The Good and Bad of the Realtor’s Lawsuit Settlement

You may have heard that the National Association of Realtors (NAR) just recently settled a major class action lawsuit, and that the outcome of the suit will likely alter home prices. But what does the settlement actually mean, and what was it about?

Realtors Commissions

As you likely know, when you buy or sell a home using a realtor, you pay a realtor’s commission.

Generally, the seller pays all commissions—which can be very expensive, when there are realtors for both buyer and seller.

Additionally, the standard realtor commission was 6%, as was written into most real estate contracts. By some estimates, when you calculate the average sale price of a home, the realtors fees were around $25,000 at that 6%.

Although buyers or sellers are legally allowed to negotiate lower fees, most realtors wouldn’t do that, given that every realtor in town charged the standard 6%.

Lawsuit Alleged Collusion

But a lawsuit was brought against the National Association of Realtors (NAR), alleging that the standard 6% was collusion—a form of unfair price fixing. Price fixing is where everybody in an industry agrees what they will charge, thus getting rid of open competition in whatever market the collusion is happening in.

In a settlement, the NAR agreed to stop including the standard 6% fee, thus allowing open competition in realtors fees in the home buying process-that is, buyers and sellers and realtors could negotiate any fee they wanted.

A Win or a Loss?

On the one hand, this could be great for buyers and consumers. With open competition, and the ability for buyers and sellers to negotiate realtor fees, the logic goes, the prices of homes may go down, as the costs associated with the realtor’s commission is expected to go down.

But it could backfire as well.

One one hand, with lowered commissions, more realtors may leave the field. Fewer realtors means less competition, and higher demand for what could eventually be limited realtors—all things that drive prices up, not down.

Additionally, now that it will no longer be standard for sellers to pay both realtor fees for buyer and seller, buyers will have to pay for their own realtors fee, something that they traditionally were not used to doing.

And even if it was assumed that the prices of homes would go down because of decreased realtor commissions, sellers may see this as an opportunity to keep the sale prices the same, and thus, profit or pocket on more of the money, thus not changing much for buyers.

Wait and See

At the very least, the settlement brings competition and negotiation between buyers, sellers, and realtors, and the hope is that this will yield some good for the housing market somewhere-although many realtors will certainly see some damage to their ultimate bottom line.

Questions about your real estate deal or closing? Call the West Palm Beach real estate lawyers at The Law Offices of Larry E. Bray today.

Sources:

vox.com/money/24106230/nar-realtors-settlement-real-estate-house-prices

fox13news.com/news/tampa-bay-realtors-react-to-major-shift-in-industry-after-settlement-ends-6-commission-rates