Result of Class Action Lawsuit Upends Real Estate Industry

The system under which realtor commissions have traditionally been paid following home sales is undergoing a major change. Multiple class-action lawsuits were brought against the National Association of Realtors (NAR) and prominent real estate brokerages, alleging that NAR policies led to artificially inflated commissions and higher costs for home sellers. Now, the settlement of those cases is resulting in payments to people who previously sold their homes and a significant shift in realtor practices going forward.

Previously, real estate agents for sellers typically provided a share of their commission to the buyers agent. This means that if the selling realtor received a commission equal to 6 percent of the total purchase price, they might agree to provide half of that amount to the buyers agent. However, these arrangements were usually not shared with the parties. Most experts in the field believe this lack of transparency triggered commissions much higher than what would be paid in an open market. Now, pursuant to the settlement , each party in a residential real estate transaction will negotiate a commission with their own realtor.

In their settlement agreement, the NAR and defendant brokerages are paying class-action plaintiffs a total of $418 million. These settlements will provide compensation to eligible home sellers who paid inflated commissions between 2015 and 2020. However, the policy shifts agreed to within the settlement should have an even more profound effect on the industry.

With so much information available online than ever before, home buyers and sellers should be able to gather market information on their own if they so choose. They can also choose on their own exactly which specific tasks they want to handle on their own and which should be put in the hands of their realtor. This will lead to increased compensation and commission rates that more accurately reflect the work being done by selling and buying agents.

Under the new system, hiring an experienced real estate attorney is more important than ever. Your attorney can assist with various legal aspects of the sale on an hourly-fee or flat-rate basis rather than percentage of the total sale amount. Dyer Rusbridge Argo, P.C. in Canton represents buyers and sellers in property transactions throughout Cherokee County and the surrounding areas. To make an appointment to discuss your particular legal needs in our Canton office, please call 770-450-5733 or contact us online .