The real estate industry is on the cusp of a significant transformation following the recent settlement involving the National Association of Realtors (NAR). This landmark agreement, resulting from a class-action antitrust lawsuit, is poised to reshape the landscape of real estate transactions in the United States.

Background of the Settlement

The NAR settlement arose from the case Burnett v. National Association of Realtors et al., which was initiated in Kansas City, Missouri. The plaintiffs argued that NAR and major brokerages had colluded to artificially inflate seller commissions, typically up to 6% of the purchase price¹. In a historic verdict last October, a jury sided with the plaintiffs, setting the stage for the settlement that has now been reached.

Key Terms of the Settlement

The settlement, which amounts to $418 million, will introduce reforms that could significantly reduce costs for homebuyers and potentially alter the business model for real estate brokers². Here are the critical components of the settlement:

• Release of Liability: NAR, along with over one million of its members, various REALTOR® associations, and MLSs, will be released from liability for claims related to broker commissions³.
• Compensation Offers Moved Off MLS: A new rule will prohibit offers of compensation on the MLS, effective mid-July 2024. However, compensation can still be negotiated off-MLS⁴.
• Written Agreements for MLS Participants: MLS participants working with buyers will be required to enter into written agreements with their buyers, also effective mid-July 2024⁴.
• Settlement Payment: NAR will pay $418 million over approximately four years, without changing membership dues for 2024 or 2025⁴.

Implications for the Industry

This settlement signifies the most extensive reform in the American real estate market in a century. It is expected to potentially lower the costs for homebuyers and could push some real estate brokers to adapt⁵. The agreement also preserves the right of consumers to have cooperative compensation as an option, albeit off-MLS³.

Moving Forward

As the industry digests the implications of this settlement, the traditional ways of conducting real estate transactions are about to change. The focus now shifts to how brokers and agents will adapt to these new rules and what this means for the future of buying and selling property in America.

As we approach the mid-July 2024 implementation date for the new rules, all eyes will be on the real estate industry to see how it evolves in response to this groundbreaking settlement.

This blog post aims to provide a high-level overview of the NAR settlement and its potential impact on the real estate industry. For more detailed information, please refer to the official documents and FAQs provided by NAR³⁴.  For any further inquiries or assistance understanding the importance of this settlement, do not hesitate to contact Joseph DiPiazza, Esq.