National Association of Realtors responds to legal settlement

The way people buy and sell real estate in America has changed dramatically, as the National Association of Realtors (NAR), has reached a legal settlement that will, among other things, end the “even-split 6% commission model.”

Additionally, 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

The NAR agreed to enact new rules which will abolish the practice of the seller paying for both their own broker and that of the buyer. It also prohibits multiple listing services (MLS) from including agent’s compensation on the listings, which the lawsuit alleged drove brokers to corral their clients towards the most expensive listings to ensure that they received the largest possible commission. 

The NAR continues to deny any wrongdoing, maintaining that, while it could have pursued appeals, the settlement ensures stability and a release from liability for its membership, which numbers over a million. 

“Ultimately, continuing to litigate would have hurt members and their small businesses,” said Nykia Wright, the interim CEO of the NAR. “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.” 

This release from liability covers all NAR members other than agents affiliated with HomeServices of America and its related companies, and employees of the remaining corporate defendants named in the cases covered by this settlement.

A statement from the NAR pertaining to the settlement states that all MLS participants working on behalf of buyers “would be required to enter into written agreements with their buyers before touring a home.”

These new requirements will go into effect by mid-July. 

Investment bank TD Cowen Insights estimates that this move could cut commissions down anywhere from 25% to 50%. This could shave $6,000 to $12,000 dollars off of the price of an average-priced home in the United States, according to TD Cowen Insights. 

“While the settlement comes at a significant cost, we believe the benefits it will provide to our industry are worth that cost,” read a statement given by Kevin Sears, president of the NAR. 

The NAR further suggested that mandating agreements would provide both transparency for consumers and flexibility in the types of services and level of value individual agents provide. 

What is unclear at this time is what model will prove the most popular among consumers in the days to come. Suggestions include keeping an even-split six-percent commission, having buyers directly pay their agents a flat fee, having sellers offer compensation in the form of concessions, or have the listing broker offer a portion of their compensation to the buyer’s agent. 

“Even if the letter of the settlement allows for cooperation, how the settlement is perceived may still re-shape agent attitudes about cooperation, and consumer attitudes about fees,” said Glenn Kelman, the CEO of brokerage firm Redfin, in a statement. “The result could be that agent-to-agent cooperation on fees is weakened but not killed.” 

No matter how the future unfolds, the shape of the real estate market has been fundamentally changed by this settlement. Here in Huntsville, realtors and companies city wide took to online spaces to share reactions to the legal settlement. 

“The Economists are likely wrong. This won’t help with affordability, and it could actually make buying a home for some home buyers more expensive. There’s going to be a little more friction in the process for buyers, especially early on,” one realtor told the Huntsville Business Journal team.

One the other hand, for some the change has some positive outcomes.

“I think the outcome of having buyer consultations before showing homes is a good thing. I’m a big advocate of doing buyer consultations for buyers to help explain the process and finances of buying a home.”

The Huntsville Business Journal will continue to report on developments in the real estate industry, both locally and on the national scale.