The National Association of Realtors (NAR), in a groundbreaking move, has decided to allow potential home buyers to negotiate their broker commissions previously set to a mandatory 6%. The pivotal decision came as a result of an ongoing class-action lawsuit settled by NAR under which the home buyers stand to save a significant amount of money previously paid as broker fees.
Broker commissions, predominantly paid by the seller but baked indirectly into the throwback price for the buyer, are usually set at 6% of the home’s selling price. This has been the norm in the housing industry for many years with the commission typically split between the buyer’s and seller’s agents. However, under the new rule, potential buyers have the liberty to negotiate their agent’s commission rates.
The settlement sprouted out of buyer-initiated antitrust lawsuits filed against NAR and four of the country’s largest brokerage firms: Realogy, HomeServices of America, RE/MAX, and Keller Williams. They pointed out that the U.S. housing market’s mandatory commission rates were uncompetitive and higher than many developed countries, like the U.K, where the average commission rates are much lower: around 1-3%.
The home buyer’s point of view is entirely justified as they are, in the end, bearers of the commission cost, which directly inflates the home price. The lawsuits pushed for transparency and competitive negotiation, striving to break down the barriers to more affordable homeownership.
As per the new rules imposed due to the settlement, brokers are required to represent a clear breakdown of the commission split between the buyer and seller agents. This allows the buyers to make a more informed decision and negotiate their broker commission to gain a more favorable deal.
Top real estate agencies have responded positively, supporting this shift towards more competitive commission rates and transparency. Given the rigid structure of the already-complex housing industry, this is a welcome change and one that promises fair treatment for all participants.
Potential home buyers should be aware that while the settlement ensures a pathway toward negotiation and transparency, it does not guarantee lower commission rates. Each buyer’s negotiating skills, local market conditions, and the capacity or willingness of the buyer’s agent to deviate from the norm can influence the final commission rate.
This settlement, undeniably, is a groundbreaking triumph for home buyers. It paves the way for a more competitive and transparent real estate market and steps closer to making homeownership more affordable and attainable for all U.S. citizens.
It is, however, important to remember not to conflate this development with the turning of the entire real estate industry on its head. Change is often slow, especially in industries as entrenched as real estate. Still, each step toward transparency, fairness, and competition is a step in the right direction and should be treated as a win for all parties involved.