The NAR Settlement – Changes in the way Americans Buy and Sell Homes

A lengthy legal battle has been ongoing since 2019 between 500,000 homeowners and the National Association of Realtors (“NAR”). On March 15, 2024, the NAR announced a $418 million settlement with a group of home sellers. This settlement addresses claims in multiple antitrust class actions accusing the NAR and major real estate companies of making sellers pay high real estate fees. This settlement has various implications for the housing market and the new rules are designed to transform the way realtors get paid and who pays them. These changes are the largest to the organizations rules in at least a generation.

The lawsuit focused on NAR’s Buyer Broker Commission Rule, which required listing agents to offer compensation for the buyer’s agent on the Multiple Listing Service (“MLS”). The plaintiffs argued that this forced sellers to pay for buyer’s agents, inflating home prices and violating antitrust laws.

Terms of Settlement

A final approval hearing is scheduled for November 26, 2024, but a district court judge has granted preliminary approval of NAR’s settlement terms. The NAR agreed to a $418 million settlement and made several changes to real estate agent commission practices:

• MLS Changes: Agents’ compensation will no longer be published on the MLS, allowing buyers to negotiate fees directly with their agents. This means the buyers’ agents can no longer use the database to search for houses based on how much they’ll get paid.
• Commission: Sellers’ agents will no longer be required to offer to share their commission with buyers’ agents. Commissions still can be negotiated as part of the process.
• Written Agreements: Buyers must sign a written agreement with their agents before viewing/touring properties, outlining the agreed-upon compensation.

Impact of Settlement for Buyers and Sellers

Supporters believe the settlement will make the market more transparent and competitive. This gives buyers the ability to negotiate more of those fees with their agent, and it gives them more control on how their agent is compensated along with a better understanding of the services that that agent is going to provide them. Sellers could also save money if they no longer need to cover buyer’s agent fees, potentially lowering home prices. Others worry that adding agent fees to buyers’ costs could make home buying unaffordable for some, especially first-time home buyers.

What the NAR Settlement Means for Buyers and Sellers in 2024-2025

If you are a buyer and your agent is using an MLS, you will need to sign a written agreement with your agent before touring a home (in person and live virtual homes) so you understand exactly what services will be provided, and for how much. You do not need a written agreement if you are just speaking to an agent at an open house or asking them about their services. [1] The written agreements must include a specific disclosure of the amount of compensation a real estate agent will receive or how this amount will be determined. The agreement also has to have a term that prohibits the agent from receiving compensation for brokerage services from any source that exceeds the amount agreed to in the agreement with the buyer. Finally, there needs to be a clear statement that brokers fees and commissions are fully negotiable and not set by law. Id.

If you are a seller, you are no longer responsible for commission fees for a buyers’ agent. Of course, real estate commissions remain negotiable, as before. Sellers may need to take into consideration that refusing to cover buyer’s agent fees could reduce their pool of potential buyers.

As part of the settlement, the NAR has agreed to implement these rules to provide more transparency and flexibility in the real estate commission structure.

[1] National Association of Realtors: https://www.nar.realtor/the-facts/what-the-nar-settlement-means-for-home-buyers-and-sellers