How a Recent Court Settlement is Reshaping the Real Estate Market
A recent court settlement between the National Association of Realtors (NAR) and groups of homeowners across the U.S. has upended the status quo by doing away with the traditional agent commission of 5-6%. As part of the settlement, the NAR agreed that brokers listing homes on NAR affiliated databases no longer need to offer or disclose upfront compensation to buyers’ agents. This gives buyers the opportunity to shop around for lower rates and negotiate commissions with brokers.
Buyers’ agents are arguably the most disadvantaged by this decision, possibly having to offer lower rates or charging flat fees for services. This has the potential to weed out “lower performing” brokers or dull the quality of representation. Although sellers’ concessions may cover costs, in a hot market, buyers’ opportunities to negotiate with sellers could be more limited. This has the potential to eliminate the need for an agent altogether.
An attorney representing one of the homeowner groups that sued the NAR said that they anticipate the settlement will put a downward pressure on the cost of hiring a real estate broker. This prediction is further supported by the proliferation of new databases like Zen List that allow licensed brokers to grant unlicensed persons access to listings. Artificial Intelligence (AI) may also create significant advantages for homebuyers by equipping them with comparative market analyses and other invaluable market data. This stands to disrupt the industry by putting buyers in the driver’s seat for transactions.
If the settlement is approved by the court, the changes are expected to take place in mid-July 2024, affecting NAR members, its affiliated Multiple Listing Services, and all brokerages with an NAR member as a principal that has a residential transaction volume of $2 billion or less in 2022. The settlement does not include agents affiliated with HomeServices of America and its related companies.
Levin Ginsburg attorneys are prepared to help clients navigate the changes this decision will lead to, including subsequent decisions that will inevitably follow. Reach out to Camila Kaplunov in our real estate group if you need legal counsel surrounding this topic or any other related issues.
