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Is the standard 6% commission fee for real estate agents a thing of the past?

7/24/24

By: Mandy D. Hexom and Tim Soefje

You may have heard the news about upcoming changes to real estate commissions throughout the nation. The National Association of Realtors (“NAR”), the largest trade association of more than 1.5 million real estate professionals, was sued in multiple lawsuits over the way commissions were offered, facing millions of dollars in potential liability.

On March 15, 2024, the NAR announced a settlement ending some of the litigation involving claims asserted by home sellers related to broker commissions. The settlement, pending court approval, will result in a financial payment to certain NAR members as well as a new MLS Rule prohibiting offers of broker compensation on the MLS (Multiple Listing Service). Prior to this settlement and new Rule, the home seller pays their listing agent, who then splits the commission with the buyer’s agent according to the current NAR rules. Traditionally, that works out to a 5% to 6% commission split evenly between the buyer’s and seller’s agents.

According to NAR, the new MLS Rule would mean that offers of broker compensation could not be communicated via the MLS, but they could continue to be an option consumers can pursue off-MLS through negotiation and consultation with real estate professionals. In other words, agents for home sellers will no longer set commission rates for buyer agents.

It was reported that the DOJ played a role in the settlement through its push for more competition in the real estate market and pressure from the DOJ’s antitrust division.

The settlement and new MLS Rule, which is currently scheduled to go in effect in mid-July 2024, may result in the following changes:

• Some buyers may opt against hiring an agent or only doing so toward the end of the process after going through most of the home hunting themselves.

• Real estate brokers will get creative and offer alternative types of real estate business models, perhaps using brokers that will list a home for a flat fee.

• Commission rates could fall to 2.5% to 4%.

It is not clear how these changes may affect claims against brokers and agents and whether there will be changes either in the cost of E&O insurance or insurance products for real estate professionals. Regardless, changes are coming that will affect real estate professionals, home buyers and sellers, and the real estate industry as a whole.

For more information, please contact Mandy D. Hexom at mandy.hexom@fmglaw.com, Tim Soefje at tim.soefje@fmglaw.com, or your local FMG attorney.