How NAR’s $418 Million Settlement Impacts Home Buyers and Sellers

The National Association of Realtors (NAR), the organization that has established homebuying and selling rules since 1908, has announced an agreement to settle a series of home-seller commission lawsuits.

NAR lawsuit background

In October 2023, a federal jury determined that the National Association of Realtors (NAR) “conspired to require home sellers to pay the broker representing the buyer of their homes in violation of federal antitrust law.” The court determined that the NAR’s commission structure and rules infringe upon antitrust laws because they essentially forced home sellers to pay a fee that could be paid by the homebuyer.

One of the original 2019 class action lawsuits was filed by nearly 500,000 property sellers in Missouri, alleging that this forced commission hurt both buyers and sellers financially. The suit claimed that sellers, who were required to pay the commissions for both agents, compensated for the loss by increasing list prices, putting buyers at a disadvantage, and inflating home costs nationwide.

In an interview with The Associated Press, Michael Ketchmark, one of the attorneys representing the plaintiffs in the lawsuits, said, “What’s at issue nationwide is costing Americans about $60 billion in extra real estate commissions.”

Realtors and brokers (collectively referred to as the NAR) were ordered to pay nearly $1.8 billion in damages. The ruling signaled a significant shift in regulatory oversight.

NAR agrees to pay $418 million settlement

On March 15, 2024, the NAR announced that it would settle this series of lawsuits for $418 million. The historic court agreement ends all litigation claims brought by home sellers.

“Ultimately, continuing to litigate would have hurt members and their small businesses,” said Interim NAR Chief Executive Nykia Wright in a statement. “While there could be no perfect outcome, this agreement is the best outcome we could achieve in the circumstances. It provides a path forward for our industry, which makes up nearly one fifth of the American economy, and NAR.”

Wright added that the association was staying true to its mission. “For over a century, NAR has protected and advanced the right to real property ownership in this country, and we remain focused on delivering on that core mission.”

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10 things to expect from the NAR settlement

The settlement will still need a federal court’s approval, but here is an at-a-glance list of what happened, and what home buyers and sellers can expect:

1. Court settlement may revolutionize U.S. home buying and selling

This groundbreaking court settlement is poised to dramatically alter the long-established business model of buying and selling homes in the United States. The traditional 6% commission that’s usually split between the buyer and seller agents will see sweeping changes.

2. Class-action damages to benefit millions of home sellers

It’s estimated that tens of millions of home sellers may be eligible to receive a small portion of a consolidated class-action damages payout.

3. End of mandatory commission fees

As part of the settlement, the NAR must eliminate long-held commission requirements. The organization is now banned from establishing rules that would permit a seller’s agent to set compensation amounts for a buyer’s agent. It’s predicted that this restriction will discourage buyer’s agents from “steering” home shoppers to higher-priced properties in an effort to collect a larger commission.

4. MLS subscription requirement removed

The settlement also removes the requirement that real estate agents must subscribe to the multiple listing service (MLS) in order to offer or receive transaction commissions. (The majority of MLS sites are owned and operated by local NAR affiliates.)

5. Broker compensation fields to be removed from MLS systems

As part of the required changes, fields displaying broker compensation must be eliminated from MLS systems.

6. NAR membership may see a decline

This decoupling of agent commissions and MLS access could lead to fewer agents feeling compelled to be members of the National Association of Realtors. NAR currently has 1.5 million members involved in every aspect of residential and commercial real estate.

7. Overall decrease in commissions, but buyers’ shares may increase

While Realtor fees were always negotiable, industry experts predict that by eliminating the fee guarantee, agents will need to compete more for business, which will likely lead to lower commissions, possibly up to 30%, which could bring down nationwide home prices and lower costs for homebuyers and sellers. For example, if the traditional commission on a median-priced $400,000 home was $24,000 — normally split between the buyer’s agent and the seller’s agent — the new fee structure could reduce the Realtor fees to $16,790.

However, while overall commissions may be lower, the NAR settlement will likely add an additional financial burden to homebuyers and the “who pays” responsibilities shift.

Under the current fee structure, the buyer’s agent’s commission is typically built into the total they pay for the property. This means the cost is spread out over the many years of their mortgage. Once finalized, the new structure may force buyers to pay a flat commission fee upfront to their agent, adding another layer of financial pressure to the already heavy combination of downpayment and closing cost fees. Fist-time buyers may feel the greatest impact.

Agents representing a buyer will likely have to negotiate their commission either with a buyer upfront or at the time the purchase offer is made. The new approach may also result in fewer buyers using Realtors.