NAR Settlement: Impacts on the Real Estate and PropTech Industries

On the 15th of March, the National Association of Realtors (NAR) made an astounding decision. After lengthy legal battles based on accusations of artificially inflating realtors’ and brokers’ commissions, they agreed to settle — to the tune of $418 million.

The decision also impacts current commission rules. Multiple Listing Services (MLS) are at the core of many of these changes, with offers of broker compensation here prohibited completely. All MLS participants must have written contracts — presumably, to prevent further lawsuits in the future.

These shifts will most likely come into effect in July 2024 and could spell big changes across the entire real estate industry.

How the NAR Settlement Impacts the Real Estate Industry

For years, it’s been standard practice for a seller to pay around 6% commission on the price of their home and for that commission to be split between the buyer’s and seller’s agents. On a high-value home, this is a big chunk of money — and until now, most sellers and buyers had no idea there was the option to negotiate a lower rate.

Now, there will be no such thing as a “standard” commission rate, although the rules won’t officially change until the Federal Court weighs in. However, is this really all doom and gloom for the real estate industry?

Not necessarily. Settling rather than allowing litigation to continue is a decision the NAR has taken largely to protect its members. The willingness to change processes is a step toward restoring consumer trust, showing that the industry is on the side of home sellers and buyers. Consumers now know that the NAR is willing to listen to their views and make changes accordingly. This could spell the start of more open, communicative partnerships between agents and sellers.

However, others think that the NAR settlement could instigate a sharp decline in the number of active realtors and brokers. Those willing to move with the times and make adjustments will be the ones that thrive.

Is it Good News for Home Sellers?

For individuals or families looking to sell their homes, they could potentially do so with lower costs. One real estate analyst, Ryan Tomasello, called the decision a “…major win for consumers.” He also pointed out that the new rulings could increase transparency for both sellers and buyers, with consumer savings of up to $30 billion across the United States per year.

The Implications for PropTech Startups

One of the most intriguing things about this settlement is that it represents a complete paradigm shift. If the NAR had not agreed to this settlement, they would have potentially had to pay $1.8 billion in damages. It’s clear that they’ve seen costs like this are unsustainable, especially as more antitrust suits crawl out from the woodwork.

For opportunistic PropTech (property and real estate technology) startups, the transforming industry could present new niches to explore. Helping buyers and sellers negotiate new rules or ensure compliance with MLS regulations may require tools that simply don’t exist right now. Likewise, realtors will need different types of analysis and financial tools to help understand how they fill the gaps left by lower commission rates.

Final Word

As marketers working with ambitious PropTech firms, we know that sometimes you have to roll with the punches. While this settlement could spell the end of high commissions, it could also herald a new era of transparent, consumer-focused realtors. Startups could build themselves a solid foundation by exploring the pain points of realtors who are willing to work within the new rules rather than railing against them.

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