Purchasing a home is a significant life event for most people, often the biggest purchase a family will ever make. A recent lawsuit against the National Association of Realtors (NAR) will impact how buyers purchase homes and the amount and method by which real estate agents charge commissions.
The NAR settlement agreement includes changes to boost competition and transparency in real estate transactions. We explain the NAR lawsuit update and how working with an attorney can make it easier to purchase a home without a realtor.
What Is the NAR Lawsuit About?
The NAR is a trade association of licensed real estate brokers and agents who provide real estate brokerage services to home sellers and buyers. Approximately 89% of homes are bought and sold using NAR real estate agents. Home sellers must offer a non-negotiable commission before listing a home on NAR’s property database (the Multiple Listing Service or MLS). The seller pays the commission to their agent and the buyer’s agent. Commissions are typically around 5% to 6% of the home’s sale price.
The NAR recently faced a lawsuit accusing it of anticompetitive practices, including steering buyers away from properties with low commission offers. Property sellers filed the lawsuit alleging that the NAR rules on commissions decreased competition and inflated housing costs. Sellers alleged that NAR conspired to raise, fix, maintain, or stabilize real estate commissions in violation of state and federal laws.
The NAR reached a $418 million joint settlement with the class of home sellers that filed the antitrust lawsuits. Under the settlement, compensation offers are not allowed on the MLS site. Brokers and sellers can offer compensation for buyer broker service, but they will no longer be communicated on the MLS.
How Does the NAR Realtors’ Lawsuit Impact Consumers?
The NAR settlement agreement may benefit consumers with price transparency and increased competition. Industry experts see the move away from set commissions as an opportunity for new and innovative service and pricing models by real estate agents. Alternative compensation models may include paying by the hour, flat fee, or purchasing sharply reduced levels of service. Having more pricing models can provide consumers with more choices and value.
There may be a decline in home prices as sellers won’t need to factor the buyer’s commission into the sale price of their home. However, first-time home buyers may encounter a barrier to becoming homeowners if they must pay their agent’s commission. Without having the commission factored into the sale price, they will face a significant cost that might not be financeable.
Without listing brokerage commissions on the MLS site, there may be more room for negotiation with sellers. Homebuyers who sign up with a broker may be able to negotiate fees more easily. However, in some cases, buyers may choose to forgo brokers entirely.
If you want to purchase a home, you might find the NAR realtors’ lawsuit confusing and want to know how it impacts you. You might also be curious about buying a house without a real estate agent. Working with an experienced real estate attorney can help decrease your fears and answer your home purchasing questions.
While the NAR settlement agreement may reduce commissions and save you money as a home buyer, complicated rules, laws, and paperwork are still involved. You will want to work with a real estate attorney even without a realtor. An attorney can prepare and review the documentation necessary for purchasing a home and protect your rights. Adam Curley has been practicing real estate law for over 16 years. As an experienced solo practitioner, Adam dedicates his time to each client’s needs and goals. Adam can guide you in the right direction and make it easy to buy a home without a real estate agent. Contact The Curley Law Firm today to understand how the NAR lawsuit update may impact your home purchase.