NAR settlement could potentially reshape real estate commission structures

The National Association of Realtors (NAR) has resolved a legal dispute over broker commissions initiated by home sellers, potentially leading to reduced commission rates and a decrease in real estate agents.

According to a NAR news release Friday (March 15), the agreement involves over one million NAR members, all state/territorial and local Realtor associations, Multiple Listing Services (MLS) and brokerages with a residential transaction volume of $2 billion or below in 2022. NAR denies wrongdoing related to the MLS cooperative compensation model but agrees to pay $418 million over approximately four years pending court approval.

The settlement ensures consumer choice in buying or selling homes and releases most NAR members and industry stakeholders from liability.

Notably, according to the release, agents affiliated with HomeServices of America and its related companies have not been released under the settlement. NAR will implement a new MLS rule prohibiting offers of broker compensation on the MLS while encouraging negotiation and consultation off-MLS. A new rule will also require MLS participants working with buyers to enter into written agreements.

The changes will be effective from mid-July 2024.

According to NAR interim chief executive Nykia Wright, the agreement benefits NAR and consumers by preserving consumer choice and protecting members. NAR President Kevin Sears said the settlement is significant despite its cost, highlighting NAR’s commitment to leading the industry forward with innovation.

“We are committed to innovation and defining the next steps that will allow us to continue providing unmatched value to members and American consumers,” he said. “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.”