In general, people are always interested in the real estate market. Are home prices increasing or decreasing? Is it a buyer’s market or a seller’s market? On March 15, 2024, the National Association of Realtors (NAR) announced a proposed settlement agreement for the class action lawsuit involving NAR and other defendants including Anywhere Berkshire Hathaway, Keller Williams, and RE/MAX that would end litigation claims brought on behalf of home sellers.
I want to be clear this is a complex settlement, I am not an attorney, therefore I am not interpreting the settlement nor am I offering an opinion. I am simply regurgitating the information that NAR has provided to brokers and to the public, almost word for word.
The plaintiffs involved in the case claimed that the real estate commission rates are too high, and buyer representatives are paid too much. In addition, the NAR’s Code of Ethics and Multiple Listing Service (MLS) Handbook, along with corporate defendant’s practices, lead to inflated commission rates and the practice of agent commission sharing. Under the former rule, to advertise a property on a listing site such as the MLS, the seller’s agent must offer compensation to the buyer’s agents.
The settlement, which is subject to court approval, makes clear that NAR continues to deny any wrongdoing in connection with the MLS cooperative compensation model rule that was introduced in the 1990s in response to calls from consumer protection advocates for buyer representation. Under the terms of the agreement, NAR would pay $418 million over approximately a four-year period.
In addition to the financial payment, NAR, boards, and the MLS will eliminate and prohibit the requirement that the listing broker or sellers make offers of compensation to buyers’ brokers/representatives in the MLS. This would mean that offers of broker compensation would not be communicated via the MLS.
The NAR settlement also requires MLS participants and Realtors working with a buyer(s) to use a buyer broker agreement. Brokers representing buyers may receive compensation if the listing broker/brokerage agrees to pay a portion of the compensation to the buyers, the buyer may pay the buyers broker, if not prohibited by the lender and the seller may agree to pay the buyers’ broker.
When the NAR settlement was announced there were media outlets that incorrectly reported the settlement by suggesting that NAR previously set or guided commission to a standard rate of 6%. I can assure you as an owner of a real estate brokerage, we have always negotiated commission rates. It is a good business practice, for every transaction is different.
The proposed NAR settlement will certainly change the real estate industry, as most industries go through change over time. Many of us have experienced personal changes that we never expected. For example, I never thought even 5 years ago that I would be driving an electric vehicle! The driving experience has proven to be more fun, less expensive, and more convenient. As we adapt to innovation and technology, we will continue to find ways to improve services and the value we provide to our clients.
Author: Beth E. Dilley, Owner | Broker, Ascendia Group. Feel free to share your feedback at: beth@ascendiagroup.com.