T
he National Association of Realtors (NAR) recently settled a class-action lawsuit that aimed to address excessive fees in the real estate industry. The settlement, which was finalized in March 2024 and took effect in August of the same year, required NAR to pay $418 million in damages and remove cooperative compensation offers from Multiple Listing Services (MLS). This change is expected to bring more transparency to the homebuying process.
However, according to Doreen Spagnuolo, CEO of the Long Island Board of Realtors (LIBOR), the impact of this settlement may be overstated. She notes that compensation for listing agents and buyer brokers has always been negotiable. The real change lies in the increased transparency and clarity that will come from explaining commission structures to clients.
The NAR settlement affects Realtors who belong to NAR, but its influence extends beyond the association's members. It brings attention to the fact that commissions are not set by law, but rather negotiated between sellers and listing agents. This means that sellers have the right to ask questions about commission fees and negotiate with their listing agent.
To comply with the settlement, listing agents must now explain to sellers that commissions are negotiable and that they can choose not to pay a buyer's broker fee. They must also articulate their value and justify their commission rates. Buyer brokers, on the other hand, must enter into written agreements with their clients, outlining the services they will provide and the compensation they will receive.
The settlement has significant implications for the real estate industry, particularly in terms of transparency and consumer confidence. It requires listing agents to explain commission structures to sellers and buyer brokers to enter into written agreements with their clients. This increased transparency is expected to lead to more informed consumers who are better equipped to navigate the homebuying process.
As of February 2025, listing agreements will need to include a statement indicating that commissions are not set by law but rather negotiated between parties. This means that sellers and buyers will have more control over commission rates and can negotiate them based on their individual needs.
The NAR settlement is not without its uncertainties, as there are still pending lawsuits in the industry. However, it marks an important shift towards increased transparency and consumer confidence. As the real estate landscape continues to evolve, associations like LIBOR will play a crucial role in supporting members through these changes and providing trusted resources for consumers.
In the end, the NAR settlement is about more than just commission fees – it's about building trust between buyers, sellers, and real estate professionals. By increasing transparency and clarity, the industry can work towards creating a more consumer-friendly experience that benefits everyone involved.
