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Commission settlement impacts homebuyers and sellers
The cost of buying a selling a home could be coming down after the National Association of Realtors announced it would pay a landmark $418 million legal settlement. Last November, a federal jury ruled the National Association of Realtors conspired with two brokerages to keep agent commissions high.
Houston - The cost of buying a selling a home could be coming down after the National Association of Realtors announced it would pay a landmark $418 million legal settlement.
Last November, a federal jury ruled the National Association of Realtors conspired with two brokerages to keep agent commissions high.
After first vowing to appeal, the NAR is now offering to settle without admitting wrongdoing.
The settlement will change the way buyers and sellers pay real estate agents and could lower home prices.
Impact of $418M realtor lawsuit settlement
"We own, and it's like, wow, right now things are really expensive, so I don’t think we’ll be selling or buying any time soon," said one homeowner we talked to named Brian.
It's been a tough few years in the real estate market.
"Houses are at like 7% right now!" said homeowners David and Paula, who say they recently put in an offer on a home.
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But that landscape is about to change.
Federal court verdict could mean lower realtor fees when selling homes
The National Association of Realtors says agent fees have always been negotiable. But its proposed settlement to lawsuits alleging a fee conspiracy, will end the practice of home sellers automatically paying both the seller's agent and buyer's agent fees, usually totaling 6%. Resulting competition among agents is expected to drive down commissions.
"We think that, on average, the commissions will come down from the existing 5% to 6% area, which really depends on where you live, pretty much to the 2% to 3% to 4% area," said Stephen Brobeck with the Consumer Federation of America.
On a $417,000 dollar home, a seller would pay about $25,000 in both the buyer and seller agent fees. Now that could be cut in half or more.
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Impact of $418M realtor lawsuit settlement
A recent settlement in the real estate industry could have long-term effects on first-time buyers and real estate agents.
"That buyer's agent commission will be taken out of the housing price, lowering the price of houses in general," explained Brobeck.
Home buyers will have to sign a contract to pay a buyer's agent an agreed upon fee, which competition could also drive down, or create more room in the market for discount brokerages or flat fees.
But some realtors fear some home buyers may skip hiring a buyer's agent to save money, and lose out on their expertise.
"It’s not just the price and closing date, we’re negotiating multiple things, from repairs, any appraisal issues that come up, any challenges with the lenders. We are constantly in communication as the buyer’s agent," explained realtor Bincy Jacob.
Some realtors say home sellers may want to continue to offer to pay the buyer's agent fee to attract more buyers.
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"This will ensure you have the most people looking at your home, that you’re not pricing it out of the market," suggested Jacob.
If a judge signs off on the settlement, the changes are expected to begin in July.
You can read the NAR's statement on the proposed settlement here.