The National Association of Realtors (NAR) has recently reached a proposed settlement agreement in litigation regarding broker commissions, potentially bringing an end to a significant legal battle. Here’s a breakdown of the key points and what it means for real estate professionals and consumers alike:
1. Background:
- The proposed settlement aims to resolve claims against NAR, over one million NAR members, state/territorial and local REALTOR® associations, association-owned Multiple Listing Services (MLSs), and certain brokerages.
- The agreement is subject to court approval and stems from claims related to broker commissions brought on behalf of home sellers.
2. Key Terms of the Agreement:
- Release of Liability: The agreement releases NAR, its members, associations, MLSs, and qualifying brokerages from liability regarding claims related to broker commissions.
- Compensation Offers Moved off the MLS: NAR will implement a new rule prohibiting offers of compensation on the MLS, effective mid-July 2024. However, compensation negotiations can still occur off the MLS.
- Written Agreements for MLS Participants: MLS participants working with buyers will be required to enter into written representation agreements with their buyers, starting mid-July 2024.
- Settlement Payment: NAR will pay $418 million over approximately four years, with no immediate impact on membership dues for 2024.
3. NAR’s Stance:
- NAR denies any wrongdoing and maintains that cooperative compensation and its policies benefit both buyers and sellers, especially those in lower- and middle-income brackets.
4. Advice for Listing Brokers:
- Listing brokers should inform their clients that offers of compensation will no longer be an option on the MLS but can still be negotiated off the platform.
- Sellers can still offer buyer concessions on the MLS, such as concessions for closing costs.
5. What’s Next:
- The changes outlined in the settlement will take effect in mid-July 2024.
- The settlement is subject to court approval, which could take several months or more, including an opportunity for interested parties to object.
- Litigation regarding the MLS cooperative compensation Model Rule may be stayed pending the settlement approval process.
In summary, the proposed settlement marks a significant development in the real estate industry’s landscape, with potential implications for how transactions are conducted and compensated. Both real estate professionals and consumers should stay informed about these changes as they unfold in the coming months.