The powerful National Association of Realtors has agreed to eliminate rules on commissions to settle lawsuits in which sellers accused it of running up fees, in what will be a massive change to the housing market and real estate industry.
The NAR announced it was settling the lawsuits on Friday, agreeing to pay $418 million in damages. The move has implications for the real estate world and is expected to cause the cost of selling a home to drop.
The settlement effectively ends commission rules that have been in place since the 1990s that were being challenged in court. The NAR, a powerful trade group, has been in the spotlight because of the lawsuits.
“NAR has worked hard for years to resolve this litigation in a manner that benefits our members and American consumers,” NAR interim CEO Nykia Wright said in a statement. “It has always been our goal to preserve consumer choice and protect our members to the greatest extent possible. This settlement achieves both of those goals.”
Last October, a federal jury found major real estate groups liable and ordered them to pay $1.8 billion in damages as part of an antitrust lawsuit that accused them of colluding to inflate the rates of commissions.
The jury, based in Kansas City, Missouri, found that the NAR, Keller Williams Realty, and HomeServices of America conspired to inflate and maintain high commissions artificially.
Friday’s ruling is major news for the housing market. Housing experts contend that the settlement will be a major shift, lowering the cost to sell a home, and a significant change to the real estate industry.
“This will blow up the market and would force a new business model,” Norm Miller, a professor emeritus of real estate at the University of San Diego, told the New York Times.
The move comes at a time of relative upheaval for real estate sales and for homebuyers.
Mortgage rates are now above 7% and for a time went above 8%, the highest in years. Home prices are also elevated, thanks to a lack of inventory. When combined with the high mortgage rates, the high housing prices have made buying and selling a home tricky for many consumers.
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The NAR itself is a massive force and represents more than 1.5 million members involved in all aspects of the residential and commercial real estate industries.
“NAR exists to serve our members and American consumers, and while the settlement comes at a significant cost, we believe the benefits it will provide to our industry are worth that cost,” NAR President Kevin Sears said.