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What should homeowners know about the recent NAR settlement?

On Behalf of | Apr 9, 2024 | Real Estate Transactions

While you’re reviewing, initialing and signing the seemingly endless documents involved in a real estate transaction, you may give little thought to the commission that the selling real estate agent gets for their work. Many people have no idea whether it’s reasonable or not. They just consider it part of the cost of selling their home.

Some homeowners, however, decided that this commission, which has typically been 6% of a home’s sale price, is too high. They filed a class action lawsuit against the National Association of Realtors (NAR), claiming that sellers are required to pay what they say is an artificially high rate for their home to be listed on the Multiple Listing Service (MLS).

Agents affiliated with the NAR are involved in about 90% of home sales in this country. It should be noted that selling agents typically split their commission with agents representing the buyers. The seller can pass along some of the cost to the buyer, but the buyer isn’t required to pay any of it.

The effects of the settlement

Recently, the NAR and the plaintiffs agreed on a settlement wherein the NAR would pay $418 million in damages. Millions of home sellers could be eligible to receive part of that settlement. Further, some of the current rules will be amended so that, among other things, sellers can negotiate a lower commission rate.

Real estate experts are divided on how much these changes will affect the cost of buying and selling a home and the housing market overall. At the very least, it will lower the rate that sellers pay in commissions. Even a 1% or 2% drop can make a big difference when a home sells for hundreds of thousands or millions of dollars.

This case shows why it’s so important to understand all of the fine print in the documents that go along with selling and buying a home. Most people can’t be expected to read every word – let alone understand it. That’s just one of the reasons why it can be worthwhile to have experienced legal guidance for these transactions.