PHOTO: FILE
The National Association of Realtors (NAR) has agreed to a significant settlement, which is set to reshape the real estate industry in the U.S. and potentially lower costs for homebuyers and sellers. The NAR will pay $418 million in damages and remove the 6% commission standard, ending antitrust lawsuits.
Key Changes:
- Agent Compensation Exclusion: Agent compensation will no longer be included in multiple listing services (MLS), addressing concerns that brokers were promoting more expensive properties.
- MLS Subscription Rules: Brokers are no longer required to subscribe to MLS, promoting competition and potentially lowering costs.
- Buyer-Broker Agreements: Buyers’ brokers must now enter into written agreements with their clients, increasing transparency.
These changes are expected to reduce real estate commissions by 25% to 50%, according to TD Cowen Insights. This opens opportunities for alternative selling models, such as flat-fee and discount brokerages.
Market Impact:
- Real Estate Firms: Shares of Zillow and Compass fell by over 13%, while Redfin saw nearly a 5% drop.
- Homebuilders: Lennar, PulteGroup, and Toll Brothers experienced gains, reflecting investor optimism about lower homebuying costs.
For an average-priced American home, currently at $417,000, sellers could see a reduction in brokerage fees by $6,000 to $12,000. This move is expected to make homebuying more affordable and competitive.
Industry Reactions: Kevin Sears, NAR President, stated that while the settlement is costly, it brings long-term benefits. The NAR was previously found liable for $1.8 billion in damages in an antitrust case and faced potential tripling of this amount.
The new rules aim to foster competition, allowing buyers to negotiate commissions and choose lower-cost agents. This historic change is seen as a win for consumers and a step towards a more competitive housing market.
Future Outlook: Norm Miller, a professor emeritus at the University of San Diego, predicts various new brokerage models will emerge, offering competitive fees. This could lead to an exodus of mediocre agents from the industry, with top brokers thriving.
While the NAR continues to face scrutiny from US antitrust officials and internal leadership challenges, this settlement marks a transformative moment for the real estate industry.
SOURCE: AOL