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    What the NAR Controversy Means For You 

    In a shocking turn of events, on March 15, 2024, the National Association of Realtors (NAR) announced a major settlement of $418 million in damages to settle a number of antitrust lawsuits, in addition to enacting sweeping changes across the real estate industry.  

    Since 2019, litigation had been working its way through the courts challenging NAR’s policies and influence on agent commission sharing, specifically what was known as the Participation Rule, which stated: in order to advertise a property on a listing site, the seller’s agent must offer compensation to buyer agents, which was almost invariably 5 to 6 percent of the sales price. This commision was to be split between listing and buyer agents. 

    The landmark Sitzer/Burnett lawsuit argued that NAR protocols unnecessarily increased real estate transaction costs for sellers, limited business options available to the American consumer, and created a monopoly for the real estate industry, which substantiated antitrust violations. 

    On October 31, 2023, a federal jury agreed, and awarded $1.8 billion in damages against NAR, and numerous national real estate agencies. However, that figure could have ballooned to more than $5 billion in damages, if the court ended up awarding the plaintiffs treble damages, which are allowed under antitrust violations. Until recently, NAR had vowed to appeal the verdict and damages, before suddenly announcing a settlement. 

    As a home buyer or seller, what does this mean for you? What about your real estate agent?

    The jury’s verdict, along with NAR’s policy changes, have effectively decoupled the listing and buyer's agent commission, meaning sellers would no longer be required to pay the buyer’s portion.

    Brokerages are responding. As of this writing, some of the nation’s largest brokerages, including RE/MAX, Coldwell Banker, Sotheby’s, and Century 21 Real Estate have severed their allegiance to NAR and no longer require their agents to carry NAR membership. Others are expected to follow suit.

    If brokerages and agents are no longer beholden to NAR’s defined compensation commission structure, consumer behavior, and demands, what happens next?   

    for sale sign in yardPhoto from Canva

    Changes for Real Estate Agents, Brokers, and Realtors

    Whether you're a real estate agent or a potential home buyer or seller, it is worth understanding what changes are rippling through the industry for agents, brokerages, and realtors. Although the term “realtor” is commonly interchanged with “real estate agent,” there is a difference, and that difference is NAR Membership.  

    Each state and jurisdiction mandates varying education and licensure requirements to become a real estate agent. Agents are typically required to practice under a real estate brokerage. Many agents and brokers went on to become realtors by joining NAR. 

    Realtor is a NAR-registered trademark and  term specifically to denote real estate agents who hold NAR membership. NAR’s allure to the public was that a "Realtor" had undergone additional training, agreed to uphold the highest of ethical standards, and was marketed as a more distinguished agent. NAR’s membership appeal to agents and brokerages offered access to otherwise restricted listing servers, powerful networking, robust continuing education, and boilerplate contracts, to name a few benefits.  

    Often, brokerages mandated (not simply encouraged) membership to NAR in order to work as one of their agents. Membership in NAR meant that a brokerage, and subsequently its agents, agreed to NAR mandates and influence.

    On the heels of antitrust litigation and NAR’s settlement and policy changes, the stage is set to completely change how agents offer and sell real estate and open the doors to new compensation structures.    

    Seller Considerations

    As brokerages divorce from NAR’s mandates and influence, and the seller’s agent is no longer required to offer a commission split in order to list a property, sellers could see their commission fee halved, with the expectation that a buyer is now responsible for compensating their own buyer’s agent. Not the seller.   

    Seller’s agents, or sellers themselves, may be less inclined to entertain offers from buyers with no representation and may lean toward offers where a buyer’s agent stands ready on the other end of the offer, for several reasons. A non-experienced buyer with no agent representation may not fully realize their requirements in a binding contract and struggle to close, thus delaying the seller or causing the deal to fall through. Or worse, they might claim legal liability from the seller and the seller’s agent for any number of reasons, such as buyer’s remorse, failing to get an inspection, or any number of other scenarios a buyer might claim that they were misled into a deal.   

    Sellers would still be free to offer a commission to be split between the seller’s agent and buyer’s agent, in what had been the established 5 to 6 percent commission split. Sellers offering a traditional commission split would be a powerful concession that would likely draw the most buyer interest and potentially more offers.  

    neighborhood cul-de-sacPhoto from Canva

    Buyer Considerations

    Although a potential cost-savings for sellers, a marketplace shift could reasonably transfer a buyer’s agent commission now to the buyer’s shoulders, resulting in the need to either bring or finance more cash, reducing purchasing power. 

    More fees to close a sale could squeeze potential buyers out of the market or encourage buyers to forgo an agent altogether, which could create the potentially risky situation where a seller has professional representation, but a buyer does not.        

    Market Effects and New Compensation Structures

    "For Sale by Owner" (FSBO) has always been an option for savvy home sellers looking to minimize costs, and preserve more of their equity, and the market could see a rise in FSBO offerings. And while real estate attorneys are not required for closing in every state, some title companies and lenders may require an attorney for closing.

    Discount pricing structures, such as flat-fee transactions or discounted commissions, have also been an option for those looking to conserve costs, but have traditionally represented a small market share. Agencies could look to capitalize on the separation of seller and buyer commission splits by offering comprehensive buy/sell representation or packages. Some agents may aggressively offer services to both the seller and buyer in exchange for a lower commission, creating Dual Agency. 

    But, seller and buyer beware. The ethical dilemma of a dual agent is that they can’t truly represent the best interests of two parties with different goals, and dual agency is illegal or heavily restricted in many states for this very reason. 

    real estate agent showing home to couplePhoto from iStock.com/gorodenkoff

    FAQs About the NAR Changes

    1) I read a news headline that said 6% commissions are gone. Does this mean I don’t have to pay a commission anymore to sell my home?

    No, the nuance is that the once traditional commission structure to be paid from the seller’s proceeds (and split between the seller and buyer agents) has changed. An agent will have some kind of fee structure to sell or list your home. 

    “NAR has agreed to put in place a new MLS rule prohibiting offers of broker compensation on the MLS. NAR has agreed to enact a new rule that would require MLS participants working with buyers to enter into written agreements with their buyers. The move is meant to ensure that homebuyers understand exactly what services and value will be provided, and for how much.” -NAR website

    2) When does this change take place?

    These changes will occur in mid July, 2024. 

    3) Where is the $418 million NAR settlement going? Who is getting paid?

    The settlement, which is still subject to federal court approval, was reached to end several current class-action litigation claims and resolve claims against NAR. It will be paid over a four-year period. Members of those class-action suits would be recipients of damages in addition to fees for legal representation. 

    4) Are all NAR lawsuits over?

    No. The landmark Sitzer/Burnett lawsuit has not been settled and was excluded from NAR’s settlement. In addition, NAR could face further investigation by the Department of Justice.

    5) What if I just sold my home? Can I get half of my seller’s commission back?

    Although it’s outside the scope of this writing to provide legal advice,  the likely answer is no, as you would have entered and agreed to a legal contract that specified the terms of your sale’s commission structure. The exception to this would be if you are a part of the current class-action litigation.

    6) What if I was planning to sell or buy a home this year? How do I shop for an agent?

    Ensure you ask potential agents what their compensation structure is and what services are included. Will a buyer’s agent look to you to pay a commission or flat-fee or expect to negotiate this with a seller? 

    Will a seller’s agent offer a discounted commission with no split, or propose a commission split as a concession to attract more potential offers? The industry is changing, so ensure you understand what fees and services you’re getting.   

    This is a developing story, and the real estate experts at MilitaryByOwner are committed to bring you the latest developments and thorough analysis as changes and impacts unfold.

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    What the NAR Controversy Means for You

    Kristi Adams


    Kristi Adams

    Kristi Adams is a proud Air Force spouse and served on active duty herself as a Space and Missile officer. She is an Associate Professor for the University of Maryland’s School of Architecture, Planning, and Preservation and holds a Master of Real Estate Development degree from the university. She and her husband have profitably owned rental properties since 2004. When Kristi isn’t writing about real estate, she’s writing about travel and has been published in several books and national publications. Find more of her writing at Kristi Adams Media.

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