What will the National Association of Realtors settlement mean for Arizona homebuyers?

A national $418 million settlement proposal over real estate commissions could drastically change how much homebuyers pay agents.

Under the National Association of Realtors deal, which needs federal court approval, the group with more than 1.5 million members has agreed to prohibit listing agents from offering buyer brokers compensation.

The case centers around an alleged practice called steering, which involves buyer agents guiding their clients to homes for sale on which they would receive the biggest commissions.

“This is the end of traditional real estate commissions,” said Greg Hague, the CEO and founder of 72SOLD. “It needed to happen. Consumers have spoken, and steering is absolutely happening.”

He gave an example of a $6 million Paradise Valley house that was on the market last year. The seller agreed to a $100,000 buyer agent fee. That’s less than half the 5% to 7% typical commission, which is often split between the buyer and seller agents.

The agent with the listing couldn’t get any showings, Hague said.

Hague said the listing agent was contacted by other real estate agents who required a 3% commission to show the house to buyers. The seller agreed to pay 3%, and the house quickly had 16 buyers looking at it, he said.

Attorneys from Hagens Berman Sobol Shapiro, the law firm that led the lawsuit against the Realtors group, say the settlement could save consumers billions of dollars a year in broker fees.

The National Association of Realtors continues to deny wrongdoing.

The settlement deal also calls for buyer brokers to have representation agreements that spell out the compensation they will receive from clients.

“We settled the NAR suit because it would have been more costly to keep fighting it. People don’t like Realtors,” said Christa Lawcock of Realty Executives. “But it’s the lawyers who win, not the first-time homebuyers.”

She said buyers without the money to pay commissions won’t have any representation and won’t get help negotiating a price or asking for home improvements or receive the recommendations for appraisers and mortgage brokers that agents can provide.

If the settlement is approved in court, the new rules could go into effect this year.

It’s not clear if this settlement will impact a similar lawsuit filed by an Arizona home seller against the state’s biggest Realtor associations and more than a dozen of its biggest residential brokerages.

Lawyers for Joseph Masiello, who filed the Arizona class-action complaint in January, didn’t respond to questions about the case.

The National Association of Realtors suit is the second settlement over commissions. Last fall, a jury ruled in favor of Missouri plaintiffs over real estate commissions, awarding them $1.8 billion.

Bobby Lieb, associate broker with Launch Powered By Compass, said the settlement doesn’t bother him.

“People selling million-dollar homes will pay experienced real estate agents to sell them because they end up making more money,” he said.

But he said commission issues are driving out inexperienced real estate agents who got into the business during the pandemic housing boom.

Hague said buyers who can’t pay a real estate agent out of pocket can negotiate an agent fee and roll it into their mortgage.

Tougher to purchase: New ranking says Arizona now among least affordable states to buy a house

Reach the reporter at catherine.reagor@arizonarepublic.com or 602-444-8040. Follow her on X, formerly Twitter: @CatherineReagor.