The 6% commission on buying or selling a home is gone after Realtors association agrees to seismic settlement – CNN

CNN —The 6% commission, a standard in home purchase transactions, is no more.In a sweeping move expected to dramatically reduce the cost of buying and selling a home, the National Association of Realtors announced Friday a settlement with groups of homesellers, agreeing to end landmark antitrust lawsuits by paying $418 million in damages and eliminating rules on commissions.The NAR, which represents more than 1 million Realtors, also agreed to put in place a set of new rules. One prohibits agents’ compensation from being included on listings placed on local centralized listing portals known as multiple listing services, which critics say led brokers to push more expensive properties on customers. Another ends requirements that brokers subscribe to multiple listing services — many of which are owned by NAR subsidiaries — where homes are given a wide viewing in a local market. Another new rule will require buyers’ brokers to enter into written agreements with their buyers.The agreement effectively will destroy the current homebuying and selling business model, in which sellers pay both their broker and a buyer’s broker, which critics say have driven housing prices artificially higher.By some estimates, real estate commissions are expected to fall 25% to 50%, according to TD Cowen Insights. This will open up opportunities for alternative models of selling real estate that already exist but don’t have much market share, including flat-fee and discount brokerages.Homebuilder stocks rose Friday midday on the news: Lennar shares gained 2.6%, PulteGroup shares added 1.1% and Toll Brothers shares added 1%.For the average-priced American home for sale — $417,000 — sellers are paying more than $25,000 in brokerage fees. Those costs are passed on to the buyer, boosting the price of homes in America. That fee could fall by between $6,000 and $12,000, according to TD Cowen Insights’ analysis.“While the settlement comes at a significant cost, we

believe the benefits it will provide to our industry are worth that cost,” said Kevin Sears, president of the NAR, in a statement.In November, a federal jury in Missouri found the NAR and two brokerages liable for $1.8 billion in damages for conspiring to keep agent commissions artificially high. Because it was an antitrust case, the NAR was potentially on the hook for triple those damages — $5.4 billion.The NAR had pledged to appeal the case, but other brokerages settled — and, eventually, so did the NAR, on Friday.“NAR has worked hard for years to resolve this litigation in a m

anner that benefits our members and American consumers,” said Nykia Wright, interim CEO of NAR, in a statement. “It has always been our goal to preserve consumer choice and protect our members to the greatest extent possible. This settlement achieves both of those goals.”The NAR had required homesellers to include the compensation for agents when placing a listing on a multiple listing service. Although NAR has long said commissions are negotiable and that the structure helped making housing more affordable for buyers, critics have long argued that the fees were expected and homesellers felt they would lose buyers if they didn’t offer them.Settlement could lead to lower homebuying costsHomesellers who brought lawsuits against the NAR have argued that 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. The sellers who brought the lawsuit against the NAR and the brokerages said that buyers should be able to negotiate the fee with their agent, and that the sellers should not be on the hook for paying it.This settlement, which is subject to a judge’s approval, opens the door to a more competitive housing market. Realtors could now compete on commissions, allowing for prospective buyers to shop around on rates before they commit to buying a home. Brokers could begin to advertise their fees, allowing customers to choose lower-cost agents. The NAR, in its announcement, did not set a suggested fee.This marks the biggest change to the housing market in a century, said Norm Miller, professor emeritus of real estate at the University of San Diego.“I’ve been waiting 50 years for this,” Miller said.Although it’s unclear what the future of the housing market will look like, Miller said he expected homebuying to pick up somewhat as costs fall dramatically for homebuyers.“There are all kinds of models we might see in the future, and no one knows what they are,” he said, suggesting some brokers may charge, say, a $3,000 fee for selling a home, while others will offer a competitive commission.The agreement will bring sweeping reforms for millions of Americans, said Benjamin D. Brown, managing partner of Cohen Milstein Sellers & Toll and co-chair of its antitrust practice, who helped craft the settlement.“For years, anticompetitive rules