National Association Of Realtors® Settlement On Broker Commission
The National Association of Realtors (NAR) has reached a proposed settlement agreement to resolve ongoing litigation regarding broker commissions. This agreement aims to end claims brought by home sellers and will have significant implications for the real estate industry.
Disclaimer: This blog is for informational purposes only and should not be taken as legal advice. Please consult a real estate attorney for any legal concerns or questions.
Overview of the Settlement
The settlement, which is still subject to court approval, would resolve claims against NAR, over one million NAR members, all state/territorial and local REALTOR® associations, all association-owned Multiple Listing Services (MLSs), and brokerages with a residential transaction volume of $2 billion or below in 2022. This agreement is seen as the best possible outcome given the circumstances, influenced by large settlements reached by other corporate defendants.
Coverage and Implications
For NAR Members:
Over one million NAR members are released from liability nationwide.
This release covers all members except agents affiliated with HomeServices of America and employees of the remaining corporate defendants still litigating.
For Brokerages Owned by Members:
Brokerage entities with a residential transaction volume of $2 billion or below in 2022 are released from liability nationwide.
The agreement provides a mechanism for larger brokerages (exceeding $2 billion in transaction volume) to obtain releases if they choose.
For NAR and REALTOR® Associations:
NAR, state/territorial, and local REALTOR® associations are released from liability nationwide.
Officers, directors, and participants in NAR activities are also released.
For Association-Owned MLSs:
All MLSs wholly owned by one or more REALTOR® associations are included in the release.
For Other MLSs:
Other MLSs can opt into the settlement by adopting the MLS practice changes and paying a per-subscriber fee to the Settlement Fund.
Practice Changes Effective August 17th, 2024
One of the significant changes involves the prohibition of offers of compensation on the MLS:
Compensation Options: While cooperative compensation remains an option, it must be pursued off-MLS through negotiation and consultation with real estate professionals. Buyer brokers can still be compensated through:
Fixed-fee commissions paid directly by consumers.
Concessions from the seller.
A portion of the listing broker’s compensation.
Compensation will continue to be negotiable between agents and their clients.
Consumer Choices: The settlement preserves consumers' choices regarding real estate services and compensation. Listing brokers and sellers can still offer compensation for buyer broker services, but these offers cannot be communicated via the MLS. Seller concessions, such as buyer closing costs, can still be communicated via the MLS, provided they are not conditioned on the use of a buyer broker.
New Rule on Written Agreements
Effective August 17th, 2024, MLS participants working with buyers must enter into written representation agreements before touring homes. This change ensures that consumers understand the services provided and their associated costs clearly.
Ongoing Litigation and Settlement Approval
The agreement does not end litigation for all defendants. Ongoing cases concerning the MLS cooperative compensation Model Rule may continue.
The settlement is subject to court approval, a process that may take several months and will include opportunities for interested parties to object.
NAR will seek to have litigation about the MLS cooperative compensation Model Rule paused pending settlement approval.
Next Steps for NAR
NAR will pay $418 million over approximately four years as part of the settlement. This substantial sum will require NAR to use its remaining resources effectively to continue delivering value to its members. NAR remains committed to leading the industry forward, supporting its members, and providing valuable resources and advocacy.
Conclusion
The NAR settlement brings significant changes to broker compensation practices in the real estate industry. As these new rules take effect on August 17th, 2024, real estate professionals and consumers need to stay informed and adapt to the evolving landscape. For specific legal advice, please consult a qualified real estate attorney.
Stay tuned for updates as the settlement process unfolds. If you have any questions or need further assistance, feel free to reach out. We're here to help you navigate these changes effectively.
