The National Association of Realtors (NAR) in the USA has agreed to reduce commissions to settle lawsuits against it.
The real estate trade group agreed in March to pay $418m (£322m) over roughly four years to resolve all claims against the group by home sellers related to broker commissions. The agreement came into effect over the weekend, and is expected to bring sweeping changes to how real estate agents across the US carry out transactions.
Around 90% of residential property sales are handled by real estate agents affiliated with NAR. The organisation, the country’s largest trade association, requires home sellers to determine a commission rate, typically 6%, before listing homes on its property database, known as the Multiple Listing Service, or MLS.
The lawsuits argued that the structure harms competition and leads to higher prices.
“NAR has worked hard for years to resolve this litigation in a manner that benefits our members and American consumers. It has always been our goal to preserve consumer choice and protect our members to the greatest extent possible,” NAR interim CEO Nykia Wright said in a statement. “This settlement achieves both of those goals.”
Notably, the landmark deal will reduce realtors’ standard 6% sales commission fee, potentially leading to significant savings for homeowners. The group had been found liable for inflating agent compensation.
Fees could be slashed by up to 30%, the New York Times reported, citing economists.
That could impact earnings for 1.6 million real estate agents, who could see their $100bn (£77bn) annual commission pool shrink by about one-third, analysts with Keefe, Bruyette & Woods wrote in a report last year about the pending litigation.
Standard commission rates in the US are among the highest in the world.
