The National Association of Realtors agreed to a settlement on Friday that will see the group pay out hundreds of millions of dollars and make changes to how real estate deals get done, which could shake up the Dallas housing market.
The settlement comes after years of litigation by groups of home buyers who claimed the group artificially held buyer and seller commissions at elevated levels and used deceptive tactics, as previously reported by The Dallas Express. The settlement will change the way contracts are written and purportedly create a more transparent process for buyers.
However, some industry experts warn this could lead to fewer agents in some markets as commissions dry up. KFAA reported that the financial firm Keefe, Bruyette & Woods claimed the change is anticipated to create a 30% drop in commissions, which could reduce the number of agents by as much as 80%.
In a statement following the settlement, the NAR said the organization believes the outcome of the settlement is reasonable and fair.
“NAR exists to serve our members and American consumers, and while the settlement comes at a significant cost, we believe the benefits it will provide to our industry are worth that cost,” said Kevin Sears, NAR president. “This will be a time of adjustment, but the fundamentals will remain: buyers and sellers will continue to have many choices when deciding to buy or sell a home, and NAR members will continue to use their skill, care, and diligence to protect the interests of their clients.”
The settlement will make changes to how firms handle their use of the Multiple Listings Services (MLS) rule, which has been in place since the 1990s. The rule allows buying and selling agents to collect a commission, which is typically between 5% and 6%. Last year, a Missouri jury found the NAR guilty of artificially keeping the commission rate elevated, as reported by Reuters. Allegations surfaced that agents would use the MLS rule to push certain properties on buyers that the agents would get better commissions on.
While the NAR said in it’s settlement that it will implement new rules on commissions, it is not clear what those rules will be yet.
“There are all kinds of models we might see in the future, and no one knows what they are,” said Norm Miller, professor emeritus of real estate at the University of San Diego to CNN. “I’ve been waiting 50 years for this,” he added.
The settlement brings to an end years of legal wrangling and ends any similar lawsuits from being filed. The NAR was not required to claim accountability and has continued to maintain that the organization has done nothing wrong.
“Ultimately, continuing to litigate would have hurt members and their small businesses,” said Nykia Wright, Interim CEO of NAR, in the statement announcing the settlement. “While there could be no perfect outcome, this agreement is the best outcome we could achieve in the circumstances.”