A federal judge has approved an agreement that calls for the National Association of Realtors (NAR) to pay about $418 million in damages and accept changes to the way real estate agents are paid to settle a lawsuit with a group of home sellers.
Judge Stephen R. Bough of the Western District of Missouri finalized the settlement that began in March when the NAR agreed to settle with a group of home sellers who had sued the association over rules governing agent commissions. The home sellers argued that the rules required them to pay excessive fees. With the settlement, agents for buyers and sellers are not allowed to discuss compensation on the popular online database, the Multiple Listing Service, or MLS.
The lawsuit challenged the long-standing practice of unilateral compensation to buyer brokers of 2.5% to 3% of the cost of a home being purchased. By mandating that the fee be split between the buyer’s agent and the seller’s agent, the NAR required commissions be around 6% for each home. It was a fee that was deemed to be in violation of antitrust laws. The suit maintained that this practice raised the cost of buying a home and had to be paid, no matter the quality of services or whether the homebuyer was willing to pay for such services at all.
While new requirements and safeguards have been in place since August to eliminate these issues, a recent Redfin report found that there was virtually no change in the compensation received by agents involved in home sales.
There was a possibility that the judge’s decision might be delayed following a last-minute opinion on Sunday from the U.S. Department of Justice that asked for provisions in the settlement be clarified. The DOJ objected to a provision requiring buyers and their brokers to enter a “written agreement before the buyer tours any home.” DOJ officials said the provision raises independent concerns under the antitrust laws, which could be addressed by the elimination of the provision. The DOJ also stated that the settlement did not shield the NAR from future legal action on these issues.
NAR officials said the settlement secures a release of liability for more than 1.4 million NAR members.
“This is an important moment for NAR members, homebuyers and sellers, and the real estate industry,” said NAR President Kevin Sears. “As consumer champions, NAR’s members have been working tirelessly to implement the practice changes required by the settlement and shepherd consumers through this period of transition.
“The principles of transparency, competition and choice are core to the settlement agreement and empower real estate professionals and consumers to negotiate the services and compensation that work for them.”