NAR restructures broker commissions in $418 million lawsuit settlement

The National Association of Realtors (NAR) agreed on Friday to pay out $418 million and change its commission structure to settle a handful of lawsuits accusing the organization of artificially inflating commissions. 

But New Yorker City buyers likely won’t see a huge difference in their deals, due to a preemptive rule change from the Real Estate Board of New York (REBNY) in January.

NAR faced a series of lawsuits after home sellers in Illinois and Missouri claimed that NAR’s rules, which required a seller’s agent to offer compensation to a buyer’s broker in order to show a home on the Multiple Listing Service (MLS), unnaturally hiked commissions, The Washington Post reported. 

As part of the settlement, NAR will institute new rules that prevent a seller’s broker from setting a buyer’s agent’s compensation, and will end a requirement that brokers subscribe to the MLS, CNN reported. Brokerage Keller Williams, which was named in the Missouri lawsuit, already settled separately in February, Reuters reported. 

The settlement still needs to be approved in federal court, Politico reported. NAR continues to deny any wrongdoing, according to a company statement on Friday. The organization declined to comment.

REBNY plans to review the proposed settlement to determine its impact on the industry and REBNY's Residential Listing Service, if any, according to a spokesperson for REBNY.

Broker fees already changed in NYC

As of this year, NYC buyers can be responsible for paying their brokers, after REBNY changed its universal co-brokerage agreement. 

Traditionally, a seller would pay a 5 to 6 percent fee that would then be split between the seller’s and the buyer’s brokers. But REBNY’s rule change allowed a buyer’s broker to reject a seller’s offer of commission and negotiate that fee from the buyer. If a seller doesn’t offer to compensate the buyer’s broker, that broker can also negotiate payment from the buyer, according to REBNY.

REBNY’s change hasn’t made a huge impact on commissions in NYC yet, though it's likely too soon to tell, says Sharon Yehoshua Darouvar, a real estate transaction attorney at Konner, Gershburg, Melnick, Darouvar. REBNY's new universal co-brokerage agreement only went into effect on Jan. 1st, 2024.

Deanna Kory, a broker at the Corcoran Group, also hasn’t seen a huge change in how commissions are structured in NYC, though she expects brokers to get more questions about fees after the NAR decision.

“The biggest change is that this is a discussion,” Kory says. “There's value both in the seller's agent and in the buyer's agent, and there's a reason to incentivize both.”