A settlement that would rewrite how many real estate agents in the United States are paid has received preliminary approval from a federal judge.
On Tuesday morning, Judge Stephen R. Bough, a United States District Judge, signed off on a settlement between the National Association of Realtors and home sellers who sued the real estate trade group over its longstanding rules on agent commissions that forced them. to pay excessive fees.
The deal is still subject to a hearing for final court approval, which is expected to take place on November 22. But that hearing is largely a formality, and Judge Bough’s action in the U.S. District Court for the Western District of Missouri now clears the way for NAR to begin implementing the sweeping rule changes required by the agreement. The changes will likely come into full effect at brokerages across the country by September 16.
NAR, in a statement from spokesman Mantil Williams, welcomed the preliminary approval of the settlement.
“It has always been NAR’s goal to resolve this dispute in a way that preserves consumer choice and protects our members to the greatest extent possible,” he said in an email. “There are strong reasons for the court to approve this settlement because it is in the best interests of all parties and class members.”
NAR reached the agreement in March to settle the lawsuit and a number of similar claims, making the changes and paying $418 million in damages. Months earlier, in October, a jury had reached a verdict requiring the agency to pay at least $1.8 billion in damages, agreeing with homeowners who argued that NAR’s rules on agent fees forced them to pay exorbitant fees when they sold their property.
The Chicago-based group, with 1.5 million members, has been a huge influence in the real estate industry for more than a century. But Missouri home sellers, whose lawsuit against NAR and several brokerages was followed by multiple claims of copying, successfully argued that the group’s rule that a seller’s agent must make a commission offer to a buyer’s agent led to inflated fees and that another rule requiring agents to list homes in databases controlled by NAR affiliates stifled competition.
By ordering the commission to be split between agents for the seller and the buyer, NAR and the brokerage firms that required their agents to be NAR members violated antitrust laws, according to the lawsuits. Such rules resulted in an industry-wide standard commission of close to 6 percent, the lawsuits said. Now, agents will effectively be barred from making those commission offers, a change that some industry analysts say will reduce commissions across the board and ultimately lower house prices as a result.
Real estate agents are preparing for pain.
“We’re concerned about the buyers and possibly how we’re going to get paid for working with the buyers going forward,” said Karen Pagel Guerndt, a real estate agent in Duluth, Minn. “There is a lot of ambiguity.”
The preliminary approval of the settlement comes as the Justice Department reopens its own investigation into the trading group. Earlier this month, the U.S. Court of Appeals for the District of Columbia Circuit overturned a 2023 lower court ruling that had struck down the Justice Department’s request for information from NAR about broker fees and how real estate listings are marketed. They now have the green light to scrutinize those fees and other NAR rules that have long confused consumers.
“This is the first step in making long-awaited change,” said Michael Ketchmark, the attorney who represented the home sellers in the main lawsuit. “Later this summer, NAR will begin to change the way homes are bought and sold across our country, and that will ultimately lead to billions of dollars in savings for homeowners.”
Under the settlement, homeowners who sold homes in the past seven years could be entitled to a small portion of a consolidated lump sum payment. Depending on how many homeowners file claims by the May 9, 2025 deadline, that could mean tens of millions of Americans.