NAR settles claims on broker compensation, pending court approval

By Monica Denisse Pineda

PHOENIX, AZ – The National Association of Realtors (NAR) reached a significant settlement agreement in March, resolving litigation regarding home sellers and broker commissions.

The National Association of Realtors is a professional member organization and the largest trade association in the US, strongly urging its members to follow a strict code of ethics. NAR will pay $418 million over four years. This court-pending settlement allows affected parties to move forward, including over one million NAR members – real estate agents, brokerages, associations and MLS’s.”It has always been our goal to preserve consumer choice and protect our members to the greatest extent possible,” said  Nykia Wright, Interim CEO for NAR.

The settlement reinforces NAR’s commitment to supporting buyers and sellers. A class notice is expected in mid-July, applying to NAR members in good standing on that date. The settlement identifies a list of affiliated brokerages for realtors covered by its terms, which can be found on the NAR website. It is important to note the settlement’s impact will vary as it does not apply to all real estate professionals.

This settlement empowers consumers, giving them the right to choose representation and negotiate broker compensation. Additionally, buyers and sellers should seek clarification on the business practices of real estate agents, whether residential or commercial. Brokerages will implement buyer broker agreements before property tours, reflecting a more direct standard in the industry’s buyer relations. As a result, a new MLS rule prohibits displaying listing compensation on the platform, encouraging open discussion and negotiation between real estate agents and clients. 

Sellers and listing agents still retain the ability to decide whether they will cover buyer agent commissions. Gary Acosta, co-founder and CEO of National Association of Hispanic Real Estate Professionals (NAHREP), commends NAR’s decision stating that [they] “made the right choice by prioritizing the protection of its members from unfair liability and preserving the option of broker cooperation.” 

This settlement signifies a shift towards greater transparency in consumer choice in real estate transactions. The rule could affect overall commission rates negotiated between real estate agents and clients. However, it also provides opportunity for flexibility and more client-centered approaches.

“NAR has protected and advanced the right to real property ownership in this country, and we remain focused on delivering on that core mission,” said Wright in response to the settlement. 

First-time home buyers and sellers can benefit from understanding their options when negotiating real estate commissions. Additionally, buyer and seller rights remain intact for those not covered in the settlement. The settlement’s impact extends beyond residential real estate. Similar to Arizona’s commercial listings, all MLS listings, regardless of property type, will no longer display compensation offers.

For more information on the settlement and a detailed breakdown of the agreement’s terms please visit the NAR website.