What the NAR Settlement Means for Real Estate Agents

The recent NAR® settlement has raised important questions about the future of real estate commissions. As a real estate agent, it's important to stay informed about the implications of this landmark case.

Luckily, we have practice as a trusted real estate education provider in explaining difficult topics. In this blog post, we'll explore the key terms of the settlement, the new real estate commission rules to come out of it, how these changes may affect your business practices, and the next steps you need to take to become compliant.

NAR® Lawsuit: Explained

The National Association of REALTORS® (NAR®) was sued in a major antitrust lawsuit over claims that it, along with some of its members, engaged in practices that artificially inflated real estate commissions, violating U.S. antitrust laws. The core issue was that the NAR’s policies, particularly those related to the Multiple Listing Service (MLS), allegedly limited competition and resulted in home buyers paying higher commission fees than they should have.

Here are the key reasons why NAR® was being sued:

• Inflated Commission Rates: The lawsuit alleged that NAR's rules, specifically related to the MLS, created a system where home sellers were required to offer a commission to the buyer’s agent, which was then bundled into the overall home sale price. This allegedly led to inflated commission rates, as home buyers had little room to negotiate lower rates.
• Anti-Competitive Practices: The plaintiffs argued that NAR’s commission structure discouraged competition by standardizing commissions. The lawsuit claimed this practice violated antitrust laws because it prevented market forces from determining fair and competitive commission rates, keeping them higher than they would be in a competitive environment.
• Lack of Transparency: The lawsuit highlighted that the way commissions were structured under the NAR's policies made it difficult for buyers and sellers to understand how much they were actually paying. This lack of transparency allegedly contributed to inflated fees and left consumers unaware of their ability to negotiate commissions.
• Collusion Between Brokers: It was claimed that the NAR® and its member brokers colluded to maintain high commissions, in violation of antitrust laws. By enforcing these rules, the NAR® and its members allegedly created a "cartel-like" environment, limiting consumers’ ability to seek out lower commissions or negotiate terms that might reduce costs.

How Did These Practices Allegedly Hurt Buyers and Sellers?

The practices at the center of the lawsuit against the NAR® allegedly hurt both home buyers and sellers by inflating costs and limiting transparency in real estate transactions. Here’s how these practices specifically impacted buyers and sellers:

Increased Costs for Buyers

• Bundled Commission Fees: Under the NAR’s rules, home sellers were required to offer a commission to the buyer’s agent, which was typically built into the overall price of the home. This meant that home buyers, even though they didn’t directly pay the buyer’s agent, were effectively financing this commission through a higher mortgage, increasing the total cost of purchasing a home.
• Lack of Negotiation: Buyers often didn’t realize they could negotiate the commission paid to their agents, as these fees were bundled into the home price. This lack of transparency left many buyers paying more than they might have if commissions were more openly negotiated.

Higher Expenses for Sellers

• Mandatory Buyer’s Agent Commission: Sellers were required to offer a commission to the buyer’s agent, which increased the cost of selling a home. The lawsuit claimed that this practice limited sellers’ ability to negotiate lower commissions, forcing them to pay a higher percentage even when they might not see equal value in the buyer’s agent’s services.
• Reduced Flexibility: Sellers had little control over the total commission paid out to both the listing agent and buyer’s agent, leaving them with less flexibility to reduce costs and maximize their profit. They were essentially locked into a standardized commission rate, even in markets where lower rates might have been more appropriate.

Suppressed Competition

• Standardized Commissions: The lawsuit alleged that the NAR’s rules kept commission rates artificially high by creating an industry standard, effectively suppressing competition. This lack of competition made it harder for buyers and sellers to find agents willing to offer lower commissions or negotiate on fees, limiting their choices and driving up costs.
• Cartel-like Environment: The lawsuit argued that the NAR® and its members created an environment where real estate brokers colluded to maintain high commissions, further restricting competition. Buyers and sellers were harmed by the lack of options and the inability to benefit from market forces driving down prices in a competitive environment.

Lack of Transparency

• Confusing Commission Structures: The complex way commissions were structured, with sellers paying for the buyer’s agent, often left both buyers and sellers in the dark about how much they were actually paying in commissions. Buyers didn’t realize they were financing their agent’s commission through the home price, while sellers weren’t always aware of how much they could negotiate on these fees.
• Misaligned Incentives: The lawsuit claimed that the bundled commission system discouraged buyers’ agents from negotiating lower prices for their clients, as higher home prices meant higher commissions. This created a potential conflict of interest, where agents may not have been fully incentivized to act in their clients' best financial interest.

Limited Consumer Choice

• Barrier to Lower-Cost Agents: By enforcing standardized commission rates, the NAR’s practices allegedly made it difficult for consumers to seek out lower-cost agents or alternatives like discount brokers. This limited sellers’ ability to reduce transaction costs and buyers’ ability to find more affordable options.
• Fewer Negotiation Opportunities: With commission structures set by industry norms, both buyers and sellers missed out on opportunities to negotiate lower fees. This reduced consumer power and flexibility, hurting their ability to save money on real estate transactions.

NAR® Settlement Terms

As part of the settlement, the NAR® agreed to pay $418 million over approximately four years, though without any admission of wrongdoing by the NAR®.

The settlement also includes important changes to the rules governing real estate commissions and MLS practices, which we’ll lay out next.

New Real Estate Commission Rules

Before we can talk about how the NAR® settlement affects real estate agents, we need to review the new rules which took effect in 2025 regarding real estate commissions.

 The new real estate commission rules are complex and extensive, so we’ll just summarize some of the most seismic shifts below. This list is not comprehensive.

Written Buyer Representation Agreements

While a written contract called a listing agreement has long been standard between a seller’s agent and a home seller, no such contract was standard practice on the buyer’s side.

In the wake of the lawsuit, buyer’s agents now must secure a written buyer representation agreement outlining services and payment structure before they’re allowed to start showing homes.

No Compensation on the MLS Listing

While commissions and fees have always been negotiable, theoretically, it often didn’t work that way in practice. It was common for a property’s MLS listing to specify non-negotiable terms of compensation for the buyer’s agent.

These terms can no longer be spelled out in the MLS. The terms have to be communicated elsewhere, such as verbally, through email, or on the brokerage website.

Upfront Fee Negotiations

Agents serving both buyers and sellers are now required to negotiate their compensation up front.

For sellers, the compensation terms for the listing agent must be negotiated beforehand and spelled out in the listing agreement.

For buyers, the compensation for the buyer’s agent must be negotiated and spelled out in the buyer representation agreement.

Optional Seller-Paid Commissions

Sellers may negotiate to pay a commission to the buyer’s agent, but it must be a negotiation, and the listing agent must negotiate with each buyer’s agent outside of the MLS.

Separate Seller Concessions

Sellers can still offer seller concessions to help defray the buyer’s closing costs. However, these can no longer be conditioned on the buyer’s agent receiving a commission. They must be treated as a separate issue.

Long-Term Impacts of the New Commission Rules

Some argue that the real estate commission rule changes could reshape the way real estate transactions are conducted, with both buyers and sellers benefiting from increased competition and lower fees.

For example, with the unbundling of buyer’s agent commissions, home buyers may find themselves empowered to negotiate their agent’s fees directly, allowing them to seek out more cost-effective representation. This could encourage buyers to shop around for agents who offer competitive rates or innovative services, leading to a more dynamic market.

Additionally, sellers might feel less pressured to inflate their home prices to cover standard commission fees, creating a more balanced pricing environment. As commission structures become more transparent, sellers could also provide incentives to buyers in other ways, such as offering credits for closing costs, further enhancing the attractiveness of their listings.

That said, it’s difficult to anticipate the long-term impacts of the new real estate commission rules. Some argue that the new rules are unlikely to shake up the status quo.

It’s somewhat easier to get a grasp on what needs to change in the short term, including how real estate agents should respond to the NAR® settlement in concrete terms.

How The NAR® Settlement Affects Real Estate Agents Now

How do the new real estate commission rules of 2025 affect real estate agents? Let’s tackle the question by role.

How The NAR® Settlement Affects Listing Agents

Listing agents will need to change some of their contracts and procedures to comply with the updated real estate commission rules.

Listing agents must now be careful to negotiate their fee during the listing agreement process, and if they relied on the MLS to communicate buyer’s agent compensation in the past, they must change their practices.

Listing agents must also be aware of the changes to how the rules for buyer’s agent fees have changed. They’ll need to discuss whether sellers are willing to cover buyer’s agent commissions, and if they are, avoid any hint of influence on seller concessions.

How The NAR® Settlement Affects Buyer’s Agents

Arguably, the NAR® settlement will have a greater impact on buyer’s agents.

The biggest are related to compensation and written representation agreements. There are many topics that buyer’s agents once delayed that will now need to be addressed up front, the most prominent of which is how the buyer’s agent will be paid.

It’s not just a matter of timing, either. Since seller-paid commissions are now optional, buyer’s agents may need to find alternative fee structures, especially if they’re operating in a strong seller’s market. Buyer’s agents may need to shift to flat fees or offer a variety of service levels with differing costs.

New Real Estate Commission Rules: Next Steps For Agents

What can real estate agents do now to get into compliance with the new real estate commission rules?

Step 1: Nail Down Your Paperwork

Listing agents need to review their listing agreements, workflows, and client-facing communications, revising any outdated language and bringing everything into line with the new commission requirements.

Many buyer’s agents will need to draft buyer representation agreements from scratch if they’ve never used them before. Buyer’s agents who already follow the practice will need to comb through the language and bring it into line with the new rules. Buyer’s agents should also consider how their workflows and client-facing communications may need to change.

Step 2: Practice Explaining Commission Changes to Clients

While some buyers and sellers will be aware of the lawsuit and resulting rule changes, it’ll be on real estate agents to explain the new world order to clients, including what has changed, what hasn’t, and why some rumors about the changes aren’t true.

It’s a good idea to practice these conversations ahead of time. You might lay out scripts or talking points, plan for specific types of follow-up questions, and roleplay with other agents to figure out the most effective ways to explain things.

Step 3: Update Marketing to Highlight Agent Value

With negotiation being the new buzzword of the day, more clients are going to start questioning what value real estate agents offer in return for their costs.

You can get out in front of these conversations by highlighting the value you offer in your marketing materials, listing presentations, and lead nurturing pipelines.

Step 4: Strengthen Your Negotiation and Compliance Knowledge

Smart real estate agents will focus their continuing education (CE) hours on topics that will help them adapt to the updated real estate commission rules.

You might want to focus on brushing up on your negotiation skills or building a more effective listing presentation. Pay close attention to legal updates, as state boards or commissions may be adjusting their rules to align with the NAR® settlement terms.

Stay Ahead With AgentCampus

To thrive in this changing landscape, real estate professionals must stay updated on new developments and adapt their strategies accordingly. We encourage both new and experienced agents to enhance their knowledge and skills by enrolling in our online real estate courses. 

Our pre-licensing and continuing education courses are designed to help you navigate this evolving market, ensuring you remain competitive and well-informed in your practice. 

Explore our offerings today to invest in your success!