Title: National Association of Realtors Agrees to Reform Agent Commission Policies and Pay $418 Million Settlement

In a landmark decision, the National Association of Realtors (NAR), a prominent real estate trade group, has taken steps to resolve multiple lawsuits claiming that its policies on agent commissions have artificially inflated costs for home sellers. As part of the agreement announced on Friday, the NAR has agreed to pay a staggering $418 million to compensate home sellers across the United States.

The lawsuits brought against the NAR and several major brokerages argued that the trade group's rules for homes listed on its affiliated Multiple Listing Services (MLS) unfairly propped up agent commissions. These rules, it was alleged, discouraged agents representing buyers from showing properties where the seller's broker offered a lower commission to the buyer's agent.

To address these concerns, the NAR has committed to significant changes. One key change is the elimination of the requirement for a broker advertising a home for sale on MLS to offer upfront compensation to a buyer's agent. This rule amendment allows individual home sellers to negotiate commission offers with a buyer's agent outside of the MLS platforms. However, any such compensation arrangements must be disclosed by the seller's broker.

Furthermore, the NAR has also agreed to mandate that agents or others working with homebuyers enter into a written agreement outlining the charges for their services. This move aims to ensure transparency so that homebuyers are aware of their agent's fees from the outset.

The rule changes are set to take effect in mid-July and represent a significant shift in the real estate industry's standard practices. They have the potential to empower homebuyers and sellers to negotiate lower agent commissions, which usually range from 5% to 6% and are traditionally paid by the seller.

Robby Braun, an attorney representing the home sellers in a federal lawsuit, expressed optimism about the impact of these changes, stating, "Our hope and expectation is that this will put downward pressure on the cost of hiring a real estate broker." Analysts from Keefe, Bruyette & Woods also anticipate lower agent commissions resulting from the NAR's rule revisions, which may even persuade some homebuyers to forgo using an agent altogether.

While these changes enable homebuyers to negotiate more competitive prices for agent services, they also require buyers to consider how to cover their agent's compensation. Homebuyers may request concessions from home sellers to include compensation for the buyer's agent, but sellers with multiple offers may choose to refuse or select an offer that does not include such requests.

Critics argue that the industry should focus on removing regulatory barriers that prevent buyers from including agent compensation in their mortgages. Stephen Brobeck, senior fellow at the Consumer Federation of America, stated, "The real solution is for the industry to work to remove regulatory barriers that make it difficult for buyers to include this compensation in their mortgages."

The settlement between the NAR and the plaintiffs, if approved by the court, will resolve the lawsuits and cover over one million NAR members, its affiliated MLS, and brokerages with a NAR member as a principal, whose residential transaction volume in 2022 was $2 billion or less. Nykia Wright, NAR's interim CEO, acknowledged the imperfections but believes this agreement is the best outcome given the circumstances.

It is important to note that the settlement does not include real estate agents affiliated with HomeServices of America and its related companies. However, other major brokerages, such as Keller Williams Realty, have recently reached their own settlements, further signaling a shift in the industry.

As the NAR prepares to implement these rule changes, the real estate landscape faces an impending transformation that could lead to greater competition and negotiation power for homebuyers and sellers alike.