In March, the National Association of Realtors announced a settlement with groups of homesellers, ending antitrust lawsuits. It has agreed to pay $418M over roughly 4 years to resolve all claims against it. The claims were related to artificially inflating commissions for real estate agents. 

New Rules (to take effect mid-July 2024) 

• The seller’s agent no longer has to set commission for a buyer’s agent when listing on the MLS (a practice that some say have led to “steering”, in which buyers’ agents direct their clients away)
• Any fields on MLS’ displaying broker compensation will be eliminated. 
• Eliminating the requirement that agents must subscribe to MLS to offer or accept compensation. 

What this means in the U.S.

Sellers: This may reduce commission costs for sellers if they decide not to include buyer’s agent compensation. 

Buyers: This may increase costs for buyers. If a seller does not want to pay buyer’s agent commission, then the buyers will have to pay the agent fee. 

Realtors: Buyer’s agents will be required to use buyer’s agreements to outline the services that they provide and their expected commission rate. This may lead to realtors competing on commissions. They could advertise their fees, allowing customers to choose lower-cost agents. This could allow prospective buyers to shop around on rates before they commit to buying a home. 

The background: 

The National Association of Realtors is America’s largest trade association. It has more than 1.3 million members. It owns local Realtor associations that operate as subsidiaries. These local associations own and operate  

Over 90% of home sales are handled by a real estate agent that is a member of NAR. In the U.S., a commission on the sale of a house is commonly 6%, often split between the seller’s and buyer’s agent. 

Homesellers have claimed that the NAR has been conspiring to keep agent commissions artificially high. To list a property, it was a requirement that the seller’s agent make an offer of payment to the buyer’s agent, setting rules that led to an industrywide standard commission. In a competitive market, the cost of the buyer’s agent’s commission should be paid by the buyer who received the service, not by the seller. If the buyer has an agent, the seller’s agent agrees to share a portion of the commission with that agent when listing the home on the market. If the buyer does not have an agent, then the seller’s agent pockets the whole commission. The lawsuits claimed that buyers should be able to negotiate the fee with their agent. Sellers often feel that they must offer high commissions to the buyer’s agent, given the risk that offering lower commissions could cause agents to steer buyers to other properties. 

What about Canada? 

There is currently a national class action lawsuit that is making its way through Canadian courts. It alleges that the Canadian Real Estate Association (CREA), alongside dozens of provincial and local real estate groups, conspired to also inflate commissions. CREA is Canada’s equivalent to the NAR. 

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