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What the NAR settlement means for real estate: YF Explains

Dani Romero
·Reporter

The National Association of Realtors reached a $418 million settlement with home sellers who alleged brokerages indirectly gouged house prices by boosting real estate agent commissions.

There are big questions about what the agreement means for the industry, home sellers, and home buyers.

Yahoo Finance's Dani Romero takes you through the implications you need to know.

Be sure to check out Real Estate: The New Reality, starting April 22 on Yahoo Finance.

Video Transcript

[THEME MUSIC]

- Realtors across America may be getting a massive pay cut. The National Association of Realtors agreed to pay $418 million to help compensate home sellers across the US. As part of a groundbreaking settlement, Compass, Keller Williams, and RE/MAX have settled claims as well. Multiple lawsuits argue that brokerages conspired to boost agents' commissions and indirectly inflated home prices.

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The agreement effectively will destroy the current home buying and selling business model. This settlement comes after a federal jury ordered the NAR to pay damages of $1.8 billion for similar allegations back in October. So what does this mean for buyers, sellers, and the housing market at large?

If approved by a federal judge, the standard 6% commission that real estate brokers have received will likely disappear. And two, buyer-broker compensation is no longer allowed to be included on local centralized listing portals, known as the multiple listing services. Some analysts on Wall Street think that these new rules will lead to commissions falling by 25% to 50%.

"The Wall Street Journal" reported this change could drive hundreds of thousands of agents out of the industry. Home sellers should now be able to negotiate fees with their agents more easily. And buyers who may now have to pay their own agents may forego one or opt for fewer services. Of course, with lower commissions, many are hoping we could see home prices fall as well.

We cover all of this and more on Yahoo Finance's "Real Estate, The New Reality."