April 15, 2024

A white For Sale signpost in front of a blue sky.

A For Sale signpost.
Photo: Joe Raedle (Getty Images)

Home prices are still way up since the onset of the Covid-19 pandemic, and high interest rates have made real estate unaffordable for a lot of people, but the ones able to make some purchases got a bit of relief Friday — and real estate stocks sank big because of it.

The National Association of Realtors (NAR) announced that it had settled a long-running lawsuit over the way that brokers are compensated that had already led the early retirement of former NAR longtime CEO Bob Goldberg.

The suit challenged the practice of home sellers paying for the commissions of real estate agents representing home buyers. When realtors look for homes on the NAR’s Multiple Listing Service on behalf of clients, they will no longer see offers of broker compensation from the sellers, which often reached into the thousands of dollars.

An October jury verdict had resulted in a $1.8 billion verdict against the NAR and other brokerage defendants, with the possibility of having to pay much more. The NAR had pledged to appeal the verdict, but it appears to have changed its mind.

“Ultimately, continuing to litigate would have hurt members and their small businesses,” said Nykia Wright, interim CEO of the National Association of Realtors, in a statement. “While there could be no perfect outcome, this agreement is the best outcome we could achieve in the circumstances.”

The new rules go into effect this July.

Real estate stocks sink

Many brokerage companies had rued the day that Redfin and Zillow, in their most recent annual reports, both included in their risk factors the possibility that “actions or decisions that would change the way real estate brokerage commissions are negotiated, calculated, or paid,” (Redfin — pdf) and “changes in how real estate commissions are negotiated, calculated, or paid, which may in turn meaningfully impact how home buyers and sellers engage with real estate professionals in the course of buying and selling a home.” (Zillow — pdf)

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