A landmark settlement will impact how homes are bought and sold. Credit: gorodenkoff

Over the past week, you’ve probably seen the headlines about the National Association of Realtors’ settlement between the real estate industry and home sellers. 

The NAR, a trade group representing real estate agents, agreed to pay $418 million to settle more than a dozen antitrust lawsuits. The plaintiffs alleged NAR artificially inflated realtor commissions that home sellers pay, which helped inflate home prices. 

This settlement is expected to impact how homes are bought and sold when changes take effect in June. 

If you’re wondering how this impacts you — I’ve read several articles to help you figure it out. 

This lawsuit is confusing. What does this mean in the simplest of terms? 

Nerdwallet offers an easy-to-understand breakdown. It highlights that home sellers will now pay smaller commissions, allowing them to keep more of the money from sales. Home buyers (instead of sellers) will now decide how much their buyer’s agents get paid. 

So, will commissions be decreased? 

It seems so. Currently, home sellers typically pay a commission of around 6%, which is usually split between the buyer’s and seller’s agents. This CNN breakdown explains that while NAR claims those fees are negotiable, NAR rules have kept this commission much higher than in other countries, where the commission averages 1% or 2%. This settlement means commissions could become more competitive. But it’s also worth noting that buyers may have to pay the fee themselves. 

What does this mean for people looking to buy their first or second homes?

That answer may be different. As Axios points out, first-time home buyers might have to pay the agent fee themselves, which could impact how much money they have for a down payment. Since home prices were at an all-time high in the last quarter and interest rates are currently high, this could impact buyers with less upfront cash. 

Will home prices go down? 

It’s unclear, but we can hope. Business Insider points out that lower fees may not necessarily mean cheaper homes. For example, sellers could list their home for the same price they would have before the settlement and then just pocket more of the profits. However, lower fees could also encourage more property owners to list their homes, increasing supply and possibly lowering home prices.

Could this impact people entering the industry as an agent? 

Possibly. I connected with Armstead Jones from the Real Estate Bees. He’s a Strategic Real Estate Advisor at HouseCashin, where he provides research and consulting services related to real estate development for housing, mixed-use, and commercial properties. 

He says we could see fewer people entering the real estate industry as part-time sellers. 

“10% of the realtors do 90% of the transactions. The other 90% of realtors do the other 10% of transactions. So you have your top 10%, whose business model will adjust. They’ll lose a little bit of money, but they’ll still be in the game,” Jones says. 

For agents who do fewer transactions and may use real estate as a side hustle, selling may not be as lucrative. This is because their commissions may be reduced to the point where they are no longer profitable, Jones says. 

The amount of time it takes to find a property to list for sale or to find a buyer who can purchase, that takes some lead time, plus the closing process in the mortgage process,” he says.  

Jones believes these part-time agents could wait anywhere from three to six months from an initial lead before they get paid, and they’re going to likely get paid less. “So, more people will probably pick other options and rethink getting into the business,” he says. 

Will agents work as hard if they are getting less of a commission? 

Possibly, according to Jones. “If I negotiate with somebody and they are only going to get like 2%, are they going to work as hard to sell my property as the property they have that they’re getting 5% commission?” Jones says. 

This whole article was filled with a lot of maybes.  

Well, yeah. The settlement is new and doesn’t go into effect until this June, so it’s unclear what could happen. 

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