although some object that the buyer will have to pay their agent, buyers do so anyway, and now they\u2019ll likely pay less. Paying less on a loan every month can add up to impressive savings over time. In short, the days of a standard 3% per agent will be over. Buyers might even get homes for under listing price, if sellers don\u2019t have to cover the 6%.<\/li>\n<\/ol>\n\n\n\n

                    Q. Does Tech Innovations Helping to Press the Industry to This Point?<\/h2>\n\n\n\n
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                    1. Yes. Online and app-based companies surely play a part in this. They enable today\u2019s buyers to do a lot of the legwork using county websites and real estate sites to locate homes and evaluate markets. Maybe there\u2019s a certain irony to it, as increasingly web-based real estate companies now face a kind of disruption to their businesses that their own production of information creates?<\/li>\n<\/ol>\n\n\n\n

                      Overall, Who Are the Big Winners?<\/h2>\n\n\n\n

                      NAR is finally out of the business of forcing homeowners to pay inflated commissions<\/em>.<\/p>\n\n\n\n

                      \u2014 Michael Ketchmark<\/a>, attorney for the Missouri home sellers, as quoted in The New York Times <\/em>(Mar. 2024).<\/p>\n\n\n\n

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                      Count Michael Ketchmark among the winners. And the other winners are\u2026<\/p>\n\n\n\n