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  • Writer's pictureChristy Murdock

What do we make of NAR's commission lawsuit settlement?

Friday morning, The New York Times broke the story that NAR had settled its commission lawsuits for a reported $418 million along with a slew of rule changes and accommodations. The hope, one assumes, is that this settlement would not only stem the bleeding of the organization legally and financially but also head off the Department of Justice's ongoing interest in the way the trade group does business.


While the deal hasn't yet been finalized, it at least served the purpose of allowing NAR's proponents and critics a chance to move forward and imagine a post-lawsuit landscape — for better or for worse.


On the day the settlement was announced, Inman hosted a live webinar discussion featuring NextHome CEO James Dwiggins, NextHome Strategic Officer Keith Robinson and Ed Zorn, the California Regional MLS general counsel. The big (and probably surprising) takeaway for me was that all three men seemed to feel that for the majority of productive, experienced real estate agent, the settlement won't mean all that much.


That's because agents will have an increasing opportunity to negotiate their own commissions, and those who can demonstrate their value to clients, whether buyers or sellers, will still be able to get paid.


The other main talking point in the discussion was that this mostly amounts to a cash grab for the attorneys. Because these are class action lawsuits with a huge number of sellers represented, by the time all's said and done, most of them will receive next to nothing in compensation.


So what exactly is the NAR settlement agreeing to?


While the final terms of the agreement haven't yet been published. NAR's statement on the settlement gives us the broad outlines. They include (quoting from the statement):


  • The release of most NAR members and many industry stakeholders from liability in these matters

  • Cooperative compensation remains a choice for consumers when buying or selling a home

  • A mechanism for nearly all brokerage entities that had a residential transaction volume in 2022 that exceeded $2 billion and MLSs not wholly owned by REALTOR® associations to obtain releases [from the lawsuits] efficiently if they choose to use it

  • A new MLS rule prohibiting offers of broker compensation on the MLS. This would mean that offers of broker compensation could not be communicated via the MLS, but they could continue to be an option consumers can pursue off-MLS through negotiation and consultation with real estate professionals.

  • A new rule that would require MLS participants working with buyers to enter into written agreements with their buyers. These changes will go into effect in mid-July 2024.


Agents connected with HomeServices of America and its affiliated entities, the sole corporate defendant remaining in the ongoing Sitzer-Burnett case, remain excluded from the settlement. Likewise, employees of the other corporate defendants involved in the cases addressed by this settlement are not exempt.


While the settlement helps resolve many of the seller-initiated lawsuits, it doesn't settle the buyer-side lawsuits. In addition, we're waiting for someone to crunch the numbers on how many brokerage entities had a residential transaction volume in 2022 exceeding $2 billion, since they are not included in the settlement.


So what does all this mean for you?


The reality is that some agents, or maybe even a lot of agents, will leave the real estate industry. Last fall, an industry-focused investment firm predicted that a million agents could leave the profession in the event of a scenario like the one we're seeing now. At the time, it was dismissed as clickbait. Now, it's looking pretty prescient.


Now, for those who don't leave, here's what comes next:


  • You will have to get good at messaging and communication. That means communicating your value, communicating about commissions, communicating your buyer agreement.


I recently had a woman castigate me in a DM on Instagram for daring to suggest that agents will have to communicate the value they bring to the buyer transaction. She seemed to think that I was suggesting that agents don't bring value. My point, however, was just the opposite — many agents add value but they suck at communicating it.


Over the years, I've had clients who, if you can believe it, had me revise their marketing materials, including their bios, for sounding too "braggy". Many of these clients were women who are taught to be modest and to downplay their contributions. That must end now.


You need to get very good at articulating what you do, how it helps, and how much money it saves for your clients. Team leader Carl Medford recently published this "Buyer Bill of Rights" to show how he articulates his role in a transaction. Learn from it.


  • People will be incredibly confused. The generalist media has positioned the lawsuits, and NAR's position in particular, as a conspiracy. You will need to explain that it wasn't, why it wasn't, and what the lawsuits were really about.

  • You will need to figure out how you're going to get paid when you work with buyers. You'll need a buyer agreement and a buyer consultation process where you can talk about compensation. Yesterday, one of the webinar participants said that a new differentiator will be how clear and well-crafted your buyer agreement is. Don't settle for the standard agreement your association provides. Talk to your broker or an attorney about drafting something that's truly useful and helpful for both you and your clients.

  • You will need to talk to your sellers about how buyer agents will get paid. Some sellers will see this as an opportunity to offer no compensation to buyer agents. You need to explain to them what that will do to their traffic and their eventual sale price. You'll need to adjust comps according to what offers of compensation the sellers offered to the buyer agents.

  • You need to get educated. Join a mastermind. Demand training from your broker. Subscribe to Inman and to The Ketchup and make it part of your daily routine to stay up-to-date on what's going on.

  • Talk to your colleagues. Real estate is a competitive industry, but I truly believe that those who will flourish right now are those who are collaborative and connected.


I love real estate, and I love real estate agents. They are the most creative and resilient people I know. There will be solutions and ways for you to move forward. Stay open, stay engaged, and keep moving forward for yourself, your business and your clients.

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