judge's gavel

published on March 15, 2024 - 12:22 PM
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The National Association of Realtors (NAR) announced an agreement Friday that would end litigation regarding home sellers’ claims regarding broker commissions. Under the terms of the agreement, NAR would pay $418 million over four years to resolve the claims against the group.

The agreement is meant to clear over 1 million NAR members located across the country, all state/territorial and local Realtor associations, all association-owned MLSs, and all brokerages with a NAR member as principal with a residential transaction volume in 2022 of $2 billion or below.

The settlement — widely expected to lead to lower broker fees — is still subject to court approval and states that NAR continues to deny any wrongdoing in connection with the Multiple Listing Service (MLS) cooperative compensation model rule, which was introduced in the 1990s in response to calls from consumer protection advocates for buyer representation. 

“NAR has worked hard for years to resolve this litigation to benefit 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,” said Nykia Wright, Interim CEO of NAR, in a press release. 

The resolution achieved two critical priorities, according to a NAR news release. It ensures that most NAR members and many industry stakeholders were safe from legal liability. Cooperative compensation remains a choice for consumers when buying or selling a home, said NAR.

NAR also secured in the agreement a mechanism for nearly all brokerage entities with a residential transaction volume exceeding $2 billion in 2022 and MLSs not entirely owned by Realtors associations to obtain releases from liability efficiently if they choose to use it. 

“Ultimately, continuing to litigate would have hurt members and their small businesses,” said Wright. “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.”

NAR said it fought to include all members and more than one million members to be safe from liabilities in the case. Despite NAR’s efforts, agents affiliated with HomeServices of America and its related companies—the last corporate defendant still litigating the Sitzer-Burnett case—are not released under the settlement, nor are employees of the remaining corporate defendants named in the cases covered by this settlement.

NAR has also agreed to implement a new MLS rule prohibiting offers of broker compensation on the MLS.

NAR also previously required home sellers to offer around 6% non-negotiable commission before homes were listed on MLS. Realtors say commission fees have always been negotiable depending on the agent. 

These compensation offers help make professional representation more accessible, decrease costs for home buyers to secure these services, increase fair housing opportunities, and increase the potential buyer pool for sellers. They are also consistent with the real estate laws in the many states that expressly authorize them. 

NAR has agreed to enact a new rule requiring MLS participants working with buyers to enter into written agreements with their buyers. NAR has continued to encourage its members to use buyer brokerage agreements that help consumers understand strictly what services and value will be provided and for how much. These changes will go into effect in mid-July 2024.

“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,” said Kevin Sears, NAR President, in a news release. “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. This will be a time of adjustment, but the fundamentals will remain: buyers and sellers will continue to have many choices when deciding to buy or sell a home, and NAR members will continue to use their skill, care, and diligence to protect the interests of their clients.” 

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