Real estate commission is a critical part of the home-selling process, compensating agents for their expertise and services in marketing, negotiating, and closing the sale of a property. Understanding how commissions work can help sellers make informed decisions and potentially negotiate better terms.
In October 2023, a federal jury in Missouri found the National Association of Realtors (NAR) and several major real estate brokerages liable for conspiring to inflate commissions paid by home sellers. The jury awarded nearly $1.8 billion in damages, a figure that could potentially triple under U.S. antitrust laws.Â
This landmark verdict has significant implications for the real estate industry, particularly concerning commission structures. Traditionally, sellers have been responsible for paying commissions to both their own agent and the buyer’s agent, typically totaling around 5-6% of the property’s selling price. The ruling challenges this model, suggesting that such practices may have unfairly inflated costs for sellers.Â
In response to the verdict, the NAR and involved brokerages have been ordered to pay substantial damages and are expected to reevaluate their commission practices to prevent future antitrust violations. This may lead to increased transparency and potentially lower commission rates in real estate transactions.Â
As a result of the settlement, significant changes have been implemented in the real estate industry. Starting August 17, 2024, new rules require buyers to sign contracts with agents before viewing properties and to take on the agent’s commission costs, a departure from traditional practices where sellers typically covered these fees. These changes aim to increase transparency and allow for more negotiable broker commissions, which may drive down overall fees and home prices.Â
These developments are expected to have far-reaching effects on how real estate transactions are conducted in the U.S., potentially leading to more competitive and transparent practices in the industry.