On March 15, 2024, the National Association of Realtors agreed to pay $418 million in damages over the next four years and implement significant changes to their regulations regarding how brokers and agents offer and display commissions. This decision was made as part of the settlement in the Sitzer | Burnett and other lawsuits filed nationwide.
The National Association of REALTORS® is a trade association that has been operating for over 110 years, with more than 1 million members throughout the country. The licensed real estate agents in the group must abide by a Code of Ethics and take continuous education to stay current with industry developments.
The Sitzer/Burnett Lawsuit began before 2019 and went to trial in 2023. It was a class action lawsuit against NAR, several other associations, multiple listing services, and brokers. The main argument was that the defendants violated the Antitrust laws by conspiring to control the commission and pricing of the real estate industry. The jury found the defendants guilty and immediately began discussing and negotiating the verdict. See the NAR Statement below.
It is essential to understand the implications of recent changes for buyers, sellers, and REALTORS® who represent them. There may be a lot of misinformation, assumptions, and even false information circulated in the media, on websites, TikTok, YouTube, etc. I’ve been following this since 2016 and reviewing all available information to formulate my understanding and predictions of my brokerage and the industry.
Compensation is being removed from the Multiple Listing Services (MLS), which is the only universal compensation system that is free of discrimination. This change will take place in July, based on the Settlement.
I’ve been a REALTOR® since 2014, President of the Local REALTORS® Association, and President of our Local Multiple Listing Service. Since 2017, I’ve been a broker and hold this designation in Arizona, California, and Nevada. Over eight agents in multiple states work with me at Summitt’s River Realty.
Since late 2022, our brokerage has utilized the Buyer Broker Agreement and the Seller Broker Listing Agreement. Both agreements explain the commissions and how they are used to provide a positive outcome for all parties involved in the real estate transaction.
As with any service industry, clients/customers must pay for the services provided. The cost of the service differs depending on the type of service requested, the expertise, years of experience, scope of work, and marketing cost. The price can vary between businesses, and the consumer and the service provider must express their terms and conditions for the services requested.
Consumers can negotiate the cost of the services at any time, and it is the service provider’s responsibility to explain the reason for the cost presented. As with any negotiation, the initial price can go up or down depending on the services that are expected to be performed.
Example:
If a consumer requests Service A from a provider who has two years or less experience in the industry, the service provided will be XX, and the cost will be set at XXX. In this case, the consumer may negotiate the price based on the provider’s experience and suggest that the cost should be XX.
On the other hand, if the provider has ten years or more of experience in the industry and the service provided will be XXX, the cost will be set at XXX. In this case, the consumer may be willing to pay more because of the provider’s experience and time in the industry.
The service provided by a REALTOR® is precious when it comes to migration, negotiations, expertise, industry-backed forms, contracts, understanding the Escrow and Title Process, and assisting in finding the right lender and service providers. Whether buying or selling a home, our REALTORS® take their job seriously and professionally.
They attend continuous education classes, office meetings, and training to ensure that our REALTORS® remain current with the most recent changes and expectations of our changing industry. Our office also invests in our business by supporting real estate and industry rights through thousands of dollars to our REALTOR® Political Action Committee.
“Since 1969, the RPAC has promoted the election of pro-REALTOR® candidates across the United States. The purpose of RPAC is clear: Funds are used to help elect candidates who understand and support their interests. Promote and protect Real Estate Rights and the Consumer’s Right to property ownership. These are not members’ dues; this is money given freely by REALTORS® in recognition of the importance of the political process. The REALTORS® Political Action Committee and other political fundraising are the keys to protecting and promoting the real estate industry.” Portions copied from RPAC (nar.realtor)
Summitt’s River Realty is dedicated to providing expertise, experience, and knowledge to guide you through the exciting process of selling or buying your home. Our agents work together to offer the best service possible, guided by our motto, ‘Where everyone becomes Family’. Our family-owned business has been serving the community since 1983, and we take pride in our reputation for excellence and our commitment to supporting private property ownership. Our success is built on referrals, and we are honored to continue serving our community.
Sincerely we are here to support both buyers and sellers in their real estate transactions.
Statement from NAR – Taken from National Association of REALTORS® Reaches Agreement to Resolve Nationwide Claims Brought by Home Sellers (nar.realtor) 3/2024
“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.”