May 4, 2024 - Business

Real estate’s radical changes: Your NAR lawsuit questions answered

Illustration of a set of keys with a percent sign keychain

Illustration: Sarah Grillo/Axios

The National Association of Realtors recently agreed to settle a big lawsuit that questions how real estate agents are paid — and who foots the bill.

The big picture: If approved, come summer, agents won't be able to make offers of compensation in the Multiple Listing Service, the database where real estate agents post homes for sale.

Why it matters: The seemingly tiny change is causing major confusion.

How it works (currently): Sellers and their broker negotiate a fee, and that broker decides how much profit they want to share with the buyers' agent.

  • That number is advertised in the MLS listing, and the seller pays both agents from the home sale earnings.
  • Many are concerned this causes buyers' agents to steer clients toward homes that offer them higher commission.

How could homebuying and selling change?

If the settlement is approved, offers of compensation will not be listed in MLS. Buyers and their broker will negotiate how much the broker should earn — and how they'll get paid, antitrust lawyer Brian Schneider says.

Who will benefit from the NAR settlement? Can I get money from a NAR settlement?

Anyone who's sold a home that was listed on MLS in recent years may be eligible for compensation. There are multiple settlements, and eligibility requirements for each vary by state.

  • You can call the settlement administrator at 888-995-0207 to see if you qualify.
  • Yes, but: If you do qualify, don't expect a huge payout.

Does the NAR settlement change commissions?

Not directly. Commissions are not set by NAR or the MLS, and are already negotiable. This will not change.

  • However, increased transparency around agent profits could lead to more competition.
  • As a result, most observers believe commissions will fall, possibly to 1%-1.5% per agent on each side, Axios' Emily Peck reports.

Will sellers stop paying for the buyer's agent?

Probably not altogether. Real estate industry leaders expect sellers will still cover at least some portion of the buyer's agent fees.

  • Most first-time buyers can't pay their agent out of pocket, but they'll be "financially slaughtered" without representation, former Zillow exec and Tomo cofounder Greg Schwartz says.
  • For that reason, sellers aren't entirely off the hook.

What does "more competition" really look like?

"[Real estate] is in the greatest state of disruption I've seen in the last decade-plus," Schwartz says.

  • Schwartz and other observers see opportunities for new business models to emerge, from paying an agent hourly to ChatGPT-like agent bots.
  • He expects minimal innovation short term, but radical change over the next five to seven years.
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