In a significant move that could reshape the landscape of home selling in America, the National Association of REALTORS® (NAR) announced a groundbreaking agreement poised to end years of litigation over broker commissions—a contentious issue that has entangled home sellers, real estate agents, and multiple industry stakeholders. This comprehensive settlement, still awaiting court approval, involves NAR, its million-plus members, and a multitude of associated entities, addressing claims for residential transactions up to $2 billion in 2022.
Amidst the sprawling legal complexities, NAR stands firm in its innocence, denying any wrongdoing linked to its 1990s-established Multiple Listing Service (MLS) cooperative compensation model. This model was a response to consumer advocate calls for better buyer representation. Despite the controversy, NAR has agreed to a hefty $418 million payout spread over roughly four years, in a spirited effort to close this turbulent chapter while bolstering consumer choice and safeguarding its members’ interests.
Nykia Wright, NAR’s Interim CEO, articulated the organization’s long-standing commitment: “NAR has worked hard for years to resolve this litigation in a manner that benefits our members and American consumers. It has always been our goal to preserve consumer choice and protect our members to the greatest extent possible. This settlement achieves both of those goals.”
This resolution liberates most NAR members and various industry players from potential liability and ensures the continuation of cooperative compensation. This feature allows consumers to choose how they compensate their brokers when buying or selling a home, enhancing flexibility and control for homeowners and buyers alike.
However, not all waters are calm following this agreement. Agents affiliated with HomeServices of America and its related companies remain outside the bounds of this settlement, continuing the litigation in the ongoing Sitzer-Burnett case. Also, entities with residential transaction volumes exceeding $2 billion in 2022, along with certain MLSs, have a streamlined path to obtain releases, should they opt to do so.
As part of its settlement, NAR has committed to instituting new MLS rules. A noteworthy change includes banning the practice of listing broker compensation offers on MLS platforms, though these offers can still be negotiated off-MLS. This adjustment aims to enhance the accessibility of professional real estate services, lower the cost barriers for buyers, foster fair housing opportunities, and expand the potential buyer pool for sellers. This reform reflects a deep alignment with real estate laws across numerous states that expressly authorize such compensation structures.
Additionally, from mid-July 2024, NAR will require MLS participants who work with buyers to establish written agreements, clarifying the services and value provided. This initiative is part of NAR’s ongoing efforts to ensure transparency and to enhance consumer understanding in real estate transactions.
The settlement marks a pivotal step for NAR, potentially ushering in a new era of real estate practices focused on consumer protection and ethical transparency. As the dust settles, both buyers and sellers can anticipate a more streamlined, comprehensible, and fair marketplace, underpinned by robust consumer choice and professional integrity.