Current:Home > InvestNational Association of Realtors to cut commissions to settle lawsuits. Here's the financial impact.-DB Wealth Institute B2 Expert Reviews
National Association of Realtors to cut commissions to settle lawsuits. Here's the financial impact.
View Date:2024-12-23 19:28:26
It could soon cost homeowners a lot less to sell their homes after a real estate trade group agreed to slash commissions to settle lawsuits against it.
The National Association of Realtors (NAR) agreed on Friday to pay $418 million over roughly four years to resolve all claims against the group by home sellers related to broker commissions. The agreement must still be approved by a court.
Almost 9 in 10 home sales are handled by real estate agents affiliated with NAR. The organization, the country's largest trade association, requires home sellers to determine a commission rate, typically 6%, before listing homes on its property database, known as the Multiple Listing Service, or MLS.
The lawsuits argued that the structure harms competition and leads to higher prices.
"NAR has worked hard for years to resolve this litigation in a manner that benefits our members and American consumers. It has always been our goal to preserve consumer choice and protect our members to the greatest extent possible," NAR interim CEO Nykia Wright said in a statement Friday. "This settlement achieves both of those goals,"
How will this impact real estate commissions?
Notably, the landmark deal will slash realtors' standard 6% sales commission fee, potentially leading to significant savings for homeowners. The group had been found liable for inflating agent compensation.
Fees could be slashed by up to 30%, the New York Times reported, citing economists.
That could impact earnings for 1.6 million real estate agents, who could see their $100 billion annual commission pool shrink by about one-third, analysts with Keefe, Bruyette & Woods wrote in a report last year about the pending litigation.
Standard commission rates in the U.S. are among the highest in the world. Real estate agents make money by pocketing a percentage of a home's sale price.
Could homeowners save money?
Most likely, because homeowners are generally on the hook to pay the 6% commission when they sell their property, although sometimes the fee is split between the buyer and seller.
For instance, a homeowner selling a $1 million property would spend up to to $60,000 on agent fees. If commissions are reduced by 30%, that same homeowner would pay a commission of about $42,000.
How will it impact the housing market?
Housing experts expect the deal to shake up the housing market and even drive down home prices across the board.
Residential brokerage analyst Steve Murray, however, is skeptical that home prices will see a meaningful decrease as a result of the deal.
"It will have the impact of reducing commission costs for sellers; it will save money for sellers to the detriment of buyers," he said, adding, "Sellers don't set home prices based on what their closing costs will be," Murray said. "The market sets home prices."
While lower or more negotiable commission fees could incentivize some new homebuyers, LendingTree senior economist Jacob Channel doesn't expect the market to roar "back to life in the wake of this settlement," while mortgage rates remain high.
"Home prices and [mortgage] rates almost certainly play a much bigger role in someone's homebuying choices than how much they'll need to pay their real estate agent does," he said.
- In:
- Real Estate
Megan Cerullo is a New York-based reporter for CBS MoneyWatch covering small business, workplace, health care, consumer spending and personal finance topics. She regularly appears on CBS News Streaming to discuss her reporting.
veryGood! (863)
Related
- Advance Auto Parts is closing hundreds of stores in an effort to turn its business around
- Chris Christie to visit Israel to meet with families of hostages held by Hamas
- Dozens of Chinese ships chase Philippine vessels as US renews warning it will defend its treaty ally
- Man charged with killing a Michigan woman whose body was found in a pickup faces new charges
- Video shows masked man’s apparent attempt to kidnap child in NYC; suspect arrested
- IRA limits in 2024 are rising. Here's what you need to know about tax savings.
- Chrishell Stause and Marie-Lou Nurk's Feud Continues in Selling Sunset Season 7 Reunion Trailer
- ‘From the river to the sea': Why these 6 words spark fury and passion over the Israel-Hamas war
- Amtrak service disrupted after fire near tracks in New York City
- Iceland evacuates town and raises aviation alert as concerns rise a volcano may erupt
Ranking
- NFL Week 11 picks straight up and against spread: Will Bills hand Chiefs first loss of season?
- Barbra Streisand says she's not a diva - she's a director
- Mavericks to play tournament game on regular floor. Production issues delayed the new court
- A Hawaii refuge pond has turned eye-catching pink and scientists think they know why
- The Latin Grammys are almost here for a 25th anniversary celebration
- Growing concerns from allies over Israel’s approach to fighting Hamas as civilian casualties mount
- Government ministers in Pacific nation of Vanuatu call for parliament’s dissolution, media says
- Are you a homeowner who has run into problems on a COVID mortgage forbearance?
Recommendation
-
Only 8 monkeys remain free after more than a week outside a South Carolina compound
-
Local election workers have been under siege since 2020. Now they face fentanyl-laced letters
-
Taylor Swift nabs another album of the year Grammy nomination for 'Midnights,' 6 total nods
-
Khloe Kardashian Gives Inside Look at 7th Birthday Party for Niece Dream Kardashian
-
Beyoncé course coming to Yale University to examine her legacy
-
Colorado star Shedeur Sanders is nation's most-sacked QB. Painkillers may be his best blockers.
-
Khloe Kardashian Gives Inside Look at 7th Birthday Party for Niece Dream Kardashian
-
Former Mississippi corrections officer has no regrets after being fired for caring for inmate's baby