NAR Settled Now What

Misinformation about real estate commissions has been rampant in the media lately. The national conversation around real estate commissions reached a crescendo since the National Association of REALTORS® (NAR) announced a settlement agreement to resolve litigation brought on behalf of home sellers related to broker commissions. With brokers and agents questioning the future of their businesses and trying to answer consumer inquiries, it’s crucial to separate fact from fiction.

Clearing the Air: The Settlement Agreement

There’s no denying that the litigation, including numerous copycat lawsuits filed after the Sitzer-Burnett verdict, caused significant uncertainty in an industry already grappling with low inventory and rising interest rates. However, the settlement agreement, which must be approved by a judge, offers a clear path forward for real estate professionals, REALTOR® associations, brokerages, MLSs, and other industry stakeholders. Most importantly, it allows NAR members to refocus on their core mission: supporting buyers and sellers.

Facts First

The media has gotten much wrong about NAR’s settlement, which involves a $418 million payout over four years. Some outlets have falsely suggested that NAR set or guided commissions to a standard rate of 6%. Even President Joe Biden recently misspoke, suggesting the settlement makes commissions negotiable for the first time.

Let’s be clear: NAR does not set commissions, and commissions have always been negotiable between brokers and their clients. Housing prices are dictated by market forces beyond NAR members’ control. Correcting misinformation is vital, especially given the settlement agreement's complexity. NAR continues to engage with the media to rectify inaccuracies, and members are encouraged to refer to official NAR sources, such as facts.realtor, for accurate and up-to-date information.

The Settlement’s Goals

The settlement achieves two key objectives: protecting members to the greatest extent possible and preserving consumer choice. Specifically, the proposed settlement:

• Resolves claims against NAR, nearly all members, all state, territorial, and local REALTOR® associations, all association-owned MLSs, and brokerages with an NAR member as a principal with a residential transaction volume of $2 billion or below in 2022.
• Preserves cooperative compensation as an option for consumers looking to buy or sell a home, provided such offers occur off the MLS.

NAR fought for comprehensive coverage, but large settlements reached by other corporate defendants shaped the negotiations. Throughout the process, NAR engaged with a diverse range of members to consider their perspectives and interests.

“Continuing to litigate would have hurt members and their small businesses,” NAR Interim CEO Nykia Wright stated. “While there could be no perfect outcome, this agreement is the best outcome we could achieve in the circumstances. It provides a path forward for our industry, which makes up nearly one-fifth of the American economy, and NAR. For over a century, NAR has protected and advanced the right to real property ownership in this country, and we remain focused on delivering on that core mission.”

Who Is Covered?

Nearly every member is covered by the release NAR negotiated in the settlement. Exceptions include members affiliated with HomeServices of America, the last co-defendant in the Sitzer-Burnett litigation, and employees of the co-defendants in the Gibson and Umpa cases.

If you are affiliated with the following brokerage groups as an independent contractor licensee, you are covered by the proposed settlement:

• At World Properties LLC
• Compass Inc.
• Douglas Elliman Inc.
• Douglas Elliman Realty LLC
• eXp Realty LLC
• eXp World Holdings Inc.
• Hanna Holdings Inc.
• HomeSmart International LLC
• Howard Hanna Real Estate Services
• Real Broker LLC
• The Real Brokerage Inc.
• Realty ONE Group Inc.
• Redfin Corporation
• United Real Estate
• Weichert, REALTORS®

All other REALTORS® who are members of NAR on the date of class notice are covered by the release. The anticipated date of class notice is mid-July. Members and state/territorial and local REALTOR® associations must abide by the practice changes set forth in the agreement but need not take any other action to benefit from the release.

Changing Business Practices

The settlement agreement mandates two key changes to how members and MLS participants conduct business:

1. Prohibition of MLS Compensation Offers: NAR agreed to create a new MLS rule prohibiting offers of compensation on the MLS. Offers of compensation can still occur off-MLS through negotiation and consultation with real estate professionals.
2. Mandatory Buyer Representation Agreements: NAR agreed to implement a new rule requiring MLS participants working with buyers to enter into written agreements before touring homes. This practice, long encouraged by NAR, helps consumers understand the services provided and their associated costs.

NAR continues to deny any wrongdoing and asserts that cooperative compensation benefits consumers. These changes offer an opportunity to clarify clients’ options and will take effect in mid-July under the proposed settlement terms.

Resources for Members

“NAR exists to serve our members and American consumers, and while the settlement comes at a significant cost, we believe the benefits it will provide to our industry are worth that cost,” NAR President Kevin Sears said. “NAR is focused firmly on the future and on leading this industry forward. We are committed to innovation and defining the next steps that will allow us to continue providing unmatched value to members and American consumers.”