The U.S. housing market is poised for a significant overhaul this summer as the National Association of Realtors settles an antitrust lawsuit regarding real estate agent compensation. The NAR agreed to pay $418 million to settle claims that commissions burdened sellers with unnecessary costs. The changes, set to take effect in July, include reforming how agents charge for transactions, requiring written agreements with buyers, and allowing buyers to negotiate compensation independently. The Department of Justice may still intervene before final approval in September.
Experts believe that the consequences of the settlement may take time to fully play out in the U.S. housing market. While the removal of the typical 6 percent fee for agents could revolutionize the market, most firms may wait until July to eliminate seller agency commission-sharing arrangements. The industry may try to maintain the status quo, with some firms competing with lower fees but overall resistance to major changes. The changes aim to provide more transparency and consumer choice, eventually lowering costs for buyers.
Two major changes are expected to affect home buyers and realtors in mid-August as a result of the settlement. Buyer agents will be required to obtain signatures on home purchase agreements before showings, and sellers will no longer be obligated to offer compensation to buyer agents for listings on the MLS. This will give buyers the opportunity to discuss and negotiate their agent compensation for the first time. Commission rates, currently around 5-6 percent, are expected to decline, potentially saving consumers billions of dollars annually.
The impact on homeowners will vary, with existing homeowners likely to benefit from lower commissions if they use the same agent for selling and buying. First-time buyers may face challenges, especially if they have limited resources to cover closing costs, including buyer agent compensation. Buyer agents will likely ask for help from sellers to cover some expenses, and new business models may emerge to attract buyers. In the long run, the market could become more liquid and slightly more affordable with lower fees for sellers, particularly for higher-priced homes.
While lower commissions may not directly lead to reduced housing prices, they are expected to lower consumer costs. The long-term impact on prices will be gradual, with some moderation eventually occurring. However, the industry may resist significant changes and try to maintain the status quo for as long as possible. As fees decrease and competition increases, real estate brokerage firms may reassess their value proposition and business models. Overall, the settlement could lead to a more transparent and competitive real estate market in the U.S.
