NAR's $418M payout weighs on real estate sector

Real estate stocks are under pressure Friday after the National Association of Realtors (NAR) reached a settlement agreement to resolve various lawsuits related to commission practices. The association has agreed to pay a staggering $418 million as a result.

Yahoo Finance reporter Dani Romero outlines new real estate guidelines that are in place thanks to the lawsuits and dives into post-settlement implications for homebuyers and sellers.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Angel Smith

Video Transcript

JOSH LIPTON: Time now to check in on some trending tickers as the closing bell on Wall Street quickly approaches. Starting with a look at the real-estate space, the National Association of Realtors to pay $418 million to settle the real estate agent commission lawsuits. Shares of real-estate stocks you can see there such as Zillow and Compass taking a hit following the lawsuit settlement.

Yahoo Finance's very own Dani Romero here with the latest. Dani.

DANI ROMERO: Say sayonara to those 6% commission fees. The NAR announced this settlement, this million-dollar settlement, but there's a couple new rules. So I want to lay those out. So for one, the new rules include it prohibits agents' compensations from being included on local centralized listing portals. The NAR had required sellers to include that compensation when listing a home on this Multiple Listing Service database. That no longer is required.

Two, a new rule-- it ends the requirement that brokers must subscribe to this Multiple Listings Service, which many are owned by the NAR local branches. And the last new rule is that it requires buyers' brokers to enter into a written agreement with their buyers.

And some Wall Street analysts have been saying that this new settlement could cause commissions to drop by 25%-- 25% to 50%, and then also it does open the opportunity for these discount brokerages to really get some skin in the game.

But again, what does this mean for home buying now, right? There's two sides to this story. So for home buying, buyers can now shop around on rates and see before they commit to buying a home. Another thing is that brokers can now start advertising their fees and allow customers to pick a lower-cost agent. I don't know if that's really going to go somewhere, but that's allowed now.

And then buyers also have to sign an agreement detailing how much they are willing to pay their agent for their services. Agents representing buyers can now negotiate that too, about I'm requiring this amount. It could either be-- the bills could either be a monthly bill or it could be just one flat fee, but it definitely is changing the game.

But at the end of the day, this agreement, this settlement really does need to be-- it's going to go to federal court. So there needs to be approval on that at the end of the day.

JULIE HYMAN: Yeah, I mean, there's a lot of unknowns still, so let's talk about this a little more. Thank you so much, Dani. Appreciate it.