National Lawsuit Updates
On March 14, the National Association of Realtors® announced a proposed settlement agreement that would end litigation of claims brought on behalf of home sellers related to broker commissions. The agreement would resolve claims against NAR, over one million NAR members, all state/territorial and local Realtor® associations, all association-owned Multiple Listing Services (MLSs), and all brokerages with an NAR member as principal that had a residential transaction volume in 2022 of $2 billion or below. The settlement is subject to court approval. View facts about the proposed settlement and more.
It’s important to note that practices won’t change today. It’s expected that the changes, if approved, will be implemented in mid-July. NAR expects the process will take several months or longer.
Resources
- Visit facts.realtor for the latest updates on the proposed settlement.
- NAR Frequently Asked Questions
- NAR Newsroom
- PAR JustListed
- Webinar Recap
NAR Video Updates
Kevin Sears: Discussing Key Settlement Considerations and Ongoing Advocacy Efforts On the Road | March 21, 2024
NAR President Kevin Sears shares an update on the association’s settlement agreement to resolve home seller litigation and highlights NAR’s ongoing work to advocate for members and consumers.
Watch this video from Kevin Sears.
Litigation Update | March 15, 2024
NAR President Kevin Sears and Chief Legal Officer Katie Johnson discuss how NAR’s resolution provides a path forward for the industry and helps ensure consumer choice.
Watch the NAR Litigation Update video.
Video from Hank Lerner
Chief Legal Officer Hank Lerner discusses what the NAR settlement may mean for Pennsylvania Realtors® with the information we have at this time.
Information About the Settlement
NAR has always wanted to reduce the significant strain on its members and provide a path forward for the industry, and from the beginning of this litigation, NAR had two goals:
- Secure a release of liability for as many of our members, associations, and MLSs as we could;
- Preserve the choices consumers have regarding real estate services and compensation.
This proposed settlement achieves both of those goals and provides a path for the industry to move forward and continue NAR’s work to preserve, protect and advance the right to real property for all.
Key Terms of the Agreement
Two critical achievements of this resolution are the release of most NAR members and many industry stakeholders from liability in these matters and the fact that cooperative compensation remains a choice for consumers when buying or selling a home.
The settlement, which is subject to court approval, makes clear that NAR continues to deny any wrongdoing in connection with the Multiple Listing Service (MLS) cooperative compensation model rule (MLS Model Rule).
A few key details of the settlement agreement:
- The agreement would resolve claims against NAR, over one million NAR members, all state/territorial and local REALTOR® associations, all association-owned MLSs, and all brokerages with an NAR member as principal that had a residential transaction volume in 2022 of $2 billion or below.
- For nearly all brokerage entities that had a residential transaction volume in 2022 that exceeded $2 billion, and for MLSs not wholly owned by Realtor® associations, NAR also secured in the agreement a mechanism to obtain releases efficiently if they choose to use it.
- NAR fought to include all members in the release and was able to ensure more than one million members are included.
- 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.
Under the terms of the agreement, NAR would pay $418 million over approximately four years.
- In addition to the financial payment, NAR has agreed to put in place a new MLS rule prohibiting offers of broker compensation on the MLS.
- Offers of compensation could continue to be an option consumers can pursue off-MLS through negotiation and consultation with real estate professionals. Sellers can offer buyer concessions on an MLS (for example—concessions for buyer closing costs) via the MLS, provided that such concessions are not conditioned on the use of, or payment to, a buyer broker.
- This change is expected to go into effect in July of this year.
When do these new rules go into effect?
It appears that the rules are targeted for implementation around mid-July 2024. But at least some of these new rules might be voluntarily adopted prior to that time. Pay special attention to the information distributed through your associations and MLS to ensure you’re up to date on the most current rules.
Potential Impact
What does the settlement mean for Realtors®?
There will continue to be many ways in which buyer brokers could be compensated, including through offers of compensation communicated off of the MLS. NAR has long believed that it is in the interests of the sellers, buyers, and their brokers to make offers of compensation — but using the MLS to communicate offers of compensation would no longer be an option.
The types of compensation available for buyer brokers would continue to take multiple forms, depending on broker-consumer negotiations, including but not limited to:
- Fixed-fee commission paid directly by consumers
- Concession from the seller
- Portion of the listing broker’s compensation
Compensation would continue to be negotiable and should always be negotiated between agents and the consumers they serve.
What does the settlement mean for consumers?
NAR’s proposed settlement would preserve the choices consumers have regarding real estate services and compensation.
After the new rules go into effect, listing brokers could continue to offer cooperating compensation for buyer broker services. Still, such offers could not be communicated via the multiple listing service.
The settlement expressly provides that sellers may communicate seller concessions — such as buyer closing costs — via the MLS provided that such concessions are not conditioned on the use of or payment to a buyer broker.
These changes, however, could impact buyers, especially first-time homebuyers. Adding additional agent compensation to the buyer side of the transaction may make it more challenging for them to afford to purchase a home.
The new rules would also require that agents acting for buyers would be required to enter into a written agreement with their buyers before touring a home.
What does this mean for the real estate industry?
The real estate market is continually evolving, and this is just one more evolution.
In fact, in 1999, Pennsylvania added buyer agency to its licensing statute and has had buyer agent documents and forms in place since then. The market adapted when those changes were added. Multiple forms allow listing agents and buyer agents to explain their value to clients and to negotiate fees among the various consumers in a transaction.
Any required rule changes are expected to be effective in mid-July 2024. PAR will be working with the Standard Forms Committee as well as other internal groups over the next few months to review our forms and practice advice to ensure they reflect the new NAR rules as they are made available.
At this point, it’s far too early to predict exactly what will happen in the housing market. For starters, the settlement hasn’t been finalized, and PAR has not yet seen the specific rules that will need to be implemented by the MLS. And there’s really no way to predict whether and how fee negotiations will change until the market has time to work itself out.
How will this affect brokerage fees? Will people still pay buyer brokers?
At this point, it’s far too early to predict exactly what will happen. PAR’s advice has been and continues to be that brokers working in any part of the transaction should focus on explaining the value that they bring to the transaction, which can then lead to a discussion about how the broker might collect a fair fee that represents their value. Those conversations will clearly be changing in some way, but PAR believes that brokers would still be able to charge a fair fee for their efforts.