• By Mike Wendling
  • BBC News in Chicago

Image source, Getty Images

A settlement in a case against US real estate agents could mean a reduction in the costs of buying and selling homes.

The National Association of Realtors (NAR) and real estate companies were accused in a series of lawsuits of artificially inflating sales commissions.

A settlement was announced on Friday, including $418 million (£328 million) in damages.

The NAR agreed to reduce commissions and make it easier for buyers to negotiate fees, measures that could ultimately result in lower buying and selling costs.

The settlement is expected to increase competition in the US housing market, where a 6% commission on the sales price is considered standard.

At the average US house price of $417,700 (£328,000), the standard commission comes to just over $25,000, a cost that is often passed on in whole or in part to the buyer.

In November 2023, a federal jury in Missouri ordered the NAR and brokerage firms to pay $1.78 billion (£1.4 billion). Under US antitrust law, a judge could potentially have tripled these damages. That case ultimately led to the settlement announced Friday.

The NAR, headquartered in Chicago, says about 1 million of its members are covered by the settlement, which is subject to final court approval.

The association operates a real estate database called the Multiple Listing Service (MLS) and requires home sellers to offer a non-negotiable commission before their properties are listed.

Without this requirement, buyers will have more freedom to negotiate lower commission rates or fixed sales charges. The settlement also includes other provisions that have the potential to reduce transaction costs.

“NAR has worked diligently for years to resolve this lawsuit in a way that benefits our members and American consumers,” NAR interim CEO Nykia Wright said in a statement. “It has always been our goal to preserve consumer choice and protect our members to the best of our ability. This settlement accomplishes both of those goals.”

Under the terms of the settlement, which takes effect in July, NAR and real estate companies are not required to admit wrongdoing.

Robert Braun, a Chicago-based attorney representing homebuyers in two class-action lawsuits against real estate agents, called this “a big change from the old norms.”

“But whether this will actually change prices in the housing market remains to be seen,” Braun said in an email.

The settlement did not resolve a number of other lawsuits against real estate companies or a possible federal investigation into the NAR. Real estate agents in Canada are also facing similar legal action over buying and selling fees.

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