- By Mike Wendling
- BBC News in Chicago
image source, Good pictures
A settlement in a lawsuit against American real estate agents could reduce the cost of buying and selling homes.
The National Association of Realtors (NAR) and property firms have been accused in a series of lawsuits of artificially inflating sales commissions.
A settlement including $418m (£328m) in damages was announced on Friday.
NAR agreed to lower commissions and make it easier for buyers to negotiate fees, moves that could ultimately lower the costs of buying and selling.
The settlement is expected to increase competition in the US housing market, where a 6% commission on the sale price is considered standard.
With an average US house price of $417,700 (£328,000), the fixed commission works out to over $25,000, which is often passed on to the buyer in whole or in part.
In November 2023, a federal jury in Missouri ordered NAR and brokerage firms to pay $1.78bn (£1.4bn). Under US antitrust law, those damages could be tripled by a judge. That lawsuit eventually led to the settlement announced Friday.
Chicago-headquartered NAR, which has about 1 million of its members, is subject to the settlement, which is subject to final court approval.
The association operates a property database called the Multiple Listing Service, or MLS, and requires home sellers to pay a negotiable commission rate before their properties are listed.
Without that requirement, buyers would have more freedom to negotiate lower commission rates or flat-price fees on sales. The solution also includes other rules that have the potential to reduce transaction costs.
NAR Interim Chief Executive Nykia Wright said in a statement, “NAR has worked hard over the years to resolve this case in a way that benefits our members and American consumers. “Protecting consumer choice and protecting our members as much as possible has always been our goal. This solution achieves both of those goals.”
Under the terms of the settlement, which will come into effect in July, NAR and property companies are not required to admit fault.
Chicago-based attorney Robert Brown, who is representing homebuyers in two class-action lawsuits against estate agents, called it “a big change from the old regulations.”
“But it remains to be seen whether this will actually change prices in the housing market,” Mr Brown said in an email.
The settlement does not resolve multiple lawsuits against property companies or a potential federal investigation into NAR. Estate agents in Canada face similar legal action in buying and selling fees.
