The National Association of Realtors (NAR) has agreed to pay $418 million in a settlement reached Friday morning, brought against the trade association on behalf of home sellers and related to agent compensation.
The settlement would give home sellers the option to compensate real estate agents in the sale of their home, no longer requiring them to pay agents the standard 6% commission.
“NAR has worked hard for years to resolve this litigation in a manner that benefits our members and American consumers,” Nykia Wright, interim CEO of NAR, said in a statement Friday. “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’s legal counsel told the New York Times, which first reported the story, that they anticipate the settlement will be filed in the coming weeks and still be subject to court approval.
In addition to the monetary settlement, NAR has agreed to a new rule prohibiting broker compensation on Multiple Listing Services (MLS), making it an option consumers can pursue off-MLS, through negotiation and consultation with their real estate team.
Marty Green, principal at mortgage law firm Polunsky Beitel Green, said in a statement that the settlement "was the only viable resolution."
"With several of the major brokerage houses already having settled, NAR was in the untenable position of fighting to protect a business model that was already compromised by the settlements," Green commented. "The filing of copycat lawsuits throughout the country made painfully clear that the litigation path was going to be massively expensive and one that NAR and the other defendants would have to win across the board to succeed. In my view, NAR made the correct choice to resolve the claims because the settlement, although extraordinarily expensive, provides a path forward where NAR can help the industry navigate the path to a new commission structure that becomes more negotiable."
Realtor.com and its affiliates attest that offers of compensation “help make professional representation more accessible, decrease costs for home buyers to secure these services, increase fair housing opportunities, and increase the potential buyer pool for sellers.”
Another rule would require MLS participants to enter into written agreements with buyers, to help them understand the services to be provided and at what price.
These provisions will go into effect in mid-July 2024, the trade association said.
“Ultimately, continuing to litigate would have hurt members and their small businesses,” Wright said. “While there could be no perfect outcome, this agreement is the best outcome we could achieve in the circumstances. It provides a path forward for our industry, which makes up nearly one-fifth of the American economy, and NAR. For over a century, NAR has protected and advanced the right to real property ownership in this country, and we remain focused on delivering on that core mission.”
NAR continues to deny any wrongdoing in connection with the MLS cooperative compensation model rule and will be required to pay the $418 million over the next four years.
Almost all brokerage entities that had a residential transaction volume in 2022 exceeding $2 billion can now obtain releases from the litigation if they choose to do so. More than one million NAR members were included in this clause.
Despite these efforts, affiliates of HomeServices of America– the last remaining corporate defendant still litigating the Sitzer-Burnett case— are not released under the 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 President Kevin Sears said. “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.”
