I wanted to address a hot topic that’s been making waves in the real estate world: the conversation around broker commissions. The National Association of REALTORS® (NAR) recently announced a settlement agreement to resolve litigation brought on behalf of home sellers related to broker commissions. This news has stirred up a lot of questions and, unfortunately, some misinformation.
Let's clear the air and get the facts straight.
Understanding the Settlement
The litigation, which includes several copycat lawsuits filed after the Sitzer-Burnett verdict, has created uncertainty in our industry. The settlement, which still needs a judge’s approval, offers a way forward for real estate professionals, REALTOR® associations, brokerages, MLSs, and other industry stakeholders. Most importantly, it allows us to refocus on our mission: supporting buyers and sellers.
What the Media Got Wrong
There’s been some inaccurate reporting around NAR’s settlement, such as claims that NAR previously set a standard commission rate of 6%. Even President Joe Biden mistakenly suggested that the settlement makes commissions negotiable for the first time.
Let's set the record straight: NAR does not set commission rates, and commissions have always been negotiable. They will continue to be a point of negotiation between brokers and their clients. Housing prices are dictated by market forces beyond our control.
Key Takeaways from the Settlement
The settlement achieves two important goals: protecting our members and preserving consumer choice. Here are the main points:
- Resolving Claims: The settlement resolves claims against NAR, nearly every member, state, territorial, and local REALTOR® associations, all association-owned MLSs, and brokerages with an NAR member as principal whose residential transaction volume in 2022 was $2 billion or below.
- Cooperative Compensation: Cooperative compensation remains an option for consumers looking to buy or sell a home, provided it happens off the MLS.
Changes in Business Practices
The settlement also mandates two key changes in the way we do business:
- MLS Rule: NAR will create a new MLS rule prohibiting offers of compensation on the MLS. Offers of compensation can still be made off-MLS through negotiation with real estate professionals.
- Buyer Agreements: MLS participants working with buyers must enter into written agreements with their buyers before touring homes. This change helps consumers understand the services and value provided by their real estate professionals.
Moving Forward
This is a time of adjustment, but remember: buyers and sellers will continue to have many choices when deciding to buy or sell a home. As real estate professionals, we will continue to use our skills and diligence to protect our clients’ interests.
NAR President Kevin Sears summed it up well: “NAR is focused firmly on the future and on leading this industry forward. We are committed to innovation and defining the next steps that will allow us to continue providing unmatched value to members and American consumers.”
It’s our duty as real estate professionals to stay informed, adapt, and continue to provide the best service to our clients. This will never change.
