Real Estate Shake-Up: NAR’s $418 Million Settlement and Practice Overhaul

In March 2024, the NAR made headlines by agreeing to a groundbreaking settlement that promises significant changes to the real estate industry. Here are the key points:

1. The Commissions Issue: Traditionally, real estate brokers have charged commissions—often up to 6% of the purchase price—for their services. This settlement aims to shake things up by eliminating these long-standing commissions. Instead, buyers and sellers will now have the freedom to negotiate fees directly with their agents upfront¹.
2. The $418 Million Payout: Yes, you read that right. NAR agreed to pay a whopping $418 million into a class action settlement fund over the course of four years. That’s a lot of zeros! The settlement will be paid through an installment plan, pending court approval².
3. Practice Changes: Beyond the financial aspect, the settlement introduces several practice changes that will ripple through the industry. Let’s explore those next.

Practice Changes & MLS Impact

1. Compensation Transparency

• MLS Policies: The settlement mandates the removal of compensation information from MLS listings. In other words, you won’t see commission percentages plastered all over property listings anymore. This change aims to create a more level playing field for buyers and sellers.
• Written Agreements: Agents working with buyers must now have written agreements in place. This ensures clarity regarding compensation and responsibilities. No more vague handshakes; it’s all about documented agreements.

2. Who’s Covered?

• Membership Matters: If you’re wondering whether this settlement affects you, here’s the scoop: NAR members are covered, but there are nuances. Brokerages with an NAR member as principal whose 2022 residential order volume exceeded $2 billion are not covered by the release. However, members affiliated with those brokerages are still included³.
• State and Local Associations: The settlement also impacts state, territorial, and local associations. They’ll need to adapt to the new rules.

3. Effective Dates

• Timing: The practice changes are set to take effect soon. Initially, NAR planned for a “late July” rollout, but they’ve adjusted the timeline. MLSs that opt in have until September 16, 2024, to implement changes. So, buckle up—change is coming!
• Why the Rush?: You may wonder why NAR is implementing these changes before receiving final court approval. Well, they’re eager to get the ball rolling and create a more transparent real estate landscape.

4. Offers of Compensation

• Buyer Broker Role: Prohibiting the publication of compensation offers on MLS listings is a significant shift. Does this mean buyers won’t need a buyer broker anymore? Not necessarily. Buyers can still have representation, but the negotiation process will evolve.
• Working for Free?: Fear not, buyer brokers won’t be working for free. The settlement doesn’t imply that. Instead, it encourages more direct communication between buyers, sellers, and their agents.

In a Nutshell

So, there you have it! The NAR settlement is like a seismic shift in the real estate tectonic plates. Commissions are out, transparency is in, and the industry is adapting. Whether you’re a seasoned agent or a first-time homebuyer, keep an eye on these changes—they’re reshaping the way we buy and sell homes.

Learn more: NAR Settlement FAQs³⁴.

To explore the many issues surrounding the marketing, sale, and process of residential real estate transactions, please give us a call and make an appointment to speak with our experienced real estate attorneys at Feeney & Dixon, LLC.

The information you obtain on this blog is not, nor is it intended to be, legal advice. You should consult an attorney for advice about your individual situation. The opinions, statements, beliefs and viewpoints expressed by the various authors and blog participants on this web site, do not reflect the opinions, statements, beliefs, or viewpoints of Feeney & Dixon, LLC, or any of their principals, employees, or agents. The authors and blog participants’ opinions are based upon information they consider reliable, but neither Feeney & Dixon, LLC, nor its principals, employees, or agents, warrant its completeness or accuracy, and it should not be relied upon as such.

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