MINNEAPOLIS — The real estate profession is still reeling after a monumental lawsuit settlement was announced on Friday by the National Association of Realtors (NAR).

The NAR agreed to pay $418 million in damages and also agreed to a set of rules that could impact thousands of realtors across the country.

Realtors say this settlement is more than 100 pages long, but there are two rule changes that stand out as the most impactful for home buyers and sellers.

Under the agreement, real estate agents who are representing buyers will need to provide a formal agreement so the buyer understands what the buying process will entail and how much the realtor will charge for their services.

Bryan VantHof with RE/MAX Advantage Plus says that change will have a lesser effect on Minnesotans.

“Minnesota has always been ahead of the game. We’ve always had some version of a buyer’s contract,” VantHof said. “I’m also licensed in Florida. There really isn’t a buyer’s contract in Florida.”

The other big change that came out of the settlement involves commission rates and how realtors get paid. 

Traditionally, the home selling process would start with a selling agent listing a home for sale on a Multiple Listing Service (MLS). Sellers would then advertise a commission on the MLS listing that would be given to buying agents when the home is sold.

Critics argue this system would encourage buying agents to only show their clients homes that come with a higher commission. Others argue this process also artificially increased the prices of homes.

Under the agreement with NAR, realtors will no longer be required to list the commission when they post a home for sale on an MLS.

VantHof says this change opens the door to several options regarding commissions paid between the buyers, sellers and their agents.

“What this ruling ultimately does is it adds two or three more layers of negotiations into buyer’s contracts, into seller’s contracts,” VantHof said.

Melissa Clawson with Clawson Home Group says these changes could affect who ultimately pays for real estate commissions moving forward.

“We used to advertise that most of the times sellers are going to cover this and now it’s 100% up to the sellers,” Clawson said.

Clawson says the sellers have always had that choice, but most sellers simply followed the norm of paying the entire commission themselves, since the buyers have to cover the down payment and the closing costs to buy the home.

“If buyers have to pay their agency compensation on top of that we’re going to see houses potentially not being as affordable for buyers,” Clawson said.

That’s the big question for the industry after the recent settlement, will buyers pay their half of the commission moving forward? And will more buyers and sellers negotiate lower commissions to save money?

“I think a lot of people are worried,” Clawson said. “The realtors who earn their commission are going to be the realtors that make it. The realtors who don’t necessarily provide that much, they probably won’t have a career for that much longer.”

VantHof says mortgage lenders are already discussing new ideas to help buyers, such as allowing them to pay the commission over time alongside their mortgage.

Real estate groups are also talking about some ideas to create a commission structure that works for everyone.

“There’s a lot of things that could change, or will change with this lawsuit that aren’t obvious and there is no obvious solution in place to say this is the new normal. We’re creating that new normal,” VantHof said.

The NAR settlement still needs to be approved by the court.

The rule changes under the settlement won’t go into effect until mid-July.

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