NAHB to Host Shop Talk on NAR Lawsuits
The class-action lawsuits filed against the National Association of Realtors (NAR) and other large real estate companies nationwide have been the subject of national media coverage for the past several months. In March 2024, the plaintiffs and defendants reached a proposed settlement agreement that would end the litigation of the claims, as well as others raised by home sellers.
In these class-action lawsuits, the plaintiffs — comprising persons who sold a home listed on a multiple listing service (MLS) system and paid commission — claim the defendants violated federal antitrust law by requiring home sellers to pay the agents representing the buyers of their homes at an inflated amount.
The claims in these lawsuits are complicated and focus on NAR’s MLS cooperative compensation rule, which requires the seller’s agent to offer a commission to the buyer’s agent in order to list a for-sale property on an MLS (a database of homes for sale in a particular geographic region).
Historically, this has resulted in a 5% to 6% total commission, with half going to the seller’s agent and half to the buyer’s agent. However, the home buyer doesn’t pay their agent’s fee directly. Instead, the buyer agent’s commission is paid by the seller as part of their closing costs. According to plaintiffs, this violated federal antitrust law by reducing competition and increasing commissions above what the services warranted.
NAR Settlement Overview
Last month, the plaintiffs and the defendants reached a proposed joint settlement agreement. As part of that agreement, NAR would pay $418 million over the next four years and agree to change various practices. This is in addition to prior settlements totaling $208.5 million with defendants Anywhere Real Estate, Inc, RE/MAX, LLC and Keller Williams Realty, Inc.
Once the settlement has been approved by the courts, the plaintiffs must develop a method to inform the class about the agreement. When the class has been established, the plaintiffs will distribute the funds in accordance with a court-approved plan.
The settlement would resolve claims against NAR; more than 1 million NAR members; all state, territorial and local Realtor associations; all association-owned MLS systems; and all brokerages with an NAR member as principal that had a residential transaction volume in 2022 of less than $2 billion.
Changes Under the Settlement
In addition to paying $418 million to the plaintiffs, NAR has agreed to change various practices. As a result, it will:
- Stop requiring listing agents or sellers to offer buyer agents compensation.
- Stop MLS participants from making compensation offers on the MLS or disclosing the listing agent’s compensation on the MLS. All compensation fields on the MLS must be eliminated. (Note: Listing agents and sellers may still offer compensation to buyer agents, but not through the MLS.)
- Stop requiring membership in a Realtor MLS before offering compensation to a buyer agent.
- Require all Realtor MLS participants working with a buyer to have a written agreement with the buyer. The agreement must explain how much the buyer agent will be paid, not have an open-ended payment and not allow the agent to be paid more than the agreement specifies.
- Stop agents from filtering MLS listings based on the compensation offered to the buyer agent.
- Require seller agents to tell the seller in writing how much they plan to pay the buyer agents and obtain approval from the seller.
NAR’s release does not cover agents affiliated with HomeServices of America and its related companies as they are still litigating.
The settlement is subject to court approval, but it’s expected that the changes will go into effect by mid-July 2024. There is also a possibility that the Department of Justice may weigh in on whether the settlement is satisfactory, which could lead to additional changes, delays or abandonment of the settlement.
Visit nar.realtor/competition-in-real-estate for the latest updates on this lawsuit.
Learn More about the Settlement
NAHB will host a Shop Talk on Tuesday, April 30 at 3 p.m. ET to discuss the proposed settlement, who is released from liability, which practices will change and what this means for builders and their sales agents moving forward.
Moderator: Kimberly Mackey of New Homes Solutions Consulting & Training
Panelists:
- Kimberly McKeag of New Homes Now Selling and Big Block Realty
- Tom Ward of NAHB Legal Advocacy
- Shawn Woods of Ashlar Homes
Disclaimer:
NAHB is providing this information for general guidance only. This information does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind nor should it be construed as such. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers.