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How NAR's settlement could change real estate forever

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Model of house next to gavel

After multiple lawsuits challenged the fairness of agent commissions, the National Association of Realtors (NAR) has agreed to overhaul the way real estate agents are paid in a historic $418 million settlement.

From mid-July 2024, NAR will slash the standard 6% sales commission fee by up to 30%, empowering homebuyers and sellers to negotiate fees directly with their agents upfront – or perhaps skip using an agent altogether.

This could shrink the annual $100 billion commission pool for 1.6 million real estate agents by about a third.

The agreement also prohibits agents' compensation details from appearing on multiple listing services, with the goal of stopping brokers from steering clients towards properties offering higher commissions.

How will compensation changes reshape the real estate market?

While these changes may incentivize new homebuyers, some industry experts see it differently. LendingTree senior economist Jacob Channel believes other factors, such as home prices and mortgage rates, will continue to play a much larger role in purchasing decisions than the amount payable to agents.

Others including Steve Brobeck, senior fellow at the Consumer Federation of America, predict that a more price-transparent marketplace will ultimately lower both consumer and housing costs.

If Channel's assessment is accurate, the rental market may not change much, if at all. On the other hand, if Brobeck’s prediction comes true and home prices fall as a result of lower commissions, there could be a surge of renters transitioning to homeownership, potentially bringing down rental prices even more.

The full impact of this landmark case remains to be seen, but one thing experts are agreed on is that it will redefine the future of real estate transactions.

More real estate business and professional headlines

Realtors leaving NAR en masse could switch to rentals – PayProp

Industry reacts to settlement that could slash commissions – The Hollywood Reporter

The era of the AI home broker approaches – Axios

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