Our sister publication RESPA News is covering the NAR settlement closely. We are sharing some of their coverage with The Title Report readers because it will have far-reaching effects throughout the real estate industry. Check back with RESPA News for future coverage.
The National Association of Realtors (NAR) reached a settlement, still subject to court approval, in the claims brought by home sellers related to broker commissions. In 2023, a jury found the defendant organizations had violated antitrust laws by following NAR’s cooperative compensation rule.
Originally, Anywhere Real Estate, RE/MAX, LLC, Keller Williams, HomeServices of America, and NAR were defendants in the Sitzer-Burnett case. Prior to the jury’s announcement, Anywhere and RE/MAXX, LLC settled the issue, and Keller Williams settled earlier this year. With NAR’s announcement, the sole remaining defendant is HomeServices of America, a Berkshire Hathaway company.
“We continue to review the settlement and specifically the amended business practices that were included in the terms,” HomeServices of America Executive Vice President Chris Kelly told RESPA News. “HomeServices continues to aggressively pursue all options to resolve our involvement in these cases.”
In the settlement, NAR continues to deny any wrongdoing related to its multiple listing service (MLS) cooperative compensation model rule. However, it will pay $418 million over approximately four years, as part of the agreement.
“NAR has worked hard for years to resolve this litigation in a manner that benefits our members and American consumers,” NAR interim CEO Nykia Wright said in a release. “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.”
NAR identified the two “critical” achievements of this move: the release of most NAR members and industry stakeholders from liability in these matters, and the cooperative compensation rule will remain a choice for consumers when they buy or sell a home. For almost all brokerage entities that had a residential transaction volume that exceeded $2 billion in 2022 and MLSs not wholly owned by Realtor associations, NAR also negotiated a mechanism that will allow them to obtain releases efficiently, if they choose to do so.
“NAR fought to include all members in the release and was able to ensure more than one million members are included,” NAR’s release stated. “Despite NAR’s efforts, agents affiliated with HomeServices of America and its related companies – the last corporate defendant still litigating the Sitzer-Burnett case – are not released under the settlement, nor are employees of the remaining corporate defendants named in the cases covered by this settlement.”
Chuck Cain, FNF Family of Companies senior vice president, national agency division, said this settlement was unsurprising, and clears “a cloud of unknowing” for NAR members wondering how to proceed.
“We’ll see how this all works out practically in the next few months,” he told RESPA News. “I believe that most brokers have already moved to buyer broker agreements as per state law. It does diminish the value of the MLS. Now we’ll see if [Home Services] settles.
“For title and settlement agents, it does require one to be cognizant of source of business in one’s market,” he added. “Where buyers’ agents may have controlled the table in the past and currently, that may begin to shift to listing agents. It will be different market-by-market.”
As part of the settlement, NAR also agreed to institute a new MLS rule that prohibits offers of broker compensation on the MLSs. NAR stated this means offers of broker compensation cannot be communicated via the MLS, but can continue to be an option that consumers can pursue off-MLS through negotiation and consultation with real estate professionals. This, NAR added, is consistent with the real estate laws in many states that expressly authorize such agreements.
“This settlement certainly challenges the long-term viability of an MLS system in the U.S.,” Sterbcow Law Group Managing Attorney Marx Sterbcow told RESPA News in a phone call. “The sole reason for the MLS was for cooperative brokerage commissions. Without that feature, listings and all their information can be put on a website for free.”
Though MLSs won’t be impacted overnight, there will likely be a transition on all levels – local, state, and national – in how listings are made, and possible MLS replacements could be on the horizon. As these changes occur, potential homebuyers may shift to beginning their homebuying journey by contacting the seller’s side about a listing, rather than look for a buyer agent. Real estate technology companies who offer free advertising on their web platforms may start dominating the home listing space.
Ken Trepeta, president and executive director of RESPRO and former director of real estate services for NAR, said brokers are upset about what NAR negotiated for them.
“It is a bad deal, but I do not think people need to take it,” he said. “I think they should move to dismiss. NAR is getting rid of its rule. The rule is the alleged cause of harm. The brokers and agents had to comply with the rule NAR essentially imposed on them. Why should they be responsible for the damage (if any) the rule has caused?
“In this era of ridiculous verdicts, settlement, even when one does not think anything wrong has occurred, has become a more common feature,” he added. “The settlement gives NAR and its members time to fulfill the judgment and makes modest changes to the rules regarding compensation that I think real estate professionals can adapt to and live with.
“It remains to be seen whether the Department of Justice will accept this result or pursue further action and what impact the settlement will have on existing cases,” he further noted. “Since the principal outcome is the NAR rule change that is alleged to have caused the damage to plaintiffs, I think the rest of the cases are essentially moot since the rule came from NAR, not the remaining defendants who were compelled to comply with it.”