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The 6% commission that many home sellers despised is on the verge of becoming a relic.
new york
CNN
—
The entire U.S. housing market is about to be renovated, and the final product could come with the big bonus of lower home prices.
That's due to a $418 million settlement the National Association of Realtors announced Friday with a group of home sellers.
The settlement, which still needs to be approved by a judge, would eliminate the 6% commission that sellers had been paying for years. However, these fees are often built into the list price of the home. So if fees are lowered, home prices could also go down, experts say.
And at a time when rising housing costs are driving inflation across the country, reining in home prices could help bring price increases back to the levels Americans experienced before the pandemic.
But none of this will happen overnight.
First, a judge would have to sign off on the settlement, which would introduce a number of new rules. Of these, buyer agents who introduce homes on regional centralized listing portals known as multi-listing services cannot know in advance what commission they will receive if their clients ultimately purchase the property.
NAR, which represents more than 1 million agents, declined to comment on whether home prices would fall as a result of the settlement. But NAR Chairman Kevin Sears said in a statement Friday that “the benefits NAR brings to our industry are worth the cost.”
The settlement comes months after a federal jury in Missouri found NAR and two brokerages liable for $1.8 billion in damages for conspiring to keep agent commissions artificially high. Ta. The NAR was the last of the three parties to reconcile.
Stephen Brobeck, a senior fellow at the Consumer Federation of America, an umbrella organization for nonprofit consumer organizations, said that separating fees from home prices would “eliminate fees, allow lower prices to be negotiated, and improve home prices and overall “It can lower both consumer costs and consumer costs.”
He estimates that in a normal year (unlike previous years, when home purchases fell to their lowest levels in nearly 30 years) Americans pay $100 billion in fees. If a settlement is reached, homebuyers could potentially save a quarter to half of that amount.
Even if a judge signs off on a settlement, “the industry will likely try to use informal mechanisms to maintain the 5% to 6% commission line,” Brobeck told CNN. For example, listing agents will continue to tell sellers that their home will sell faster if they pay the buyer's agent commission. In that case, the amount of compensation will increase because the total commission will ultimately be split 50-50 between the listing agent and the buyer's agent. What's more, the buyer's agent “will refuse to negotiate the commission.”
Tomasz Pikorski, a real estate professor at Columbia University, is skeptical that the settlement will move house prices significantly.
She told CNN that transparency is important to homebuyers who may have limited understanding of how sellers arrived at their asking price, given that fees are calculated behind the scenes. He said it was a “step in the right direction” in terms of increasing gender equality.
However, since fees act like taxes, lowering fees could encourage more renters to buy homes. That could more than offset the price savings provided by the new system, Pikorsky said.
With or without the NAR settlement, factors such as housing inventory, mortgage rates and consumer savings rates “will play a much larger role,” Brobeck said.
