Significant changes are impacting the real estate industry in the United States. A class-action lawsuit against the National Association of Realtors (NAR) and major brokerage firms has led to a substantial settlement. This agreement brings new rules for how buyer agents are paid, aiming to increase transparency in real estate transactions.
Key Takeaways
- A $1.8 billion jury verdict against NAR was followed by a $418 million settlement.
- New rules eliminate the mandatory posting of buyer broker compensation on the MLS.
- Buyers must now sign representation agreements before touring homes with a Realtor.
- The changes became effective on August 17, 2024.
- Initial reports suggest commission costs have not decreased as expected.
Antitrust Lawsuit and Landmark Settlement
On October 31, 2023, a Kansas City jury issued a $1.8 billion class action verdict against the National Association of Realtors (NAR) and several large brokerage firms. The lawsuit alleged antitrust violations. Specifically, it claimed that NAR's rules on the Multiple Listing Service (MLS) artificially inflated real estate agent commissions. The plaintiffs argued that requiring sellers to offer compensation to buyer's agents violated antitrust laws, reduced competition, and shifted buyer broker service costs to sellers at inflated, non-negotiable rates.
Following the verdict, a settlement was reached. On November 26, 2024, the court granted final approval of a $418 million settlement against NAR. This agreement included significant, industry-wide changes. A core component of the settlement is the elimination of the rule requiring listing brokers to offer compensation to buyer brokers through the MLS.
Key Dates
- October 31, 2023: Kansas City jury returns $1.8 billion verdict.
- November 26, 2024: Court grants final approval of $418 million settlement.
- August 17, 2024: New buyer representation agreement rules take effect.
New Rules for Buyer Representation
As a direct result of the settlement, new procedures are now in place for buyers working with Realtors. Effective August 17, 2024, any individual interested in touring a house with a Realtor must first sign a buyer representation agreement. This agreement clearly outlines the compensation structure for the buyer's agent.
This change aims to ensure that buyers are fully aware of their agent's compensation before engaging in property tours. It shifts the negotiation of buyer agent fees from the seller's side to a direct agreement between the buyer and their agent. This is a significant departure from previous practices in many markets where seller-paid buyer commissions were standard.
"Representation and compensation have always lived separately," stated Judi Desiderio, a broker with over three decades of experience. "To memorialize this, on January 1, 1992, New York State Agency Disclosure Law became effective to clarify, via disclosure agreement, who agents work for. These disclosures are signed by both buyers and sellers."
Commission Structures: US vs. International Practices
The lawsuit brought renewed attention to real estate commission rates in the United States compared to other countries. Some media reports suggested that US commissions were among the highest globally. However, an analysis of international practices reveals a more complex picture.
In the United States, real estate agents typically operate as independent contractors. Their compensation is based strictly on commissions, usually averaging 4-6% of the sale price. Mexico follows a similar model, with commissions averaging 5-8%.
Global Commission Models
While the US and Mexico rely primarily on commission-based agent compensation, many other countries integrate salaries and benefits. This often results in lower commission percentages paid by the client, as a portion of the agent's income is fixed.
According to data compiled from various sources, including Google and AI, countries such as Canada, the UK, France, Singapore, Australia, Germany, Austria, and Spain often employ real estate professionals as employees. These professionals receive wages, benefits, and commissions that typically range from 1-5%. In Germany, for example, commission rates can reach as high as 7%, but they are almost universally paid by the seller, similar to the previous US model.
Impact on Costs and Transparency
A central question surrounding the settlement was whether it would benefit the public by reducing fees and increasing transparency. Initial reports indicate that the promised cost reductions have not materialized. Nicole Friedman of the Wall Street Journal reported on this in an article titled "Settlement on Realtor Fees Hasn’t Cut Costs."
Jack Miller, Chief Executive of real estate consulting firm T3 Sixty, noted that "nothing changed" in terms of overall costs. Furthermore, data from Redfin showed an unexpected trend. The average commission paid to a buyer's agent in the second quarter of 2025 was 2.43% of the home's sale price. This represents an increase from 2.38% a year earlier. This suggests that the market is still adjusting, and costs have not yet declined for buyers or sellers.
Commission Trends
- Q2 2024: Average buyer's agent commission: 2.38%
- Q2 2025: Average buyer's agent commission: 2.43%
- This represents a slight increase, not a decrease, post-settlement.
The shift in how buyer agents are compensated has created some confusion among licensees and the public. The real estate market is adapting to these new rules. The long-term impact on commission rates, market competition, and consumer satisfaction remains to be seen.
Future of Real Estate Compensation
The real estate industry is now operating under a new framework. The goal of maximum exposure for listings remains important for sellers. Many sellers may continue to offer compensation to both listing and selling brokers to attract more potential buyers.
For buyers, the need for professional services in real estate transactions persists. Experienced real estate professionals provide valuable guidance, market knowledge, and negotiation skills. These services are essential for achieving the best outcomes in property transactions. Just as individuals pay for accounting or legal services, paying for professional brokerage services is a standard practice.
The public's needs and preferences will ultimately drive the market's evolution. As consumers become more informed about commission structures and representation agreements, the industry will continue to adapt. The focus remains on ensuring fair practices and transparent transactions for all parties involved in real estate. This new era requires agents, buyers, and sellers to navigate agreements with increased clarity and direct negotiation.
