What is the National Association of Realtors Lawsuit Really About?

The National Association of Realtors (NAR) antitrust lawsuits claim that the organization’s rules limit competition and artificially inflate commission rates by tying access to the Multiple Listing Service (MLS) to NAR rules. The lawsuits also claim that the NAR’s “adversary commission rule” violates federal and state antitrust laws. This rule forces home sellers to offer payment to the buyer’s broker when listing a property on the MLS. The jury ruled the Defendants were guilty of conspiracy to violate anti-trust laws in the civil class action.

The NAR rule requires that a seller broker disclose an offer of compensation to the buyer broker when the house is first listed. The buyer doesn’t pay their agent’s fee directly. Instead, the commission is fully paid by the seller as part of their closing costs. The question is, “Is it reasonable for the seller to pay a third party who is not representing their interests? The NAR Rule has been in existence since the mid-1990s.

According to the recently settled lawsuit, this is a form of antitrust, by reducing competition and inflating commissions.

THE MEDIA HAS SUGGESTED:

A. Home Prices Will Fall. Not Likely! Home prices are determined by market forces such as the supply and demand for homes, the cost of construction, and interest rates. Even though interest rates remain high, we are still experiencing a shortage of homes. Prices will continue to increase. Home sellers will likely capture more profit.

B. Real Estate Commissions Will Fall.

1. This will likely be true for sellers as their listing agents can no longer publish any offer of compensation to the buyer’s agent and sellers are free to determine how much if anything they’ll pay the buyer’s agent.

2. This will likely not be true for buyers because they could see an increase in cost of between 2-3% for representation. They may be responsible for paying some part, or all the buyer’s agent’s commission. It’s likely to make purchasing a home more expensive for buyers. For example, a firsttime home buyer using FHA financing will now need to save at least 3% for a down payment, 3-5% for closing costs, plus 2-3% if they want representation from a buyer agent.

Thinking of Selling Your Home?

According to the NAR, 52% of buyers found their home online, 28% through a realtor. Over 90% worked with a buyer’s agent to successfully purchase their home. It may be in your best interest to consider some form of compensation for the buyer’s agent. You’re welcome to discuss with me how to navigate the changes in the real estate market structure. Feel free to call, email, or text me.