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The End of 6% Commission As We Know It?

As you probably heard, last week the National Association of Realtors (NAR) announced that they would settle with a staggering $418M payout against the class-action lawsuits targeting broker commissions. But the NAR settlement isn’t solely monetaryif approved it will effectively transform the way real estate agents currently earn commissions.

Breaking Down The Sitzer-Burnett Case

It all began in October 2023, when Sitzer-Burnett, a class-action lawsuit, was filed in Missouri’s federal court by a group of home sellers. The plaintiffs argued that the commission rates are too high, buyers’ agents are overpaid, and that the NAR’s Code of Ethics and MLS Handbook have led to inflated commission rates. 

At the time, NAR, Keller Williams, and HomeServices of America (a Berkshire Hathaway affiliate) were named as the defendants in the case. In February, Keller Williams agreed to pay $70M in settlement towards the lawsuits. With NAR’s recent decision to settle, this would then leave HomeServices of America as the sole defendant in the case.

The NAR’s Settlement, Explained

Who’s Supported?

The NAR’s agreement to settle will rectify the claims against the following: 

  • The NAR and more than one million of its members
  • All Local and State REALTOR® Associations
  • All Association-Owned MLSs
  • All Brokerages with NAR Member Principals that had a residential transaction volume in 2022 of $2B or lower

What Will Be Changing?

Broker Commissions

At this time, home sellers currently pay a 5% to 6% commission and this commission is usually split amongst the seller’s agent and the buyer’s agent. Sellers are then required to display the buyer agent commission in a designated field on the Multiple Listing Service (MLS). This value, though not accessible by homebuyers, can be viewed by the buyers’ agents. If the settlement is approved, this field will cease to exist.

Following NAR’s decision to settle, commissions will be removed entirely from the MLS. Despite this change, commissions are still open for discussion and negotiation, so long as it is not conducted on the MLS.

Written Agreements

In response to the lawsuit, NAR also states that they will enforce the requirement of written agreements between buyer agents who participate in the MLS and the home buyers.

This change has been inspired by the NAR for years in an effort to provide clients with transparency and the necessary information surrounding their home purchase. 

What’s the Timeline for NAR’s Settlement?

NAR proposes to pay the $418M settlement in a court-controlled trust fund that will be paid out over four years. The payment is said to first represent the plaintiffs’ legal fees and the remaining will then be distributed to members of the class.

Once NAR’s settlement is approved by the court, the changes listed could go into effect as early as mid-July 2024.

“NAR has worked hard for years to resolve this litigation in a manner that benefits our members and American consumers. It has always been our goal to preserve consumer choice and protect our members to the greatest extent possible. This settlement achieves both of those goals,” 

Nykia Wright, Interim CEO of NAR

The NAR further explains the decision to settle and what that entails in their recent news article, “National Association of REALTORS® Reaches Agreement to Resolve Nationwide Claims Brought by Home Sellers.”

Stay Ahead of the Curve with DASH

Ultimately, while the full effects of the NAR settlement are yet to unfold, one thing is clear: the landscape of real estate transactions in the United States is on the cusp of a significant transformation. 

This shift could democratize the process of buying and selling homes, making it more efficient, transparent, and perhaps even more equitable for all parties involved. 

Whether this will lead to a better market overall remains to be seen, but the initial signs point to a future where the power dynamics of real estate may be fundamentally altered.

In an industry as dynamic as real estate it’s vital to stay ahead of the curve and DASH was created for just that. With DASH, real estate agents are equipped with the latest and greatest of new development content. 

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