Key Details:
- On Tuesday, November 26, 2024, Judge Stephen R. Bough granted his final approval of the settlement agreement between the Sitzer/Burnett plaintiffs and the National Association of Realtors® (NAR).
- As of November 14, more than 490,000 claims have been filed (mostly online) by plaintiff class members. Early projections on payout per claim (after attorney fees) are over $900 per person, though that’s likely to go down as more claims come in.
- The DOJ’s latest filing urged the court to remind NAR that the settlement wouldn’t stop future litigation or their ongoing antitrust investigation, but industry experts are waiting to see how the DOJ’s position could change after January 20, 2025.
This afternoon, U.S. District Judge Stephen Bough granted his final approval to the National Association of Realtors (NAR) commission settlement with the Sitzer/Burnett plaintiffs, marking a pivotal moment in the ongoing evolution of the real estate industry.
While the $418 million settlement and accompanying rule changes bring closure to years of litigation on behalf of home sellers, the decision also sets the stage for significant changes and ongoing legal battles that will shape the future of real estate practices.
If we needed to be reminded of that, the latest warning from the U.S. Department of Justice (DOJ) just made it clear that the settlement is not a barrier to future litigation, including lawsuits filed by buyers and any legal action taken during the DOJ’s ongoing investigation.
But as Byron Lazine and Nicole White discussed in this week’s Real Word, what the DOJ says between now and January 20th could amount to little more than fist-shaking from a department that, for the past four years, has had NAR and the real estate industry in its crosshairs.
“I’m really looking forward to what the DOJ is saying, what their statement of interest looks like post-January 20. I don’t care what the DOJ says between now and January 20th. I don’t believe anything’s going to happen coming from the DOJ that’s substantial. We’re in a lame duck session.”
Key Components of the Settlement
The settlement resolves lawsuits brought by home sellers and includes significant changes:
- Financial Payout: The $418 million from NAR contributes to nearly $700 million in settlements, with additional funds from companies like HomeServices of America.
- Rule Changes: Agents are now required to secure signed agreements before showing homes, and sellers’ agents can no longer offer preemptive compensation through MLS platforms.
Millions of consumers have already been notified about the settlement via postcards, emails, and digital ads, with claims being processed online. As of November 14, the company overseeing those notifications had received 491,490 claims, most of which came in online.
Early projections estimate payouts of over $900 per claimant (from the $450 million remaining after the plaintiffs’ attorneys get their one-third cut), though the final amount will likely decrease as more claims are filed.
The real estate market has yet to feel the full effects, as many transactions closing today were initiated before the settlement’s rules took effect. However, the coming months are expected to bring more clarity and highlight areas where agents will need to adapt further.
Ongoing Legal Challenges & DOJ Investigation
While the settlement marks an important milestone, legal and regulatory issues are far from resolved. Separate lawsuits filed by homebuyers remain active, raising similar antitrust allegations. In addition, various objections to the settlement—ranging from concerns about consumer compensation to the effectiveness of the rule changes—are still being debated.
Law professor Tanya Monestier, who has been critical of practice changes in the industry (particularly buyer and seller agreements) filed a lengthy objection to the settlement in October.
The Department of Justice (DOJ) has also weighed in, suggesting that parts of the settlement may not fully address potential antitrust violations.
In its latest statement, the department warned that, even if Judge Stephen R. Bough grants his final approval, the NAR settlement doesn’t preclude buyers from pressing forward with lawsuits to protect buyer interests.
The DOJ has also suggested the buyer agreement required by NAR settlement terms “may harm buyers and limit how brokers compete for clients.”
From the DOJ filing:
“It bears a close resemblance to prior restrictions among competitors that courts have found to violate the antitrust laws in other proceedings and could limit — rather than enhance — competition for buyers among buyer brokers.”
In this week’s episode of The Real Word, Lazine asked White the question, “Do these buyer agreements harm buyers?”
“I think we’ve been very clear that they essentially mean nothing…because you can cancel them at any time, you can decide you don’t want to work with somebody afterwards. I do think that there is an advantage to having them just so there’s actually a conversation being had when you’re meeting with a buyer—on what your obligation is to them, what the buyer’s obligation is to you, what you’re agreeing to in terms of how you see this relationship going—which I think is a fine conversation. And again, if a buyer decides to buy, and they like [the agent], it works great. But at the end of the day, they mean nothing….It’s very clear in the form that you can actually get out whenever you want.”
Meanwhile, broader disruptions in the industry continue, including debates over NAR’s Clear Cooperation Policy and membership agreements.
Stay tuned for more.
