Sellers could benefit from NAR settlement, Redfin CEO says

The U.S. housing market hasn't been kind to first-time buyers or sellers in recent years. However, sellers may soon see potential benefits from the landmark settlement from America's largest real estate trade association. 

This could allow sellers to keep a greater portion of their home equity, Redfin CEO Glenn Kelman told FOX Business.

The National Association of Realtors (NAR), agreed to drop its policy on broker commissions last week as part of its settlement against a series of lawsuits brought on behalf of home sellers centered on this fee. 

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Some lawsuits claimed the NAR rules on broker compensation "violate antitrust laws and inflate the fees paid to buyer’s agents by requiring a listing agent to compensate a buyer’s agent for listing a property on the MLS." 

Kelman agreed that there is "a real case to be made that consumers deserve a better deal, but the primary beneficiary will not be the buyer. It will be the seller. They will keep more of their hard-earned home equity."

The group, which hasn't admitted any wrongdoing, will pay $418 million over four years to compensate home sellers. Under the terms of the settlement, the listing databases governed by the NAR – also known as multiple listing services (MLS) – are no longer allowed to offer a commission to a buyers' agent. 

An MLS is a database run by a cooperative of real estate agents who can share listings with agents at different brokerages. It gives agents "a wide view of the market and that sort of powers all the real estate websites like Redfin and Realtor.com," according to Kelman.

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The settlement is still subject to court approval. If approved, the changes will take effect in July.

Here's how the process works and how it will impact sellers: 

In most real estate transactions, an agent represents the seller and another represents the buyer. The listing agent, when posting the listing to this MLS, included an offer of compensation to the buyer's agent, which is usually worth 2.5% to 3% of the home's value, according to Kelman. 

In other words, the listing agent can say they will pay the buyer's agent a commission and what percentage that will be. 

If the settlement is approved by the court, the database will no longer be able to facilitate this commission sharing, Kelman explained. 

"That can bring about a change in the industry where one agent instead of two is involved in the sale," he said. 

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That said, it won't change the final price of a home but rather determine how much the seller gets to keep. 

Ticker	Security	Last	Change	Change %
RDFN	REDFIN CORP.	9.61	-0.02	-0.21%

Kelman said that by the time a homeowner pays all the transaction fees, they have given up about half of their home equity. 

"I think someone moving up will have more money from the last sale of their home to buy their next home," he said. But "if I'm a first-time homebuyer thinking that prices are going to come down, I'm not sure that's the case." 

NAR said in a statement to FOX Business that the group does not set commissions and that they are negotiable. 

"The rule that has been the subject of litigation requires only that listing brokers communicate an offer of compensation," the NAR said, noting that "that offer can be any amount, including zero. And other rules throughout the MLS Handbook and NAR policy expressly prohibit MLSs, associations, and brokers from setting or suggesting any such amount that should be included in that field."