April 24, 2024

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Real estate fees may decrease after settlement with US agents

Real estate fees may decrease after settlement with US agents
  • By Mike Wendling
  • BBC News in Chicago

Image source, Getty Images

A settlement in a case against US real estate agents could mean lowering the cost of buying and selling homes.

The National Association of Realtors (NAR) and real estate companies have been accused of artificially inflating sales commissions in a series of lawsuits.

A settlement was announced on Friday, including compensation worth $418 million (£328 million).

NAR has agreed to lower commissions and make it easier for buyers to negotiate fees, steps that could ultimately lead to lower buying and selling costs.

The settlement is expected to increase competition in the US housing market, where a 6% commission on the sales price is the norm.

At the average US home price of $417,700 (£328,000), the standard commission amounts to just over $25,000, a cost that is often passed on in whole or in part to the buyer.

In November 2023, a federal jury in Missouri ordered NAR and the brokerage firms to pay $1.78 billion (£1.4 billion). Under US antitrust law, the judge could have tripled these damages. The case ultimately led to the settlement announced Friday.

NAR, based in Chicago, says about 1 million of its members are included in the settlement, which is subject to final approval by the court.

The association operates a real estate database called the Multiple Listing Service, or MLS, and requires home sellers to submit a non-negotiable commission rate before listing their properties.

“NAR has worked hard for years to resolve this lawsuit in a way that benefits our members and American consumers,” NAR Interim CEO Nikia Wright said in a statement. “Our goal has always been to preserve consumer choice and protect our members to the greatest extent possible. This settlement achieves both of those goals.”

Under the terms of the settlement, which will take effect in July, NAR and the real estate companies do not have to admit wrongdoing.

Robert Brown, a Chicago-based attorney who represents homebuyers in two class actions against real estate agents, called this “a big change from the old norms.”

“But it remains to be seen whether this will actually change prices in the housing market,” Brown said in an email.

The settlement does not resolve a number of other lawsuits against real estate companies or a potential federal investigation into NAR. Real estate agents in Canada also face similar legal action over buying and selling fees.