If you’re planning to buy and/or sell a home this year, you may be wondering whether that recent settlement in the class-action lawsuit against the National Association of Realtors (NAR) will affect the transaction. You may have heard that it’s likely to save many homeowners thousands of dollars.
What should you know? Let’s take a brief look at some of the details.
The reason for the lawsuit
The lawsuit revolved around the commission that real estate agents who represent sellers typically receive. It’s been about 6% of the home’s sale price, which is often no small amount. It typically is taken out of the proceeds of the sale, which means the seller pays it. That’s unless they can get the buyer to agree to pay part of it.
The plaintiffs argued that 6% was an arbitrary figure and too high. (It’s lower in most other industrialized countries.) Further, sellers had no room to negotiate it if they wanted their home listed (along with most others on the market) on the Multiple Listing Service (MLS).
What this means to home sellers
The NAR, which represents agents that are in about 90% of home sales in the country, reached a settlement in which it agreed to pay $418 million in damages. If the settlement is approved, any home sellers who paid these 6% commission rates could be entitled to a share of it.
In the settlement, the NAR also agreed to make the commission rate negotiable. The average rate is expected to drop at least 2% once the settlement is approved. That’s $20,000 on a $1 million home. The changes are currently scheduled to take effect this August.
This commission is just one of the many details in agreements signed by buyers and sellers that most of them aren’t even aware of. Some are negotiable or can be shared with the other party to the transaction. Some can commit people to things they had no idea they were agreeing to. These are among the reasons why it’s worthwhile to have legal guidance when you’re involved in what’s likely one of the largest transactions you’ll ever make.