BAM Key Details:

  • The National Association of Realtors (NAR) has agreed to settle a series of antitrust commission lawsuits, paying $418 million in damages and revising commission rules. 
  • One of the key terms of the settlement is the complete removal of any offer of buyer broker compensation from the MLS. Sellers and their agents can still offer it via off-MLS negotiations and consults. 
  • Byron Lazine hosted a breaking news Hot Sheet broadcast to cover the settlement and respond to live questions. 

The National Association of Realtors® (NAR) has agreed to a landmark settlement in industry lawsuits, paying $418 million in damages and agreeing to sweeping changes in the U.S. commission structure. Legal counsel for the trade association agreed to the settlement terms early Friday morning. 

The settlement, which is still pending the federal court’s approval, would end a growing queue of legal claims from U.S. home sellers arguing that the decades-old practice of seller-paid buyer agent compensation forced them to pay more than a reasonable amount in agent commissions. 

New York Times journalist Debra Kamin broke the news today. In a statement from NAR, Nykia Wright, Interim CEO of NAR said, “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.” 

Byron Lazine covered the breaking news in an emergency live broadcast to discuss the settlement and answer live questions:

Who is covered by the settlement—and who is not?

According to NAR’s own statement, today’s settlement, if approved by the federal court judge, would settle all legal claims against NAR, as well as “over one million NAR members, all state/territorial and local REALTOR® associations, all association-owned MLSs, and all brokerages with an NAR member as principal that had a residential transaction volume in 2022 of $2 billion or below.” 

That unfortunately still leaves 94 brokerages out of the settlement, including some of the biggest players in the real estate industry. Dave Gallagher shared the details on Real Estate News

To name a few— 

  • Compass (with $227.98 billion sales volume in 2022)
  • eXp ($15.1 billion)
  • Redfin ($39.8 billion)
  • Howard Hanna Real Estate ($37.7 billion)

Dozens of other national and regional real estate firms also made that list. 

According to settlement terms, any real estate brokerage not covered that chooses to settle has two options: 

  • Option 1: Make a deposit within 120 days equal to 0.0025 multiplied by their average annual total transaction volume into a settlement escrow account opened by the plaintiffs. 
  • Option 2: Brokerages that can show they’re unable to afford a deposit of that size can go into non-binding mediation within 110 days following the federal court’s preliminary approval of the settlement. 

Also not covered by the settlement are MLSs not owned by Realtor associations. These also have two options for settling: 

  • Option 1: Make a deposit within 120 days of the preliminary settlement in an amount equal to 100 multiplied by its total number of subscribers in 2023, based on the subscriber count listed in T3 Sixty’s 2023 Real Estate Almanac. 
  • Option 2: MLSs that can show they’re unable to afford a deposit of that size can also choose non-binding mediation within 110 days following the preliminary approval of the settlement.

Along with the above options, MLSs choosing to settle must change their practices as specified in the original settlement agreement.

Also, despite NAR’s best efforts during negotiations, they could not obtain a release for HomeServices of America and its related companies—the lone holdout corporate defendant in Sitzer/Burnett. 

HomeServices is not covered by the settlement, nor are employees of the remaining corporate defendants named in the lawsuits covered by the settlement. 

No news, yet, on HomeServices’ petition to the U.S. Supreme Court requesting a review of Sitzer/Burnett. 

No more offers of broker compensation in the MLS

Along with paying $418 million in damages, NAR has agreed to put in place a new rule prohibiting offers of buyer broker compensation on the MLS. 

Sellers and their agents could still make offers of buyer broker compensation via off-MLS negotiations and consults, meaning seller-paid buyer agent commissions are still an option. 

But this would remove MLS from the equation, presumably to minimize the potential for steering buyer clients away from listings that don’t offer cooperative compensation. 

Keeping cooperative compensation as an off-MLS option is in keeping with real estate laws in the many states (including Missouri) that expressly allow them. 

Written representation agreements for buyer agents

NAR has also agreed to a new rule that would require MLS participants—specifically those working with buyers—to enter into written representation agreements with their buyers.

From NAR’s statement:

“NAR continues, as it has done for years, to encourage its members to use buyer brokerage agreements that help consumers understand exactly what services and value will be provided, and for how much.”

All changes included in the NAR settlement will go into effect in mid-July 2024.

Jason Cassity breaks it down on BAM IG

BAM Creator Jason Cassity covered the news in a green screen Instagram Reel, and commenters were quick to share their thoughts on the settlement.

Here are just a few: 

  • “Somehow I feel like my yearly membership dues are about to go up.” (@derrickswflrealtor
  • “Business as usual. This only forces agents to truly reflect inward to understand their value and EXPLAIN that to their buyer clients as well as HOW they get compensated. The way of “working with me is FREE” is no more. It forces agents to have these “uncomfortable” conversations that some don’t want to have.” (@markanthonyball
  • “If it PERMANENTLY prevents Realtors from getting sued, that’s great. However, I’d think that this money will have to come from all Realtors through NAR increasing charges to Realtors. How it’s going to play out in the long run is anyone’s guess. That said, for now it’s business as usual.” (@reedhomesnw
  • “Thanks for nothing NAR. And I mean nothing; no insurance benefits, no protection, nothing.” (@amyowensrealtor
  • “Kinda relieved this hopefully ends it. I think what was decided in MO just showed a lot of agents did a poor job doing exactly what most already do with negotiating commission and explaining to sellers the breakdown.” (@adam_craun)

Check out the post yourself to see more and to share your own thoughts:

Several real estate stocks are down

Stock values for real estate companies started to slide after the settlement was announced, with Zillow stock down about 7.5 points as of 2:00 pm ET. CoStar, meanwhile, was up by more than six points.

Stock reactions were one of the many facets Byron Lazine and Tom Toole discussed in today’s breakdown of the settlement on the Knowledge Brokers Podcast

An Email from NAR President Kevin Sears

NAR President Kevin Sears sent out an email to NAR members outlining the key terms of the settlement and highlighting what the association has achieved with today’s settlement. 

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 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.

Kevin Sears

NAR President

This is a developing story. More details coming soon.