The nation’s major real estate association has suffered a lot of hard knocks and bad news in the past few years, but only one of them was expected to have much of an impact on home buyers and sellers. It turns out even that isn’t true.
The National Association of Realtors (NAR) has endured struggles with competing commercial real estate platforms, accusations of excessive spending on its executive staff, a sexual harassment scandal that resulted in the loss of the group’s president and CEO, spending massive amounts lobbying, and battling lawsuits over the way broker commissions were structured. That last one, which ended in a negotiated settlement, was predicted by many to save home buyers lots of money and maybe even threaten NAR’s existence.
But predictions have now been met with reality.
Back in 2024, after a protracted legal battle that threatened billion-dollar losses, NAR agreed to a $418 million settlement and a major change in how its members, Realtors, were paid. Previously, the seller paid for a standard (but negotiable) commission for both sellers’ and buyers’ agents. The argument was that the old way of doing things kept commissions artificially high, and now that buyers would presumably negotiate with their agents about the commission, commission rates would go down, and all would be good.
As I’ve noted before here (see “NAR and the ‘price plunge’ delusion”) and on a podcast, the Realtor commission change was never destined to result in direct savings to home buyers. That’s because, briefly, someone still needs to pay the buyer’s agent; buyers now have to negotiate a commission separately with their agent, and home prices just happily absorb the now-gone buyer’s commission, so it’s arguable that buyers will pay more than they would have under the old system.
And now there’s data to back me up.
Remember that $418 million NAR lawsuit? The parties suing the trade group charged that it had conspired to ensure high agent commissions.
In August, Mark Worley wrote on Redfin that “The average U.S. buyer’s agent commission was 2.43% for homes sold in the second quarter, up from 2.38% a year earlier.” That represented the third consecutive quarter of rising commissions following the NAR commissions change. They now average the same amount as before the agreement went into effect.
Dave Gallagher, writing in Real Estate News, notes that some buyers are trying to skip having a separate buyer agent altogether and are dealing directly with the seller’s agent. But he quotes Matt Kuchar, founder and CEO of agent services company Showami, who says “A listing agent is just going to see this as an opportunity to make two commissions. . . . And their argument is gonna be ‘I have to do twice the work, so why would I take less?’”
Buyer agent commissions now average the same amount as before the agreement went into effect.
Many sellers include the buyer’s agent commission anyway; it’s currently a buyers’ market in lots of places across the country, so sellers do what they need to to entice buyers. As a NAR op ed stated this past May, “If sellers choose to offer compensation to buyer’s agents, it’s because they recognize the importance of attracting qualified buyers and ensuring smooth, reliable transactions. There is no nefarious collusion here, just market participants making rational choices.”
When the real estate cycle turns over and those markets return to being sellers’ markets, some observers expect that to change, because sellers won’t have to give as much to draw in buyers. I’ll happily await the real-life data on that; my guess is that sellers will not in any way reduce their home prices just because they are no longer paying a buyer’s agent; they’ll just pocket more of the proceeds. And the buyers will be paying for all of that plus now their own agent’s commission.
The results of the lawsuit aren’t all ridiculous and misunderstood. As the Federal Reserve explained on its website, one of the required changes is that “all brokerages must implement buyer representation agreements, which clearly lay out for prospective buyers how their agents will be compensated and the final compensation amount.” Not all states required that before, and that is definitely information that buyers should have.
It’s something that state lawmakers and NAR should have done on their own many years ago, but at least one good thing has come out of all of this mess.
Headline of the week
“Real estate billionaire Donald Bren was sued by own son before publicly disowning him over alleged man cave scam”
— Taylor Herzlich (New York Post)
Go figure
$3.5 million: listing price of one of the units in a home at 171 Buena Vista Avenue in San Francisco, the home used as the setting for the 1980s Ted Knight sitcom Too Close for Comfort (Compass) . . . 500: number of California victims of a predatory real estate scheme operated by an Oakland-based company that charged people fees for the exclusive right to be their listing agent for the next two decades (California Attorney General) . . . $77 million: amount that victims, many retirees, were defrauded of as part of a multiyear real estate scam called “Sanctuary Belize” (U.S. Justice Department) . . . 3.6 percent: monthly increase in September of the price per square foot for San Francisco homes; nationally, the prices decreased 0.8 percent (Realtor) . . . $42 million: price paid for “the most expensive home sale of 2025” in San Francisco (San Francisco Business Times) . . . $50 million: two Los Angeles area real estate developers are accused by the U.S. Department of Justice of committing about $50 million in fraudulent use of federal, state, and local dollars intended to deal with homelessness. (Fox Business)
Say what?
“Researchers expect millions of Americans to relocate from properties facing increasing risks of flood, fire and other kinds of disasters in the years ahead.”
— Debolina Banerjee and James R. Elliott, “FEMA buyouts vs. risky real estate: New maps reveal post-flood migration patterns across the US” (The Conversation)