As you may be aware, the National Association of REALTORS® (NAR) recently announced an agreement that would end litigation of claims brought on behalf of home sellers related to broker commissions. What you might not know is everything related to what this settlement means. We’ve created this page, which we will update with resources and information as it becomes available. Please make sure to check this page regularly, and we thank you for your continued support.
For information from NAR directly, including resources and other material and relevant items, please visit one of the following sites:
C.A.R. has received many questions about NAR’s proposed settlement of the antitrust class action lawsuits brought on behalf of home sellers related to broker compensation. The settlement is subject to final court approval; however, because the release of claims extends through the date of class notice, NAR will be putting practices changes in place in late July to avoid any gap in the release of liability. C.A.R. has provided answers to some of the most commonly asked questions.
1. What are the most important practice changes that will be implemented as part of the NAR settlement?
2. How will buyer agents get paid?
Buyer agents can continue to get paid in a variety of ways, including but not limited to:
3. What should I do if I currently have a listing that will run past late-July?
The listing agreement will need to be amended to reflect the fact that beginning in late-July (or sooner, if an MLS removes its broker compensation field earlier), offers of compensation cannot be communicated through the MLS.
4. If I am a listing agent and communicating with an unrepresented buyer, how can I establish that I’m not representing the buyer?
Clearly communicate to the buyer that you are not representing them. The Buyer non-Agency Agreement (C.A.R. Form BNA) can be used to document that there is no agency relationship between you and the buyer. It is also recommended that you continue to remind the buyer in written communications that you do not represent them and cannot advise them, and that communications and documents provided by you to the buyer are for the benefit of your client.
5. Is C.A.R. planning to take any action to prohibit dual agency in California?
C.A.R. has historically supported the ability of brokers and salespersons to act as dual agents. Any change to the laws permitting dual agency would need to be considered at the relevant policy committee and done at the legislative level.
6. Can listing agents offer compensation to the buyer’s broker on the listing agent’s own website or flyers?
Yes. Listing agents can communicate their own offers of compensation on the listing broker’s or listing agent’s own websites or flyers.
7. Can buyers finance commissions?
No. Under the current residential mortgage finance system, financing commissions is not possible. Banks would treat a loan to finance commissions as a personal loan, which would have higher rates. Fannie Mae, Freddie Mac, and the FHA do not allow commissions to be added to the balance of a mortgage. The Department of Veterans Affairs similarly does not allow veterans to pay commissions using their VA home loan benefit.
NAR has released a special digital supplement of REALTOR® Magazine with 16 pages of important content that will dispel misinformation about the proposed settlement. It also includes valuable resources that help separate litigation facts from fiction, debunk myths, and help explain the importance of a written buyer agreement.
To read this supplemental issue, click on the image below.
Throughout 2024, NAR is making the popular Accredited Buyer’s Representative (ABR®) designation course, typically $295, available to REALTORS® at no cost. Take the first step toward earning your ABR® designation at become.abr.realtor.
NAR has recently updated the NAR Settlement and Settlement Financing FAQs.
For the NAR Settlement FAQ, talking points include:
Download the NAR Settlement FAQ here.
For the NAR Facts Financing FAQ, talking points include:
Download the NAR Facts Financing FAQ here.
Greetings to my fellow CDAR members,
I would like to take a moment to discuss the recent developments surrounding the settlement reached by the National Association of REALTORS® concerning the litigation regarding broker commissions and home sellers.
It is important to first clarify that the National Association of REALTORS® respects the autonomy of brokers and agents when it comes to setting commissions. Commission rates are typically negotiated between the parties involved. Recent legal actions stemmed from concerns about the requirement for listing brokers to disclose compensation offers, which a federal court in Missouri found to potentially violate antitrust laws. This ruling has led to widespread financial implications and a series of similar lawsuits across the country. It’s crucial to emphasize that there isn’t a fixed “standard” commission rate. Both MLS and Association regulations strictly prohibit any attempts to manipulate or influence commission fees for real estate brokerage services.
In response to the ongoing legal challenges, the National Association of REALTORS® has reached an agreement aimed at addressing concerns regarding the MLS rule on compensation offers. This agreement includes a $418 million payment over four years by the National Association of REALTORS® and the implementation of rules to prohibit the offer of compensation in the MLS and requiring MLS participants working with buyers to enter into written agreements with their buyers.
The California Desert Association of REALTORS® is proactively supporting its members in adapting to the proposed changes. We are organizing training sessions and providing resources to ensure our members are well-prepared. For the latest updates on the lawsuit, members can visit https://facts.realtor. Please note that this page is exclusively for REALTOR® members.
The National Association of REALTORS® is generously offering its Accredited Buyer’s Representative (ABR®) designation course, typically priced at $295, at no cost to REALTORS®. Members can enroll at https://become.abr.realtor and take advantage of this opportunity to advance their skills.
The California Desert Association of REALTORS® is committed to supporting our members. We will provide ample training, education, and resources to help navigate this transition successfully. Together, we will adapt and thrive. For detailed information and frequently asked questions about the settlement agreement, please visit https://facts.realtor.
Thank you,
Susan Marshall
2024 President
California Desert Association of REALTORS®
The National Association of REALTORS® have made multiple FAQs and other relevant explaining documents available to membership via the facts.realtor website. You can also access these documents via the links below:
Misinformation has been pervasive in the media over real estate commissions. Here are the facts you should know.
The national conversation around real estate commissions reached a crescendo since the National Association of REALTORS® announced a settlement agreement that would resolve litigation brought on behalf of home sellers related to broker commissions. Brokers and agents have their own questions about what comes next for their businesses, while at the same time trying to answer consumer inquiries. And many headlines aren’t separating fact from fiction, feeding misinformation to you and your clients.
Let’s clear the air: There’s no doubt the litigation—including copycat lawsuits that were filed after the Sitzer-Burnett verdict—caused considerable uncertainty in an industry already dealing with the effects of low inventory and interest rate increases. The settlement, which must be approved by a judge, provides a path forward for real estate professionals, REALTOR® associations, brokerages, MLSs and other industry stakeholders. Most importantly, it gives NAR members the chance to refocus on their core mission to support buyers and sellers.
Facts First
There’s much the media has gotten wrong about NAR’s settlement, which would require the association to pay $418 million over four years. Some outlets have suggested that NAR previously set or guided commissions to a standard rate of 6%. Even President Joe Biden, in recent comments, misspoke in suggesting that the settlement makes commissions negotiable for the first time.
You know that is false. NAR does not set commissions, and commissions were negotiable long before this settlement. They are and will remain entirely negotiable between brokers and their clients. And housing prices are dictated by market forces beyond members’ control.
Getting the facts right is important, especially because the settlement agreement is complex. NAR is continuing to engage with media to correct inaccurate reporting about the settlement. Members are also encouraged to refer to official NAR sources, like facts.realtor, for the most accurate and up-to-date information about the settlement and what it means for consumers.
The settlement achieves two important goals: protecting members to the greatest extent possible and preserving consumer choice. The proposed settlement:
NAR fought for a release that covered all industry players, but large settlements reached by other corporate defendants shaped the negotiations. Throughout the settlement process, NAR also engaged with a diverse range of members to consider their perspectives and interests.
“Ultimately, continuing to litigate would have hurt members and their small businesses,” NAR Interim CEO Nykia Wright said in a statement. “While there could be no perfect outcome, this agreement is the best outcome we could achieve in the circumstances. It provides a path forward for our industry, which makes up nearly one-fifth of the American economy, and NAR. 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.”
How To Know If You’re Covered
Nearly every member is covered by the release NAR negotiated in the settlement. The members not covered are those affiliated with HomeServices of America, the last co-defendant in the Sitzer-Burnett litigation, and the employees of the co-defendants in the Gibson and Umpa cases.
If you are affiliated with any of the following brokerage groups and are an independent contractor licensee, you are covered by the proposed settlement, even if your brokerage may not be covered:
All other REALTORS® who are members of NAR on the date of class notice are covered by the release. The date of class notice is anticipated to be in mid-July.
Members on the date of class notice and state/territorial and local REALTOR® associations must abide by the practice changes set forth in the agreement, but they do not need to take any other action in order to benefit from the negotiated release.
The release does not cover brokerage firms with residential transaction volume above $2 billion in 2022, despite NAR’s effort to include them. For those companies, the settlement provides an avenue to pursue inclusion in the release but does not obligate them to do so.
Changing Business Practices
The settlement agreement also mandates two key changes to the way members and MLS participants do business.
NAR continues to deny any wrongdoing and maintains that cooperative compensation is in the best interest of consumers. NAR members can use these changes as an opportunity to explain their clients’ options. Both changes would go into effect in mid-July under the terms of the proposed settlement.
NAR considered a range of legal options throughout the litigation process, including reaching a settlement or continuing to appeal the Sitzer-Burnett verdict and litigate the related copycat cases. The latter could have forced the association to file for Chapter 11 bankruptcy protection, leaving members, associations, MLSs and brokerages exposed.
Resources for Members
NAR is committed to supporting members through these changes. Members can get the facts about the settlement at facts.realtor, which is regularly updated with new information and resources, including FAQs.
For those who want to prepare for the new MLS rule requiring buyer representation agreements, consider taking the Accredited Buyer’s Representative (ABR®) designation course, which NAR is offering to members at no cost through the end of the year.
“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,” NAR President Kevin Sears said in a statement. “NAR is focused firmly on the future and on leading this industry forward. We are committed to innovation and defining the next steps that will allow us to continue providing unmatched value to members and American consumers.
“This will be a time of adjustment, but the fundamentals remain: Buyers and sellers will continue to have many choices when deciding to buy or sell a home, and NAR members will continue to use their skill, care and diligence to protect the interests of their clients.”
The National Association of REALTORS® (NAR) today announced an agreement that would end litigation of claims brought on behalf of home sellers related to broker commissions. The agreement would resolve claims against NAR, over one million NAR members, all state/territorial and local REALTOR® associations, all association-owned MLSs, and all brokerages with an NAR member as principal that had a residential transaction volume in 2022 of $2 billion or below.
The settlement, which is subject to court approval, makes clear that NAR continues to deny any wrongdoing in connection with the Multiple Listing Service (MLS) cooperative compensation model rule (MLS Model Rule) that was introduced in the 1990s in response to calls from consumer protection advocates for buyer representation. Under the terms of the agreement, NAR would pay $418 million over approximately four years.
“NAR has worked hard for years to resolve this litigation in a manner that benefits our members and American consumers. It has always been our goal to preserve consumer choice and protect our members to the greatest extent possible. This settlement achieves both of those goals,” said Nykia Wright, Interim CEO of NAR.
Two critical achievements of this resolution are the release of most NAR members and many industry stakeholders from liability in these matters and the fact that cooperative compensation remains a choice for consumers when buying or selling a home. NAR also secured in the agreement a mechanism for nearly all brokerage entities that had a residential transaction volume in 2022 that exceeded $2 billion and MLSs not wholly owned by REALTOR® associations to obtain releases efficiently if they choose to use it.
NAR fought to include all members in the release and was able to ensure more than one million members are included. Despite NAR’s efforts, agents affiliated with HomeServices of America and its related companies—the last corporate defendant still litigating the Sitzer-Burnett case—are not released under the settlement, nor are employees of the remaining corporate defendants named in the cases covered by this settlement.
In addition to the financial payment, NAR has agreed to put in place a new MLS rule prohibiting offers of broker compensation on the MLS. This would mean that offers of broker compensation could not be communicated via the MLS, but they could continue to be an option consumers can pursue off-MLS through negotiation and consultation with real estate professionals. Offers of compensation help make professional representation more accessible, decrease costs for home buyers to secure these services, increase fair housing opportunities, and increase the potential buyer pool for sellers. They are also consistent with the real estate laws in the many states that expressly authorize them.
Further, NAR has agreed to enact a new rule that would require MLS participants working with buyers to enter into written agreements with their buyers. NAR continues, as it has done for years, to encourage its members to use buyer brokerage agreements that help consumers understand exactly what services and value will be provided, and for how much. These changes will go into effect in mid-July 2024.
“Ultimately, continuing to litigate would have hurt members and their small businesses,” said Ms. Wright. “While there could be no perfect outcome, this agreement is the best outcome we could achieve in the circumstances. It provides a path forward for our industry, which makes up nearly one fifth of the American economy, and NAR. 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.”
“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,” said Kevin Sears, NAR President. “NAR is focused firmly on the future and on leading this industry forward. We are committed to innovation and defining the next steps that will allow us to continue providing unmatched value to members and American consumers. This will be a time of adjustment, but the fundamentals will remain: buyers and sellers will continue to have many choices when deciding to buy or sell a home, and NAR members will continue to use their skill, care, and diligence to protect the interests of their clients.”
The National Association of REALTORS® is America’s largest trade association, representing more than 1.5 million members involved in all aspects of the residential and commercial real estate industries. The term REALTOR® is a registered collective membership mark that identifies a real estate professional who is a member of the National Association of REALTORS® and subscribes to its strict Code of Ethics.
