How will the NAR verdict affect real estate prices?

In a typical real estate transaction, the seller does not directly pay the buyer’s agent. Instead, the buyer’s agent’s commission is usually covered by the seller as part of the total commission, which is typically specified in the listing agreement between the seller and the listing agent.

The total commission percentage is agreed upon in the listing agreement between the seller and the listing agent, but it’s not uncommon for the total to be around 6% of the final sale price of the property. The exact percentage can vary depending on local market conditions and negotiation.

Sellers typically factor that fee in when they’re pricing their homes. However, the verdict in a new court case may put a halt to the practice.

A $1.78 billion verdict may change the industry

A federal jury in Missouri found the National Association of Realtors (NAR) liable for $1.78 billion in damages in a class action lawsuit involving upwards of 260,000 home sales in Missouri, Illinois and Kansas between 2015 and 2022. According to the verdict, NAR and several residential brokerages essentially conspired to keep commissions artificially high. Since that’s a violation of U.S. antitrust laws, the damages could be tripled to more than $5.3 billion.

What does this mean for buyers and sellers? It may be too early to say. The NAR has vowed to appeal, and the U.S. Department of Justice has vowed to continue the antitrust probe. For now, the practice remains intact. However, that creates additional legal uncertainties for homeowners who are thinking about selling – and that may make it harder for prospective buyers to find the homes they want and need.

Given the importance of a real estate transaction – and the money that’s involved – it’s always wisest to have experienced legal guidance before you finalize any agreements.