This story is being republished under a special NJ News Commons content-sharing agreement. Link to story: nj.com/news/2024/03/in-a-big-change-sellers-will-likely-pay-lower-commissions-on-home-sales-big-change-for-home-sellers-lower-commissions-are-on-the-way-experts-say.html
As part of an agreement to settle a series of lawsuits over inflated real estate commissions, the National Association of Realtors said Friday that big changes are on the way.
The group said it will pay more than $418 million to settle the lawsuits. But much more significantly, industry experts say, the settlement will upend the real estate market and create more competition, which will lead to lower commissions.
The realtor group said it will eliminate a longstanding rule that mandated a non-negotiable commission be posted on the Multiple Listing Service (MLS), its real estate database, which handles more than 90% of home sales. Currently, to list a home with MLS, the non-negotiable commission is typically between 5 and 6 percent.
By removing that rule, real estate commissions can be negotiated, which could lead to lower costs for home sellers.
Asked for comment, the National Association of Realtors referred NJ Advance Media to its statement.
“This would mean that offers of broker compensation could not be communicated via the MLS, but they could continue to be an option consumers can pursue off-MLS through negotiation and consultation with real estate professionals,” said Nykia Wright, the group’s interim CEO, in the statement.
The commission of 5% to 6% is typically paid by the seller, and if a home’s buyer is working with their own agent, the commission is typically shared between the two agents upon a sale.
A 6.0 percent commission takes away a big chunk of a home seller’s profit.
For example, a home that sells for $800,000 will give a seller’s agent a $48,000 paycheck if that agent also brings in the buyer. If a separate agent brings in the buyer, $24,000 would go to each agent and their offices.
Home sellers in the United States pay roughly $100 billion in real estate commissions annually, according to a report in the New York Times.
“The forces of competition will be let loose,” Benjamin Brown, co-chairman of the antitrust practice at Cohen Milstein and one of the lawyers who hammered out the settlement, told the New York Times. “You’ll see some new pricing models, and some new and creative ways to provide services to home buyers. It’ll be a really exciting time for the industry.”
