U.S. Realtor Group's $418 Million Antitrust Settlement Tentatively Approved

A federal judge has given preliminary approval to a $418 million antitrust settlement proposed by the National Association of Realtors (NAR). The settlement resolves claims that the NAR's policies on listing agent commissions violated antitrust laws and inflated home prices for buyers.

The lawsuit, filed by the U.S. Department of Justice in 2020, alleged that NAR rules allowed real estate brokers to charge inflated commissions by prohibiting home sellers from negotiating lower fees for buyers' agents. The settlement requires NAR to make changes to its rules and policies to increase transparency and competition in the real estate market.

Under the terms of the settlement, the NAR will change its rules to stop requiring sellers to include buyer's agent compensation in the home price, allowing the seller's and buyer's agents to negotiate the commission separately. While some experts believe these changes could reduce commissions by 30%, others argue that home prices are driven more by high demand and low supply.

Why this matters: The settlement has the potential to bring significant changes to the real estate industry, affecting how real estate agents are compensated and potentially lowering costs for homebuyers. The outcome could set a precedent for how antitrust laws are applied within the real estate sector, influencing future regulatory policies and business practices.

The changes are anticipated to go into full effect among brokerages across the country by September 16, 2024. The agreement is still subject to a final court approval hearing on November 22, but that is largely considered a formality.

The settlement also releases NAR, multiple listing services it controls, and brokerages with transaction volumes under $2 billion from claims brought by home sellers nationwide. However, larger brokerages like Redfin, Compass, and HomeServices of America are not cleared by the settlement and can opt-in by paying a formula-based amount.

Several large brokerages, including Anywhere, RE/MAX, and Keller Williams, have already struck their own deals with the plaintiffs. The settlement is part of a broader legal landscape, with HomeServices of America facing a separate $1.8 billion jury verdict in a different lawsuit.

The full effects of the settlement on consumers won't be known until the changes take effect in mid-July. "The settlement will lead to sweeping changes in the way buyers and sellers work with their agents, including increased transparency around real estate agent fees," said a spokesperson for the plaintiffs. However, the ultimate impact on commission rates remains uncertain.

Key Takeaways

• Federal judge approves $418M antitrust settlement by National Association of Realtors
• Settlement requires NAR to change rules to increase transparency and competition
• Changes may reduce commissions by 30%, but home prices depend on supply and demand
• Settlement releases NAR and smaller brokerages, but larger firms can opt-in
• Impact on commission rates remains uncertain until changes take effect in 2024