So what’s this lawsuit about Realtor commissions all about?

This spring has brought significant challenges for the National Association of Realtors (NAR). In a landmark move, the association agreed to a $418 million settlement in March over allegations that its rules on agent commissions led to artificially high fees. This decision is expected to deeply influence the real-estate industry and homeowners alike, with experts predicting a seismic shift in the U.S. housing market, potentially the biggest in a century. Further complicating matters, a federal appeals court has reopened the Department of Justice’s antitrust investigation into NAR’s policies, a case previously considered settled.

The controversy stems from a lawsuit accusing NAR of conspiring to keep commission rates high. A federal jury sided with the plaintiffs last October, slapping NAR with a $1.8 billion penalty. This lawsuit, initiated by Missouri home sellers in 2019, challenged the practice of sellers paying commissions for both their own and the buyer’s agents, contributing to a standard commission rate of 5 to 6 percent — significantly higher than in many other nations.

NAR’s decision to settle was driven by several factors, including the potential for triple damages and ongoing legal battles that could have led to even more staggering financial penalties. This settlement follows a tumultuous period for NAR, marked by internal scandals and leadership changes.

Beyond NAR, the ripple effects of this settlement are felt industry-wide, with over a dozen class-action suits filed against the nation’s top brokerages. Some, like Anywhere Real Estate, have settled, paying out millions, while others continue to fight.

What does the NAR settlement mean for sellers and buyers?

For buyers and sellers, the settlement is likely to mean lower commission rates, as sellers gain more power to negotiate fees. Buyers might start paying their agents directly, potentially leading some to skip agents altogether or seek limited services. The overall impact on home prices is yet to be seen.

What does the NAR settlement mean for real-estate agents?

Real estate agents face a potential drop in income and a thinning of their ranks. The settlement could also disrupt traditional listing services, fostering innovation and possibly more competition from tech startups aiming to disrupt the market.

What does the settlement mean for New Yorkers?

Though New York agents aren’t part of the National Association of Realtors (NAR), the recent settlement will still influence the local market. Many brokerages in New York have made their own agreements on agent commissions, and the Real Estate Board of New York (REBNY) has banned listing brokers from paying buyers’ agents. These changes are pushing the industry towards greater transparency.

Do New York renters need to pay broker fees?

Yes, renters still have to pay broker fees, which have risen from an average of 12% to about 15% or more. City Councilmember Chi Ossé has reintroduced a bill to shift this cost from renters to landlords, although it previously failed to pass.