Agency fees in the US could be slashed by up to almost a third, the New York Times reported over the weekend, citing economists, after a real estate trade group agreed to slash commissions to settle lawsuits against it.
The National Association of Realtors (NAR) agreed on Friday to pay $418m (£328.2m) over roughly four years to resolve all claims against the group by home sellers related to broker commissions. The agreement must still be approved by a court.
Almost nine in ten residential property sales in the USA are handled by real estate agents affiliated with NAR. The organization, the country’s largest trade association, requires vendors 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 Friday. “This settlement achieves both of those goals,”
Standard commission rates in the U.S. are among the highest in the world. But the landmark deal will slash realtors’ standard 6% sales fee, potentially leading to significant savings for homeowners. The group had been found liable for inflating agent compensation.
The reduction in fees could impact earnings for 1.6 million real estate agents, who could see their $100bn (£78.5bn) annual commission pool shrink by about one-third, analysts with Keefe, Bruyette & Woods wrote in a report last year about the pending litigation.
