What You Need to Know About the Ruling Against the National Association of Realtors
The court decision—which follows months of controversy for the organization—could mean that home sellers no longer have to pay fees for buyers’ agents.
The court decision—which follows months of controversy for the organization—could mean that home sellers no longer have to pay fees for buyers’ agents.
A lawsuit filed by nearly half a million Missouri home sellers against the National Association of Realtors (NAR) was ruled in favor of the plaintiffs this week. The verdict of the suit, which claimed that the NAR had conspired alongside several large brokerage firms to inflate agents’ commission fees, will require the defendants to pay close to $1.8 billion in damages. It could also open the door for negotiations between homebuyers and their agents to set agents’ compensation rates.
Home sellers complained that the "standard" practice of setting a five to six percent commission fee—typically paid by home sellers and split between their agent and the buyer’s—"suppressed competition," says a Reuters story, "by keeping commissions for buyer brokers in the 2-1/2 to 3% range despite the brokers' diminishing role, with many buyers able to find homes independently online." As home prices increase, the sellers claimed that this standard commission rate inflated their overall costs paid to brokers.
A New York Times story says the verdict, "has the potential to rewrite the entire structure of the real estate industry in the United States," and one source with Capstone LLC called it, "a significant hit for real estate brokers." There is no certainty that the ruling will lower costs of purchasing a home, but it could make fees more transparent while also calling into question the role of a real estate representative in future home-buying processes.
Just two days after the ruling was handed down, NAR chief executive officer Bob Goldberg resigned from his position a year before his planned retirement. Calls for his resignation began before these suits were decided; according to the Times, Goldberg faced scrutiny from the organization’s membership after reports of sexual harassment surfaced in August.
The suit follows several recent out-of-court antitrust settlements that resulted in major real estate brands like Re/Max and Coldwell Banker to not require their agents to be members of the NAR—a controversial move as the NAR both owns the trademark on the word "Realtor" and, in some markets, grants access to the Multiple Listing Service real estate database only to members of the organization.
Top Image: A For Sale sign in front of a home on October 23, 2019 in Miami, Florida. (Photo by Joe Raedle/Getty Images)
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