Could Class Action Settlements Nix the NAR Membership Requirement for Agents?

This week, Rob Hahn, aka Notorious R.O.B., joined Byron Lazine and Nicole White on The Real Word to talk about two Realtor association scandals and two lawsuit settlements that could lead to a long-awaited divorce in the real estate industry. 

For too long, agents across the U.S. have essentially been forced to join the National Association of Realtors® (NAR)  in order to access the MLS—which is essential to their work. 

So, one of the questions that came up had to do with whether this arrangement is even legal, how NAR has maintained its gatekeeper position for the MLS, and what recent events might do to shake things up. 

By recent events, we’re talking mainly about these:

1. NAR’s sexual harassment scandal surrounding allegations against former president Kenny Parcell
2. SDAR’s massive embezzlement scandal 
3. Anywhere and RE/MAX settlements of class action lawsuits on buyer commissions

Regarding the first question, Rob, who has years of experience providing legal services, said most lawsuits filed to challenge NAR’s gatekeeper status have failed, giving that status legitimacy in every state where a legal challenge has hit a brick wall. 

But that could change. 

“The MLS and Realtor associations need to get divorced.”

For most of Rob’s career as an MLS consultant, he’s focused on privatization. Because he believes that the MLS and Realtor associations “need to get divorced.” 

For one, Rob referenced an Inman survey that found roughly 70% of Realtors join a Realtor association just to access the MLS. 

Not only does that constitute a financial burden for agents—especially in a tough market—but it also weakens the Realtor association itself since the large majority of its members are only there because they don’t have a choice. 

Byron mentioned a conversation he had with NextHome CEO James Dwiggens. He predicts that, if NAR settles with the plaintifs for the two class action lawsuits, the cost of that settlement—which he expects would cost them around $2–4 billion, if not considerably more—would, of course, be passed on to NAR members, who are already paying $700 a year. 

Dwiggens suggested that, in the event of a NAR settlement, members will pay an assessment of $400–$600 for the next four years. But if NAR membership were no longer required for MLS access, and 70% of those members left, the cost of that $2–4 billion settlement would be felt all the more by the remaining 30%. 

At that point, those remaining might, after all, demand that NAR leadership tighten their own belts and share the pain if they want to retain whatever credibility and influence they have left. 

RE/MAX and Anywhere settlements and what they could mean

As RE/MAX announced yesterday, it is the second defendant in two class action lawsuits on buyer agent commissions to reach a settlement with the plaintiffs. 

RE/MAX joins Anywhere in agreeing to not only a cash settlement but also some changes in certain business practices. We won’t know the details of those changes until after the court approves the agreement. 

Notorious R.O.B. has a working hypothesis on what could happen: 

If you join any of those large national brands, you’re required by company policy to be a Realtor… So, I think those settlements are going to remove that requirement.

Rob Hahn aka Notorious R.O.B.

If that’s the case, any RE/MAX and Anywhere agent could simply decide they no longer want to be a NAR member, and their brokerage could not require them to stay. 

The MLS access is the key. Decouple that from Realtor association membership—starting with NAR—and NAR leadership will have to start earning those dues. 

Another possibility Byron suggested was a new association for real estate agents that would compete with NAR for members, just as LIV Golf challenged the PGA Tour. Rob agreed that it is possible if NAR loses its gatekeeper status with the MLS. 

And with NAR’s reputation tarnished by the recent scandal and NYT exposé, we’re not ruling that out. 

Rob also brought up a caveat regarding the settlements:

Here’s the thing: they’ve settled, but they’ve only settled two lawsuits. They only settled Sitzer, out of Missouri, and Moerhl. That’s it. They have not yet been sued in 60% of the country…You cannot protect yourself from lawsuits that have not yet been filed. You can’t compromise future plaintiff’s rights. So, yeah, I think both RE/MAX and Anywhere got off really light—big wins for those two companies. But they can’t protect themselves from being sued in, say, South Carolina….And now, every settlement like this creates more of an incentive for copycat lawsuits.

Rob Hahn aka Notorious R.O.B.

With NAR representing a larger target, the cost of settling the Moerhl and Burnett (Sitzer) lawsuits would be a heavy one.