National Association of Realtors (NAR) Settlement – Blog 1

This is the first in a series of four blog posts intended to address the recent NAR settlement from March 15, 2024.

The Claim, Background and Settlement

A settlement was reached March 15, 2024, with the National Association of Realtors (NAR) regarding a lawsuit brought by home sellers claiming that agents were inflating sales commissions.  It is important to understand the context of the claim and the settlement.

The basis of the claim centered around the MLS’ rules regarding cooperative compensation.  The rule was introduced in the 1990s in response to calls by consumer protection advocates seeking to improve buyer representation.  The rule called for agents working with sellers to advertise in the MLS the cooperative commission the seller was offering to an agent working with a buyer that was successful at putting a property for sale under contract.  The intent was to clearly communicate the offer of compensation to an agent representing the buyer even though the compensation was actually paid for by the seller.  The claim is this was a form of antitrust, resulting in higher commissions and reduced competition.  For purposes of this series, keep in mind the lawsuit was brought by home sellers and not buyers.

NAR reached a settlement on the lawsuit for $418 million.  NAR deemed it was better for the industry group, its members, and the American consumers to settle the case versus protract the litigation through the process and appeals.  A settlement does not acknowledge or admit guilt and NAR maintains no wrongdoing as it relates to MLS or compensation rules.

The model up to this point has worked from a position where sellers incentivized buyers to purchase their home over another and this included offering compensation to a buyer’s agent representing a buyer.  We have seen this throughout the years and the changes it brings based upon market conditions.  Twenty years ago, when it was a buyer’s market, it was not uncommon for sellers to offer in addition to compensation a year of pre-paid HOA dues, or a brand-new Vespa or even a luxury car to entice a buyer.  More recently we have seen sellers in what is still a seller’s market, offering struggling buyers, a concession at closing to cover lender financing options for buydowns of the interest rate that can amount to tens of thousands of dollars.  The question amongst the sellers behind the lawsuit was if they were offering little or no compensation to a buyer’s agent were their homes being overlooked and not shown by agents working with buyers.

So what does the settlement do?  Check out our next blog for the details.

Realtors are still your best asset for protecting and preserving your real estate and the generated wealth creation coming from your home.

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