Home sellers may soon no longer need to foot the hefty commission of their buyer's real estate agents after a landmark verdict in a recent multibillion-dollar class-action suit against some of the largest brokerage firms in the United States.
Last month, a federal jury ruled that the National Association of Realtors (NAR) and two large brokerages, HomeServices of America and Keller Williams Realty, were liable for conspiring to artificially inflate the commissions paid to real estate agents. The group and brokerages were later ordered to pay damages of nearly $1.8 billion, which could swell to over $5 billion if the court issues treble damages.
Changes in the Real Estate Industry
Following the landmark ruling, several suits have already made changes to the agreements signed by sellers with their real estate agents. The NAR, for instance, revised its agreement and reduced its mandatory buyer commissions to $0, as first reported by Inman News. This means listing brokers can offer nothing as compensation.
In early October, the Real Estate Board of New York (REBNY) announced that the agents of sellers could no longer make an offer of compensation or directly compensate a buyer's agent. In addition, any compensation to the buyer's real estate agent from the seller should be paid directly by the seller. The changes will begin in January 2024.
Some experts in the real estate industry believe there are more changes to come to the real estate industry, including promoting transparency in relation to how commissions are negotiated.
"Ultimately, it will just lead to more transparency in terms of how commission rates are negotiated with a seller and a listing agent, and how they're actually presented in a listing agreement," Nick Oliver, a principal broker at Hauseit, told Yahoo Finance.
Other experts, including Zillow, said they believe it may take years before the landmark ruling against the NAR impacts the real estate market.
Other Cases Against the NAR
The NAR is currently a defendant in other lawsuits, specifically in Illinois, New York, South Carolina, and Texas. In these cases, the lawyers of plaintiffs argue that the NAR is forcing sellers to pay out commissions to the agents of buyers.
In addition to the lawsuits, the Justice Department is also allegedly considering legal intervention that focuses on the real estate commission-sharing system, according to Bloomberg.
