NAR Settlement
The National Association of Realtors (NAR) has reached a settlement to enhance transparency and competitiveness in real estate transactions. In response to lawsuits from buyers and sellers, the settlement introduces changes such as requiring agents to disclose commission rates upfront, allowing separate negotiation of commissions, and reforming MLS rules. On this page, you'll find explanations and useful information about how these changes may impact you as a buyer or seller.
How did all of this start?
Legal actions against the National Association of Realtors (NAR) began when home sellers and buyers filed lawsuits, alleging that the NAR and several major real estate brokerages engaged in anti-competitive practices that inflated commissions. The lawsuits, notably Moehrl v. NAR and Sitzer v. NAR, claimed that NAR’s policies and the brokerages’ practices led to higher costs for sellers and restricted competition. In August 2024, NAR reached a major settlement to address these allegations, aiming to enhance transparency and competition in real estate transactions. Here’s a summary of the lawsuits and their outcomes:
Plaintiffs and Defendants
Plaintiffs: Home sellers and buyers alleged that NAR and major brokerages engaged in practices that inflated commissions. Key plaintiffs include:
- Moehrl v. NAR: Led by Christopher Moehrl and others, representing sellers nationwide who sold homes listed on NAR-affiliated MLS from March 2015 to December 2020.
- Sitzer v. NAR: Led by Michael Burnett and Rhonda Sitzer, focusing on sellers in Missouri who sold homes through NAR-affiliated MLS from April 2014 to June 2020.
- Defendants: The lawsuits targeted NAR and major brokerages like Keller Williams, HomeServices of America, RE/MAX, and Realogy Holdings Corp., alleging that they enforced rules leading to inflated commissions and reduced competition.
Legal Allegations and Settlement
Allegations: The lawsuits claimed that NAR’s policies and brokerages’ practices violated antitrust laws by requiring sellers to pay buyer agent commissions, thus inflating costs and reducing transparency.
Settlement Details: NAR and the brokerages agreed to pay over $83 million for the Moehrl case and $1.18 billion for the Sitzer case. Changes include allowing more flexible commission negotiations and revising MLS policies to eliminate mandatory commission-sharing requirements. NAR denies wrongdoing but settled to avoid prolonged litigation.
Future Implications: The settlement aims to reshape real estate commission practices, fostering a more competitive and transparent market for consumers.
Impact on Buyers and Sellers
1. Commission Transparency
Buyers are now required to sign a buyer-broker agreement with their agent, in which they will negotiate the agent’s commission directly. Sellers will set a commission for their listing agent. Unlike before, when commission structures were more predetermined, these components can now be negotiated during the offer process, allowing for greater flexibility and transparency in real estate transactions.
Impact on Buyers and Sellers:
- Buyers: will have a clearer understanding of the costs associated with using a buyer’s agent. This may lead to more informed decisions about whether to use an agent and how to negotiate their fees.
- Sellers: will have more leverage in negotiating commission rates with agents. They may also choose to pay only for the services they find necessary, potentially lowering overall transaction costs.
2. Decoupling Buyer and Seller Agent Commissions
What’s Changing: The practice of sellers paying both the listing agent’s and the buyer’s agent’s commissions is under scrutiny. The settlement encourages more flexibility, allowing for separate negotiations.
Impact on Buyers and Sellers:
- Buyers: may be required to negotiate and pay their agent’s commission directly, which can lead to more competitive pricing and better-tailored service.
- Sellers: can focus on negotiating only the listing agent’s commission.
3. MLS (Multiple Listing Service) Reforms
What’s Changing: MLS rules will be revised to eliminate the offer-of-compensation fields for buyer agents. This change is designed to ensure that consumers know all commissions are negotiable.
Impact on Buyers and Sellers:
- Buyers: could benefit from more diverse service offerings and pricing models from buyer agents.
- Sellers: will have more control over how much they wish to offer to buyer agents, or whether they want to offer anything at all.
4. Healthy Competition Among Agents:
What’s Changing: The settlement aims to foster a more competitive environment by encouraging agents to differentiate themselves based on service and pricing, rather than relying on standardized commission structures.
Impact on Buyers and Sellers:
- Buyers: more options in choosing agents based on service quality and fees.
- Sellers: the ability to select agents who offer the best value for their specific needs, possibly reducing costs.
Awareness of New Practices: stay informed about how these changes might affect your local real estate market, as implementation may vary by region. Attend a one-on-one seminar to learn more about the recent changes in the industry.
Would you like to learn more about how this could affect your buying or selling process?
Get in touch with us today to book your free personalized seminar. We’re here to support you every step of the way.
