Powerful Realtor Group Agrees to Slash Commissions to Settle Lawsuits

[BeyondGeography]

Last edited Fri Mar 15, 2024, 10:50 AM - Edit history (1)

Source: NY Times

American homeowners could see a significant drop in the cost of selling their homes after a real estate trade group agreed to a landmark deal that will eliminate a bedrock of the industry, the 6 percent sales commission.

The National Association of Realtors, a powerful organization that has set the guidelines for home sales for decades, has agreed to settle a series of lawsuits by paying $418 million in damages and by eliminating its rules on commissions. Legal counsel for N.A.R. approved the agreement early Friday morning, and The New York Times obtained a copy of the signed document.

The deal, which lawyers anticipate will be filed within weeks and still needs a federal court’s approval, would end a multitude of legal claims from home sellers who argued that the rules forced them to pay excessive fees. Representatives for N.A.R. were not immediately available for comment.

Housing experts said the deal, and the expected savings for homeowners, could trigger one of the most significant jolts in the U.S. housing market in 100 years. “This will blow up the market and would force a new business model,” said Norm Miller, a professor emeritus of real estate at the University of San Diego.

Read more: https://www.nytimes.com/2024/03/15/realestate/national-association-realtors-commission-settlement.html?smid=nytcore-ios-share&referringSource=articleShare&sgrp=c-cb

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Gift link: https://www.nytimes.com/2024/03/15/realestate/national-association-realtors-commission-settlement.html?unlocked_article_code=1.c00.2hf_.UWPml5O93Scv&smid=nytcore-ios-share&referringSource=articleShare&sgrp=c-cb

[TeamProg]

1. It's absurd to have to hand over 6% of the value of your house to

simply sell it on the open market.

However, I’m guessing this will end up helping the rich over the middle class again.

If I’m selling my 2 million dollar home I could likely negotiate a 2% commission, but trying to get my 300k house sold might require a higher commission just to get buying agents to show the place.

[jvill]

13. 5%

As the owner of 2 homes that fit your criteria, I was able to negotiate the fee down to 5% 2 years ago because I had a condo I knew would sell well and the market was nuts. I wish I had all the low rates and windfalls the posters on this site they think people have.

[TeamProg]

20. 6 is of course the standard but yes, a realtor friend of mine listed and did the paperwork on

three houses for me for 4% ( 1% for her and 3% for buying agent) and another direct/non-listed place for 1%. But it sold for 1.725 mill., so it was worth while.

On places I’ve bought, I have no idea what the sellers paid, guess I could’ve asked my realtor friend to look at the agent accessible mls listing.

[Prairie_Seagull]

2. In times past, prior to real estate boom and the internet.

It took more actual work for the agents and with home prices cheaper agents and brokers made less actual income.

It is about time for this. Is the commission negotiated or will they settle on a different percentage?

[BeyondGeography]

3. From the article

Economists estimate that commissions could now be reduced by 30 percent, driving down home prices across the board. The opening of a free market for Realtor compensation could mirror the shake-up that occurred in the travel industry with the emergence of online broker sites such as Expedia and Kayak.

It’s a gift link so you can read the whole thing.

[Prairie_Seagull]

4. Thanks BeyondGeography

I went to the link and they wanted me to sign up I guess, so I bailed. I get incredible amounts of email per day and I am trying to go on a diet. haha

[Old Okie]

5. GIFT LINK

What does that term mean because when I click on it I get a pop-up that blocks viewing the article and asking for a sign-in?

[BeyondGeography]

6. Sorry...that shouldn't have happened

Let me know if this works:

https://www.nytimes.com/2024/03/15/realestate/national-association-realtors-commission-settlement.html?unlocked_article_code=1.c00.2hf_.UWPml5O93Scv&smid=nytcore-ios-share&referringSource=articleShare&sgrp=c-cb

[Chellee]

8. This one worked for me. Thanks nt

[Prairie_Seagull]

29. Thanks BG, that worked great. nt

[Crepuscular]

28. ...

The other factor that is not really addressed is that much of the work that real estate agents do, they are not compensated for. In normal markets, (not the insane sellers market that has been in place for the last few years) agents frequently list homes and have 3, 6 or 12 months of time and effort into marketing them, only to have the listing expire and the property be re-listed by someone else. They are not compensated for that time and effort. Working with buyers is the same way, they may be shown dozens of homes, the agent may provide lots of research and effort, only for the buyer to decide not to buy or to buy a FSBO, etc. To a great degree, consumers have been conditioned to expect free services much of the time relating to real estate. What balanced that out was that when a property was bought or sold, the amount of compensation to the agent was substantial. That allowed agents to provide a lot of the "free" services to those consumers who didn't end up providing them a paycheck. If that dynamic changes, will consumers be willing to pay an hourly rate for services rendered, if they don't end up buying or selling a house, credited against a commission if they do? It's going to be interesting to see how things pan out.

[louis-t]

7. There has never been a 'fixed' commission. All commissions are negotiable.

Always have been. There has never been industry-wide collusion in my business ever. If agents would explain to sellers and buyers what is already on their own forms, this would never have happened. In a seller's market, this was likely to come up because prices have gone up so high, when sellers see the commission they freak out. Never mind that they just made another $100,000 on their house in the last 4 years. In a buyer's market (if we ever get back there again) sellers will be begging us to sell their house and commission won't be an issue. Isn't it amazing that no one ever says attorneys make too much money? $400 and hour is just fine.

[Sucha NastyWoman]

9. Don't see how the NAR is going to keep brokers from charging whatever rate they want.

If the NAR tried, they themselves would be price fixing.

There is already negotiation of fees going on.

[Sucha NastyWoman]

10. I don't see how the NAR is going to have any control over what each broker charges.

If the NAR tried, they themselves would be price fixing.

There is already negotiation of fees going on.

[TexasBushwhacker]

11. Attorneys have an enormous amount of overhead

Besides the rent, utilities, etc, they have the cost of their support staff - the paralegals, bookkeepers, receptionist, researchers, mediators, etc. If they're a personal injury attorney, they only get paid if they win the case.

[louis-t]

12. Realtors only get paid if the house closes.

I have an office bill of $1,100 a month at my home. When I had an office at the business address, my bill was $1,500 a month. We have association dues ($500), licensing fees ($80) and franchise fees ($500) every year. We take 6 hours of continuing education every year ($50). Signs, cards, lockboxes, marketing, paying a professional photographer on listings that require it (aerial photos, etc). If I hire an assistant, I have to pay them. I don't make anywhere near $400 an hour. Tired of hearing how "Realtors make too much money". I don't count your money, why are you counting mine? The people that make a lot of money selling Real Estate are working their asses off. They can't leave their work at the office and go home. I answer the phone up to 10 pm. It starts at 8 am. I've been blamed for prices of homes being too high, I've been blamed for the bush recession. Now I'm being told I 'fix commissions.' Sheesh!

[TexasBushwhacker]

14. Oh, I understand

Good realtors work hard for their money. What concerns me is that if the commission is negotiable, rather than a flat 6%, who is going to work to sell the cheaper properties? Is someone with a little "starter home" going to have to pay MORE just to get it listed? I ended up selling my little house myself back in the 90s, but not everyone has the time to do that.

[louis-t]

21. It's not always about time. It's about experience.

There are so many things that can go wrong in a sale. Things you can't see coming, things that can be corrected if you know what to do. I get people that want to sell by owner, then they call and ask for free advice when they run into trouble.

[Happy Hoosier]

15. If I sold my house today....

I think it would for about $400K. 6% would be $24,000. I mean no disrespect, but I have a hard time imagining that I'd get $24,000 of value from a realtor. I don;t begreudge you a dime of what you make, but if I'm paying it, the equation changes, yes?

The last house I sold, I went FSBO and hired an attorney for the paperwork. My total legal expenses were less than 2% of the sales price.

The market was super-hot then, so it made sense. I had 5 offers in just a few days and sold at 20% over my initial asking price.

[moreland01]

17. Same here.

We've always sold ourselves and just paid for the title company to do the closing paperwork. Far, far less than realtors wanted to charge. Once, we paid $500 to a company that put us on the MLS and sent us yard signs and flyers. We fielded the calls and showed the home ourselves.

I would much prefer a competitive set price. With this ruling, I can imagine some smart companies popping up that charge, say, $5K to do everything, regardless of the sales price of the home.

Very happy to see this turning the tide on what I always thought was an appalling practice of collusion.

[louis-t]

22. Yes, there will be small companies popping up-'discount brokers'

And, as in the past, they won't last long. There have always been 'discount brokers'. If we ever have a buyer's market again, sellers will be begging us to sell their houses. It's happened before. Builders would tell us to take a hike, until the bush recession. Nothing was selling. Suddenly, they're your best buddy.

[louis-t]

23. What part of "this is what I charge" is collusion?

Just because a high-powered attorney won in court doesn't mean "all Real Estate companies are in collusion to fix prices". I charge 6%. If someone wants to negotiate, that's fine. Sellers that are doing the most whining are the ones that saw their home value rise 30% in the last 4 years. If you made an additional $80,000 in equity in 4 years, why are you complaining the commission is too high? So, 'discount brokers' are "smart companies"? Every one of them that "popped up" in the last 30 years around here went under. Every, single, one. So, when you go to sell by owner, don't bother calling an agent for free advise when something goes wrong. By the way, how much money do you think the attorney that brought this suit made? The latest settlement was $418 million.

[moreland01]

24. If you made an additional $80,000 in equity in 4 years, why are you complaining the commission is too high?

I hope you're kidding. What part of the value of my home that I have been maintaining and paying property taxes on do I owe to a Realtor? I've never had a realtor offer to pay for my new windows or roof, or mow my lawn, or upgrade my appliances. What I build in equity is none of the realtor's business and he/she/they are not entitled to a larger chunk of it.

A flat fee for services is a more logical option which I would be happy to shop around for and pay, depending on who offered the best quality of service for that price.

[moreland01]

25. We used

FSBO back in 2002 and they're still going strong, albeit under varying ownership.

[Happy Hoosier]

26. I'm paying for a service, right?

If I feel the price of the service exceeds its value, and I seek a cheaper alternative, isn’t that how the market works? Either lower prices, or offer more value.

Personally I think a straight percentage commission is kinda nuts. I might be willing to pay it if I’m desperate to sell, but if I’m not, 6% is a huge chunk of the sales price. I’d prefer a flat rate.

[Delphinus]

16. Thank you

for telling us your truth; what you wrote helps so much.

[3Hotdogs]

18. Is the $100k (or whatever) increase in the value of homes due to infation? Increased demand from an increased population

with fewer new homes being built? Or from something the real estate sales rep did? Somehow, I doubt it is from efforts of the sales reps.

I understand that the sales rep composes a blurb to embellish (puff) the property. (It was clearly a real estate agent that named Greenland, Greenland). Beyond that, you set up the Thursday tour of new listing with other reps on the M.L.S. service. And you open the door on Sunday for the open house. Maybe you even "stage" the house. Beyond that, what does the rep provide?

My parents bought their house in 1947 for $4,950, I sold it in 2017 for $475,000. The sales rep had nothing to do with the price differential. It was all, inflation.

[honest.abe]

19. This is great news. 6% commission is rediculous.

Especially for more expensive homes. For example a 1m sale home is $60,000 commission. That's a one year salary for many workers.

[Elessar Zappa]

27. Great news.