NAR Lawsuit Update: Major Proposal Announcement

NAR Lawsuit Update: Major Proposal Announcement

Resolution appears to be on the NAR’s horizon. The real estate commission lawsuits that began in 2019 could receive long-awaited closure in the form of a settlement agreement. 

For anyone outside of the real estate industry, the entire saga might have passed by unnoticed, despite the country-wide implications it has.

Even for the formidable real estate economy, the Sitzer-Burnett verdict and copycat lawsuits brought uncertainty. All this, while Americans are dealing with high interest rates on mortgage loans and lower-than-ideal inventory. 

Summer Weather in California

We’ll explain the good and bad about the NAR settlement - From Canva

Thankfully, the settlement proposal will return real estate to relative normality. If approved, it will allow real estate agencies, brokerages, and several connected industries to breathe easier. 

Let’s Begin with The Facts 

The National Association of Realtors would pay $418 million over four years if the settlement proceeds. 

There’s misinformation all over the place about the NAR lawsuit update. You may have even heard President Joe Biden speak on the affordable housing situation and say that now, Americans can negotiate their commissions for the first time. 

The NAR response was to remind the public that commissions were already negotiable and “will continue to be.”

“Real estate agent commissions are driven by the market and are not the cause of the affordability crisis. Until there is an all-of-government approach to a historic lack of inventory and supply in communities across the country, the dream of homeownership will remain out of reach for millions of middle-class Americans.”

What Does the Settlement Do for Over 1 Million NAR Members?

Two main goals will be achieved if the settlement goes forward. 

  1. Claims against nearly every NAR member, plus the NAR itself, will be resolved. This includes state, local, and territorial REALTOR associations, all association-owned MLS’s, plus any brokerage with an NAR member as principle that completed less than $2 billion in residential transactions in 2022.

  2. Cooperative compensation will still be on the table for consumers, as long as the offers happen off of the MLS platform.

The NAR admits that “there could be no perfect outcome” but the settlement they’d delivered was the best the circumstances allowed for.

In their official NAR update on the settlement, they insist that further litigation would have “hurt members and their small businesses.” Settlements reached by other corporate defendants also may have affected the negotiation power of the NAR.

The NAR also noted that, “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.”

Key Points of the NAR Settlement Proposal

You can read the full press release if you’d like, but we’ve got the short form right here.

  • Release of liability: As mentioned, almost all NAR members will be freed of liability. The released would include state, territory, and local REALTOR associations, association-owned MLSs, and all brokerages with $2 billion is residential transactions during 2022 with an NAR member as principle.
  • No more compensation offers on the MLS: The NAR agreed to prohibit compensation on the MLS as part of the settlement. 
  • Written agreements when MLS participants ask for buyers: As a rule, MLS participants must enter a written agreement with buyers starting mid-July 2024.
  • Settlement payment: The proposed settlement would see $418 million paid by the NAR over 4 years. The good news is that 2024 and 2025 NAR dues will not be affected by this settlement.
  • NAR’s continued stance: In the press release, the NAR reiterates that it believes cooperative compensation benefits buyers and sellers. It also says that current NAR policies benefit both parties, promoting home ownership, “particularly for lower and middle-income buyers.”

The NAR also released an official video outlining the changes in more detail.

The Changes for Real Estate Practices Post-NAR Settlement

Two main changes are going to force real estate practices to adjust and adapt.  

Firstly, compensation offers won’t be allowed on the MLS moving forward. To get around this, some members might discuss compensation offers off-platform.

Secondly, written agreements will become a mandatory step of a real estate transaction. In fact, they’ll need to be entered into before buyers tour a home. The NAR reminds readers that they’ve always encouraged this, but it will now become a requirement. 

Real Estate Transaction

Written agreements will now be required - Photo from Canva

NAR Settlement in a Nutshell

Despite the massive settlement, it looks like the NAR thinks the potential outweighs the penalty.

“NAR exists to serve our members and American consumers, and while the settlement comes at a significant cost, we believe the benefits it will provide to our industry are worth that cost,”

Sure, real estate agents and agencies will need to make adjustments, but the NAR settlement preserves cooperative compensation. As the NAR stated, that was available before the settlement and will continue to be, but perhaps with increase clarity for consumers now. 

The National Association of Realtors appears to have protected the interests of consumers and members. At the same time, they preserved the dignity of an industry responsible for a fifth of the American economy, maintaining no wrongdoing. 

If you’d like to speak with us about this NAR lawsuit update, fill out a quick contact form. You can also speak with an NAR representative if you’d prefer. 

More Questions? Follow-up With Us!

If you have more questions about what to expect from the markets around the Bay Area, don’t be afraid to reach out to us today. Our experts are experienced in all property types and the entire San Francisco Bay Area, and we can help you to find what you need to know today.

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