The way Americans buy and sell homes had a major shakeup Friday, with a powerful realtor group agreeing to overhaul the standard 6 percent commission on purchases—a move that’s expected to dramatically reduce the cost of real estate transactions.
The National Association of Realtors, which represents 1.5 million U.S. real estate agents and has set the guidelines for home sales for decades, agreed to drop the mandatory commission to settle lawsuits that accused it of artificially inflating commissions for its agents.
The organization also agreed to pay $418 million in damages, The New York Times reported, citing a signed agreement.
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The deal still requires a federal court’s approval, but, if given the OK, it stands to make the costs surrounding buying and selling homes significantly cheaper. Without a standard commission, realtors would be able to offer different rates—allowing consumers to shop around and decide on which realtor, and what commission rate, fits their needs.
Nykia Wright, the interim chief executive of N.A.R., told the Times it was their “goal to preserve consumer choice and protect our members to the greatest extent possible.”
Norm Miller, professor emeritus of real estate at the University of San Diego, told CNN that this is biggest change to U.S. housing in over a century.
“I’ve been waiting 50 years for this,” he said.
Miller suggested that some real estate agents may move away from commissions entirely—instead advertising a flat fee to buyers and sellers.
The change comes on the heels of two verdicts that went against the N.A.R., which was found liable for artificially inflating real estate commissions in some instances—something it still denies doing.
With the threat of similar lawsuits continuing to roll in, experts predicted the organization may agree to ditch its standard commission to put a stop to the repeated litigation.
“Ultimately, continuing to litigate would have hurt members and their small businesses,” Wright said, according to The Washington Post. “While there could be no perfect outcome, this agreement is the best outcome we could achieve in the circumstances.”
If the settlement is approved by a federal judge, the changes are slated to go into effect in July.
