Buying a home—the most significant purchase many people make—can be a disheartening experience.
The real estate industry is far more intricate and opaque than most expect, often making the home buying process feel like navigating a maze. It’s emotional, laden with paperwork, and tends to leave buyers feeling unfairly overwhelmed, reports CNN.
This complexity is partly by design, heavily influenced by the National Association of Realtors (NAR), a powerful trade organization that has long controlled much of the U.S. real estate market.
However, there is both good and bad news on the horizon.
The positive development is that antitrust authorities have pressured NAR to loosen its control over agent commissions. This shift is expected to eventually reduce costs for buyers and sellers and introduce alternative methods for purchasing and selling homes that don’t rely on traditional agents.
Since the settlement announcement, real estate agents nationwide have been undergoing training and reviewing new contracts with homebuyers. Starting this Saturday, the familiar 6% commission fee—twice to three times higher than what agents earn in other developed countries—is set to change. Sellers, who previously covered the cost for both the listing and buyer’s agents, will now only be responsible for their own agent’s fee, while buyers and their agents will negotiate compensation directly.
“It’s a partial deregulation of a marketplace that was regulated not by government, but by the industry,” says Stephen Brobeck, senior fellow at the Consumer Federation of America. “In the long run, it’s going to be a very good thing.”
Yet, unwinding the system that NAR has entrenched over decades will take time. This system kept commission details obscured from public view and fought to preserve its structure.
Despite the internet making it easier to connect buyers and sellers, the 6% commission has persisted, largely due to NAR’s influence. The organization, representing over 1.5 million Realtors, is a formidable lobby in Washington and has trademarked the term “Realtor,” enforcing its exclusive use.
While NAR has claimed that commission fees are negotiable, this often isn’t the case in practice. For instance, if you’re selling a home and expect to pay a 6% commission, you might be hesitant to negotiate with your listing agent, fearing that buyer agents could steer their clients away from your property if the commission is lower. A national study found that properties with lower commissions often take longer to sell.
NAR’s history spans over a century, and its control has often prevented buyers and sellers from realizing they could negotiate. “Effectively, there’s an industry-wide gag rule on marketing that talks about commissions,” says Brobeck, citing a 2021 study.
The recent changes to the commission model mark a significant departure from the long-standing practices that maintained Realtors’ dominance. The Department of Justice has sued NAR multiple times, and investigations into its MLS system continue.
In response to CNN, a NAR spokesperson reiterated that commissions are negotiable and that Realtors must have transparent discussions about compensation, as mandated by their Code of Ethics.
These changes come at a turbulent time for NAR, following scandals involving its former president and a jury ruling against the organization in a landmark case challenging its commission model. Despite these setbacks, NAR’s substantial lobbying efforts mean it still holds considerable influence in the market.
Brobeck emphasizes that while the shift in commission structure is groundbreaking, NAR’s deep-rooted control remains a challenge. “They’ve kept it as a black box, and they’ve done so through gag rules and confusing terminology,” he says.
He adds, “I don’t blame Realtors for the industry’s problems, or NAR’s. They’re good people in a flawed system.”
