NAR settles commission lawsuits for $418 million

The National Association of Realtors has agreed to pay $418 million in damages to settle the real estate commission lawsuits. The trade group has also agreed to abolish the “Participation Rule” that required sell-side agents to make an offer of compensation to buyer brokers.

Taken together, the settlement and multiple rule changes will reshape how millions of sellers and buyers transact, and how their representatives get paid.

Some analysts and experts say the changes could wipe out billions in agent commissions in the coming years while accelerating a decline in the number of working real estate agents.

NAR’s legal counsel approved the settlement agreement early Friday morning. It has yet to be filed in court. Lawyers for the trade organization anticipate the settlement will be filed in the coming weeks, however, it will still be subject to court approval.

According to NAR, this settlement brings an end to all of the litigation claims brought by home sellers. However, the lawsuits filed by homebuyers, known as Batton I and Batton II, will continue.

Rule changes for agents and brokers
In addition to the damages payment, the settlement also bans NAR from establishing any sort of rules that would allow a seller’s agent to set compensation for a buyer’s agent.

Additionally, all fields displaying broker compensation on MLSs must be eliminated and there is a blanket ban on the requirement that agents subscribe to MLSs in the first place in order to offer or accept compensation for their work.

The settlement agreement also mandates that MLS participants working with buyers must enter into a written buyer broker agreement. NAR said that these changes will go into effect in mid-July 2024.

“NAR has worked hard for years to resolve this litigation in a manner that benefits our members and American consumers. It has always been our goal to preserve consumer choice and protect our members to the greatest extent possible. This settlement achieves both of those goals,” Nykia Wright, the interim CEO of NAR, said in a statement. “Ultimately, continuing to litigate would have hurt members and their small businesses. While there could be no perfect outcome, this agreement is the best outcome we could achieve in the circumstances. It provides a path forward for our industry, which makes up nearly one-fifth of the American economy, and NAR. For over a century, NAR has protected and advanced the right to real property ownership in this country, and we remain focused on delivering on that core mission.”

The trade group also noted that the settlement agreement is not an admission of guilt and that the practice of cooperative compensation is still allowed as long as it is pursued off-MLS.

According to the NAR, buyer brokers still have a variety of ways to be compensated, including via a fixed-fee commission paid directly by the buyer, concessions from the home seller or a portion of the listing broker’s compensation.