“Home buying costs set to decrease following major US real estate group settlement”

"Home buying costs set to decrease following major US real estate group settlement"

The National Association of Realtors Resolves Antitrust Litigation

The National Association of Realtors (NAR) has agreed to a settlement of $418 million in antitrust litigation. This settlement was in response to accusations of brokerages inflating sales commissions, and is expected to bring significant changes and lower costs when Americans buy and sell homes. Brokers were accused of setting fees for both buyers’ and sellers’ agents, resulting in combined commissions of 5% to 6%. Critics objected to this practice and believed it encouraged agents to steer clients towards homes carrying higher commissions.

Changes to Commissions and Fees

Under the settlement, the NAR will eliminate decades-old rules on commissions and make it easier for buyers to negotiate fees with their own agents or use no agents at all. This could result in lower typical commissions by thousands of dollars, which would benefit families and individuals struggling with inflationary pressures or being priced out of their neighborhoods.

However, this could also reduce revenue for traditional real estate brokerages and make employment less lucrative and appealing for the more than one million NAR members. Brokers earned an average of $90,000 a year as of May 2022, which is about 50% above the national average for all jobs, according to the federal Bureau of Labor Statistics. Share prices for several brokerages fell, including some by double-digit percentages, after the settlement was announced.

Impact on the Real Estate Industry

The settlement comes 4-1/2 months after a federal jury in Kansas City, Missouri ordered the NAR and several brokerages to pay $1.78 billion in an antitrust case covering agents in that state. Several similar lawsuits have been filed around the country, and defendants in the litigation have included HomeServices of America, part of Warren Buffett’s Berkshire Hathaway, Anywhere Real Estate, Compass, Douglas Elliman, Keller Williams, and Re/Max.

The changes take effect in mid-July, with court approval required for the accord. The settlement resolves claims against NAR agents, state and local realtor groups, and most smaller brokerages. HomeServices is not part of the settlement, and plaintiffs in the Missouri case have pressured them to change their practices.

Reactions to the Settlement

JPMorgan analysts wrote, “Mortgage rates being where they are, this could take a while to normalize and in the meantime put added financial pressure on the residential brokerage industry.” Analysts at RBC said the settlement could also benefit CoStar and its Homes.com real estate portal. However, not everyone welcomes the changes. Judi Desiderio, chief executive of Town & Country Real Estate in East Hampton, New York, where homes routinely sell for millions of dollars, said, “It will cause confusion for every buyer, seller, broker and agent. Some buyers could end up paying more for homes.”

Overall, this settlement marks a significant shift in the real estate industry and could impact homebuying for years to come.

Originally Post From https://www.reuters.com/legal/big-us-real-estate-group-settles-litigation-over-inflated-commissions-2024-03-15/

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