Major Change Coming to Home Selling Commissions: What You Need to Know

The US housing market is on the verge of a significant change that could ultimately lead to cheaper home prices for buyers. A $418 million settlement announced by the National Association of Realtors is set to eliminate the standard 6% commission paid by homesellers, a fee that is typically included in the listed price of the home. Experts believe that lower commissions could result in lower home prices, offering some relief in a time of soaring housing costs and inflation.

However, the settlement is still pending approval by a judge and would come with new rules, including limiting buyers’ agents’ prior knowledge of their commissions when showing homes listed on multiple listing services. Despite the potential benefits, the NAR has not confirmed whether home prices will indeed fall as a result of the settlement.

The settlement follows a federal jury’s ruling that found the NAR and two brokerages liable for conspiring to keep agent commissions artificially high, with the NAR being the final party to settle. If finalized, the decoupling of commissions from home prices could save Americans up to $100 billion a year in fees, according to some estimates.

While the industry may try to maintain the status quo of 5 to 6% commissions through informal mechanisms, some experts remain skeptical about the impact of the settlement on home prices. Regardless, transparency for homebuyers and potential incentives for renters to buy homes could shift the dynamics of the housing market. Ultimately, factors such as housing inventory, mortgage rates, and consumer savings rates will continue to shape the future of the housing market, with or without the NAR settlement.