NAR Class Action lawsuit settlement has been reached

[Cdog]

Read below!

So here’s my take. This is a good thing for all real estate “professionals”.Nobody will be showing you a home now on the buyer side without a written agreement for compensation from the buyer. And if they do they risk making nothing.

No longer will you see a compensation offered to the buyers agent unless the seller wants to and agrees to in writing to offer that compensation. But nonetheless any broker that knows his ass from a hole in the ground is going to mandate that no offer will be written on anything without a compensation agreement much like we do in commercial.

• Release of liability: The agreement would release NAR, over one million NAR members, all state/territorial and local REALTOR® associations, all association-owned MLSs, and all brokerages with an NAR member as principal that had a residential transaction volume in 2022 of $2 billion or below from liability for the types of claims brought in these cases on behalf of home sellers related to broker commissions.
  • NAR fought to include all members in the release and was able to ensure more than one million members are included. Despite NAR’s efforts, agents affiliated with HomeServices of America and its related companies—the last corporate defendant still litigating the Sitzer-Burnett case—are not released under the settlement, nor are employees of the remaining corporate defendants named in the cases covered by this settlement.
• Compensation offers moved off the MLS: NAR has agreed to put in place a new rule prohibiting offers of compensation on the MLS. Offers of compensation could continue to be an option consumers can pursue off-MLS through negotiation and consultation with real estate professionals. And sellers can offer buyer concessions on an MLS (for example—concessions for buyer closing costs). This change will go into effect in mid-July 2024.
• Written agreements for MLS participants acting for buyers: While NAR has been advocating for the use of written agreements for years, in this settlement we have agreed to require MLS participants working with buyers to enter into written representation agreements with their buyers. This change will go into effect in mid-July 2024.
• Settlement payment: NAR would pay $418 million over approximately four years. This is a substantial sum, and it will be incumbent on NAR to use our remaining resources in the most effective way possible to continue delivering on our core mission. NAR’s membership dues for 2024 will not change because of this payment.
• NAR continues to deny any wrongdoing: NAR has long maintained — and we continue to believe — that cooperative compensation and NAR’s current policies are good things that benefit buyers and sellers. They promote access to property ownership, particularly for lower- and middle-income buyers who can have a difficult-enough time saving for a down payment. With this settlement, NAR is confident it and its members can still achieve all those goals.

 

[havasujeeper]

This settlement is so confusing. Do I get any money from past sales? If not, who gets the settlement money? Who profits from the sale of a house now days?

 

[zhandfull]

So essentially a buyer has no representation that is paid for by the seller? That sounds crazy.

 

[X Hoser]

Anything specific to a dual agency transaction to when a listing agent also secures the buyer? Will they have to refer one side away? I’ve been out of real estate for 40 years and have not been following this legal action.

 

[2Driver]

Huh? So I call you to show me a random house and you first have to get me to commit to paying you? I’m confused.

 

[BabyRay]

The way I read it, the buyer will have to commit to paying their agent. But, either they’ll then pay less for a home, or they’ll negotiate with the seller for reimbursement. In the end though, because both buyer and seller are negotiating with their agents, I suppose it could reduce commission costs. It’s going to be challenging, particularly for the buyer’s agent, as buyers are going to be reluctant to make the commitment. I’d be all over getting listings if I was an agent.

The really stupid part is that if a buyer is willing to pay both sides, they can’t put that in the listing. That takes away a marketing tool that a seller may have wanted to use.

 

[Cdog]

This settlement is so confusing. Do I get any money from past sales? If not, who gets the settlement money? Who profits from the sale of a house now days?

Likely the asshole attorney. If you’re part of the lawsuit you’ll get your $12.

 

[Cdog]

Huh? So I call you to show me a random house and you first have to get me to commit to paying you? I’m confused.

Yes, all brokerages will move to a disclosure where they will have you sign a document that states they are to be comp at a certain percent or dollar figure if they are to represent you on the transaction.

This will also provide agency which is great for those buyers agents out there hustling. No longer will Byers be able to go and purchase that same home through their friend when they use some other poor bastard to show them the house. That agent will have a signed document agreeing to the agents compensation & agency

 

[Cdog]

Anything specific to a dual agency transaction to when a listing agent also secures the buyer? Will they have to refer one side away? I’ve been out of real estate for 40 years and have not been following this legal action.

As I read it so far, the seller can still agree to compensate both sides in writing, then it will be business as usual. But that is now an addendum or something added to the transaction.

On my listings when you sell a house through me and purchase through me I offer a 4.5% listing fee. So if I bring the buyer I discount the overall fee from 5 to 6% to the 4.5%.

 

[Cdog]

This is exciting! If you have bad representation on the buyers side you’ll know it quickly. They won’t know how to negotiate actual business transactions.

People like myself, who spent the better part of 2 1/2 decades doing this will paint the bad negotiators into a corner. Performance and condition guarantees will move the goal post on compensation agreed to.

Overall, I think the public can expect the compensation model to remain. In fact, average a little higher as this plays out because those with little experience or bad negotiators are going to be forced out of the market and the people who do the work will be compensated greatly for their experience and ability.

 

[Motoxxxloak]

This put my new boat interior discussion on hold once that email came out this morning.

How many houses do you need to show someone before they commit to you? What keeps the buyer from just going directly to the listing agent? How many buyers are going to be scared by their agent saying they want them to commit to pay them on paper, prior to showing them any houses?

As far as your bad negotiators comment, what does that mean for the green folks? The ones just learning how to grind and negotiate? This means they'll be forced out and only the ones who have experience will get paid? Kinda seems like the rest of the country. Bunch of old dudes getting rich of the backs of the "bad negotiators or ones with little experience"

 

[D19]

Its pretty stupid really. Pretty sure this is Zillow or some other conglomerate trying to monopolize the market. Nothing different than what all the other unions do to give their members the shaft.

Regarding the co-op fee, It's kind of in a way how we already do things with commercial transactions, however in commercial we don't have all the silly NAR rules to follow.

We'll figure it out, not really all that worried about it. The only thing that will really change is the increase in difficulty, time and paperwork for doing things the way we already do. Thanks NAR!

 

[Cdog]

Its pretty stupid really. Pretty sure this is Zillow or some other conglomerate trying to monopolize the market. Nothing different than what all the other unions do to give their members the shaft.

Regarding the co-op fee, It's kind of in a way how we already do things with commercial transactions, however in commercial we don't have all the silly NAR rules to follow.

We'll figure it out, not really all that worried about it. The only thing that will really change is the increase in difficulty, time and paperwork for doing things the way we already do. Thanks NAR!

With one correction.

Thanks class action lawsuit!

 

[Sportin' Wood]

This could be fun. Can buyers with strong agents now have a line in the sand to grind hard on the purchase price because the buyer can work a performance clause into the agreement? This might make being a buyer agent a whole new game.

I like shaking the snowglobe. What happens when the seller gets a weak agent? How hard will it be to wiggle out of that contract? Now, you have to be smart about hiring an agent. The part timers might be looking for a new side hustle.

 

[Cdog]

This put my new boat interior discussion on hold once that email came out this morning.

How many houses do you need to show someone before they commit to you? What keeps the buyer from just going directly to the listing agent? How many buyers are going to be scared by their agent saying they want them to commit to pay them on paper, prior to showing them any houses?

As far as your bad negotiators comment, what does that mean for the green folks? The ones just learning how to grind and negotiate? This means they'll be forced out and only the ones who have experience will get paid? Kinda seems like the rest of the country. Bunch of old dudes getting rich of the backs of the "bad negotiators or ones with little experience"

How many houses. 1. Compensation agreement and agency prior to showing the first house.

Nothing. But that listing agent will have to negotiate their buyer compensation fee with the seller just like the traditional buyers agent will have to. Agreements can be made between the listing agent and seller prior to a buyer showing interest.

Buyers won’t have a choice. They don’t pay anything if they don’t buy.

Yes! It’s beautiful since I’m now an old white guy.

 

[RiverDave]

Upon first read this almost reads like it's encouraging dual agency / double ending? I have always tried to stay away from that because how can one person represent two peoples interests? When it happens on our transactions we split it between two agents on the team.

I need to read into this further.. but it almost sounds like C-Dog said.. Originally it was the agents were going to lose $$, but now this looks like the experienced ones will make more and the newbies better get a real good mentor or they're screwed.

RD

 

[530RL]

Huh? So I call you to show me a random house and you first have to get me to commit to paying you? I’m confused.

No, but the Seller is no longer required to agree up front to pay the buyers agent to get onto the MLS. That is the crux of the settlement. Access to the proprietary MLS systems.

The rule change gives a seller, and the sellers agent the right to list a home on MLS without being forced to compensate the buyers agent. Something that was effectively precluded under the old NAR agreements. And the belief is that selling agents will now want as much access to the information in MLS as possible, as opposed to keeping the information proprietary amongst the NAR members, specifically the buying and selling agents.

As a result, the plaintiffs believe that the current closed access MLS system will open up to broader access and dissemination of listing information, as well as total commissions on a sale will be lower.

That's the theory........

What keeps the buyer from just going directly to the listing agent?

That's the goal of the Plaintiffs, cut out another party in the transaction and the associated cost. The theory of the plaintiffs is that if you need help as a buyer, you should pay them not the seller. And the old system forced the seller to pay the buyers agent.

If a buyer does not need an agent, why is the seller being forced to pay an agent, and why can't the buyer get some of that from the seller as a discount on the price, as opposed to the former mandated fee/commission to the buyer agent.

That's the theory......

Upon first read this almost reads like it's encouraging dual agency / double ending?

rd

They are trying to economically end dual agency by no longer mandating a buyers agent commission to be paid by seller. The selling agent commission is whatever it is, regardless whether the buyer has an agent or not. Buyers do not need an agent and if they do not, the selling agent has no contractual obligation to them as they do in dual agency agreements.

 

[Cdog]

Upon first read this almost reads like it's encouraging dual agency / double ending?

rd

Buyers will have to jump through hoops and not be so flighty. That’s a net benefit since they are typically the free radicals in the transaction.

The business is really supposed to work this way if you’re a buyer, you have to prove your ability to purchase before a seller agrees to a sales contract. But in practice it doesn’t actually turn out that way Byers run around town having different agents show them properties without having to commit to any of those agents or provide the proof of financial wherewithal while wasting those agents time.

The listing agent still has to negotiate a buyers representation fee with the seller, so I don’t see how this gives any advantage outside of there being a relationship between the seller and listing agent. But that exists now my compensation model highlighted above in a previous post. Although, if my compensation model beats what an another buyers agent brings to the table, perhaps the seller does not see the deal with that buyer as a tractive financially. This could go a lot of different ways.

 

[attitude]

This seem like another series of YouTube videos I need to watch in my preparations to buy a house. Do I now need to budget in paying my realtor as the buyer into the cost of the house?

Cdog, does this mean for a realtor to show houses (like you did for me last year) the “buyer” and the realtor now need a contract.

 

[rivrrts429]

This thing reads like a bad episode of “unintended consequences.” This definitely has Zillow and RedFin verbiage all through it.

 

[Cdog]

This seem like another series of YouTube videos I need to watch in my preparations to buy a house. Do I now need to budget in paying my realtor as the buyer into the cost of the house?

Cdog, does this mean for a realtor to show houses (like you did for me last year) the “buyer” and the realtor now need a contract.

Yes unless the sellers representation offers compensation upfront. Although as a courtesy, I offered to show you some options.

 

[Cdog]

This thing reads like a bad episode of “unintended consequences.” This definitely has Zillow and RedFin verbiage all through it.

I think it’s likely to bite them in the ass and show everybody that they are a business that preys on the industry & naïve people that think they exist as a consumer tool.

 

[ChumpChange]

So all home prices should now drop by 3%.

 

[D19]

So all home prices should now drop by 3%.

Lol ya right. You first!

 

[530RL]

So all home prices should now drop by 3%.

Probably not.

But if buyers can now get access to the MLS without going through an agent, or agreeing to pay an agent, then experienced buyers can probably negotiate for themselves and sellers can probably pay lower total commissions.

 

[Sportin' Wood]

Probably not.

But if buyers can now get access to the MLS without going through an agent, or agreeing to pay an agent, then experienced buyers can probably negotiate for themselves and sellers can probably pay lower total commissions.

Only if they can get into see the house without an agent babysitter. Perhaps proof of qualification can open that door?

 

[brecht]

escrow closes next Wednesday for my house - what does this mean for me?

 

[Echo Lodge]

So I guess I need to wait a few weeks before I list my MIL's Leisure World Pad?

Home buyers and sellers to be spared standard broker commissions under $418 million settlement

Consumer advocates say the National Association of Realtors' legal agreement, if approved, could save buyers and sellers thousands of dollars and lead many buyers to forgo agents entirely.

www.nbcnews.com

If the settlement is approved, brokerage commissions would be stripped from MLS sites and opened up to negotiation with sellers, among a series of other changes. Homebuyers, too, would be able to negotiate fees more easily if they choose to sign up with a broker — though experts say the new arrangement may incentivize more buyers to forgo brokers entirely.

The new brokerage-fee changes would begin to take effect within months of the settlement's approval. A preliminary hearing to approve the deal is slated to take place in the coming weeks.

 

[attitude]

Probably not.

But if buyers can now get access to the MLS without going through an agent, or agreeing to pay an agent, then experienced buyers can probably negotiate for themselves and sellers can probably pay lower total commissions.

Hasn’t the MLS always been available to anyone, you just need to pay the fee?

 

[530RL]

Only if they can get into see the house without an agent babysitter. Perhaps proof of qualification can open that door?

There are a lot of logistical/physical hurdles. But if a seller has a choice between coughing up 3% of the sales price, or hiring a selling agent that will take the time to show and sell the house, it means as Cdog points out, good selling agents who actually work will be in high demand.

It may be an opportunity for full service sellers to actually compete on service and results.

Hasn’t the MLS always been available to anyone, you just need to pay the fee?

Absolutely not. That was one of the major points in the lawsuit relating to how NAR rules were anticompetitive and led to higher commissions.

Access is not only subject to fees, but to qualification by the local owner of that MLS service.

For example, see link on how to get onto MLS for ARMLS

How to Join ARMLS

To join the MLS as a subscriber, complete the following required steps: Get licensed with the Arizona Department of Real Estate. Next, hang your license with a brokerage. Finally, the...

armls.com

 

[Berdes]

This settlement is so confusing. Do I get any money from past sales? If not, who gets the settlement money? Who profits from the sale of a house now days?

This settlement is so confusing. Do I get any money from past sales? If not, who gets the settlement money? Who profits from the sale of a house now days?

Come on Man, it's a class action lawsuit. The only winners are the lawyers.

 

[Englewood]

Buying a home just became more expensive. Just like minimum wage laws, if screws the people it was intended to “help”.

The attorneys are the only winners. This does literally nothing to protect the consumer as it was packaged.

 

[attitude]

There are a lot of logistical/physical hurdles. But if a seller has a choice between coughing up 3% of the sales price, or hiring a selling agent that will take the time to show and sell the house, it means as Cdog points out, good selling agents who actually work will be in high demand.

It may be an opportunity for full service sellers to actually compete on service and results.


Absolutely not. That was one of the major points in the lawsuit relating to how NAR rules were anticompetitive and led to higher commissions.

Access is not only subject to fees, but to qualification by the local owner of that MLS service.

For example, see link on how to get onto MLS for ARMLS

How to Join ARMLS

To join the MLS as a subscriber, complete the following required steps: Get licensed with the Arizona Department of Real Estate. Next, hang your license with a brokerage. Finally, the...

armls.com

So will the MLS now be open to everyone?

 

[530RL]

So will the MLS now be open to everyone?

That is not a requirement of the settlement.

The argument is that under the current situation, selling agents understand that agents who have access to the MLS system will get paid if they bring a buyer. So naturally selling agents rightfully rely on the MLS system and it’s guaranteed commission to buyers agents bringing them buyers.

When sellers no longer have to pay buying agents as part of their listing, selling agents will look either to opening up the MLS system or alternatively find new ways to disseminate the information to find buyers.

The thought is the mandatory payment to buyers agents by sellers protects the MLS system by not requiring the dissemination of listing information as the guaranteed payment finds buyer for sellers.

Who knows what will happen, but the theory remains by the plaintiffs that selling agents will now have to find buyers through other means to gather their commissions or will force their organization to open up MLS to not only buyers agents but to buyers. Rationally if a buyer is now paying as opposed to the seller, a buyer is better off paying a few thousand to an attorney or consultant, and negotiating with the seller for a discount as the seller now has three percent more to work with in the transaction. And that could possibly lower total transaction costs.

 

[Mrhavasu]

Lets have a reality check, most buyers are not going to pay a buyers agent. They will not sign a contract to do so.
They will just go direct to the listing agent. It is already a trend. Zillow has won. I always say, the listing agent
always gets paid. Consumers are conditioned to, "get it for less". People get weird when money is involved,
common sense goes out the window and greed sets in. Buyers agent are screwed and the consumer will suffer.
And the MLS is already open, its called Zillow.

 

[zhandfull]

Lets have a reality check, most buyers are not going to pay a buyers agent. They will not sign a contract to do so.
They will just go direct to the listing agent. It is already a trend. Zillow has won. I always say, the listing agent
always gets paid. Consumers are conditioned to, "get it for less". People get weird when money is involved,
common sense goes out the window and greed sets in. Buyers agent are screwed and the consumer will suffer.
And the MLS is already open, its called Zillow.

This!
My last purchase was exactly like this about a year ago. Went straight to listing agent to see property found on Zillow. Made an offer. Negotiated a 14% reduction of price. Seller paid the full 6% buyer/seller fees to two agents at the same agency. One representing seller and one supposedly representing me the buyer.

Interesting enough, I keep getting settlement and class action lawsuits cards in the mail at property. Seller will someday get pennies on the dollar back on the buyers side fees of transaction.

 

[Angler]

With the prices of homes so expensive, are sellers still paying 6% realtor fees?

 

[BHC Vic]

On my way

 

[SOCALCRICKETT]

Lets have a reality check, most buyers are not going to pay a buyers agent. They will not sign a contract to do so.
They will just go direct to the listing agent. It is already a trend. Zillow has won. I always say, the listing agent
always gets paid. Consumers are conditioned to, "get it for less". People get weird when money is involved,
common sense goes out the window and greed sets in. Buyers agent are screwed and the consumer will suffer.
And the MLS is already open, its called Zillow.

Yep, everytime me or my parents bought a house, it was a house we found on our own. With the internet and social media most of the time the buyer knows about the house before their agent even shows them

 

[caribbean20]

I’m looking to list a property in the next few months. I recall seeing an effective date of this new agreement a few months out.

So, net, net, should I expect to negotiate a sellers agent fee on the deal, of something like 3% or 2.5%? Is that where this is headed? And the buyer will pay their agent a separate fee, if they even engage a buyer agent, or they just go it alone.

Am I reading this correctly?

 

[badgas]

With the prices of homes so expensive, are sellers still paying 6% realtor fees?

4% seems to be more the standard on people I talk with.

 

[Orange Juice]

Hasn’t the MLS always been available to anyone, you just need to pay the fee?

I think you are referring to advertisers like zillow and redfin. MLS is a different avenue for sellers.

Don't think as a seller or buyer it's going to help you. Nothing is free.

 

[SOCALCRICKETT]

I’m looking to list a property in the next few months. I recall seeing an effective date of this new agreement a few months out.

So, net, net, should I expect to negotiate a sellers agent fee on the deal, of something like 3% or 2.5%? Is that where this is headed? And the buyer will pay their agent a separate fee, if they even engage a buyer agent, or they just go it alone.

Am I reading this correctly?

I was always under the impression that seller negotiates the "seller commissions" with their agent and the buyer does the same with theirs, usually it's 3% to each side in total.

Should be the seller will pay 3%, and the buyer will pay 3%.

 

[530RL]

Lets have a reality check, most buyers are not going to pay a buyers agent. They will not sign a contract to do so.
They will just go direct to the listing agent. It is already a trend. Zillow has won. I always say, the listing agent
always gets paid. Consumers are conditioned to, "get it for less". People get weird when money is involved,
common sense goes out the window and greed sets in. Buyers agent are screwed and the consumer will suffer.
And the MLS is already open, its called Zillow.

If it is all available on Zillow as you say, and following your comment that sellers will no longer have to pay 3% to buyers agents, how exactly will the “consumer suffer”?

Under your scenario, there is another 3% on the table for the consumer to negotiate for?

 

[Mandelon]

The MLS is a paid service. Maybe they open it up to buyers, but buyers would have to pay the fees. I see security concerns with that scenario as shady operators will have a great source of vacant homes to burglarize or rent out to multiple tenants. As a seller I would maybe NOT want my property listed on such a service. Although Zillow and Redfin already put most of that info out there. Its going to be interesting.

To clarify the Listing Agent is the one the sellers hire. The Selling Agent is the one who brings the buyer. That has always confused people not in the biz.

 

[530RL]

The MLS is a paid service. Maybe they open it up to buyers, but buyers would have to pay the fees. I see security concerns with that scenario as shady operators will have a great source of vacant homes to burglarize or rent out to multiple tenants. As a seller I would maybe NOT want my property listed on such a service. Although Zillow and Redfin already put most of that info out there. Its going to be interesting.

To clarify the Listing Agent is the one the sellers hire. The Selling Agent is the one who brings the buyer. That has always confused people not in the biz.

In Arizona they are referred to on the typical contract as Broker or Agent on "behalf of Buyer" and Broker or Agent on "behalf of Seller"

 

[BHC Vic]

This is what our “Norco Famous” agent said

 

[Englewood]

One of my former agents sent me this…

“Each home seller plaintiff got less than $5.70 and their lawyers got $69,000,000. Ironically, on the lawyer's invoice it said that the "usual, customary lawyers fee is equal to 1/3 of the settlement”, and that's how they came up with their fee. If that's not price fixing or collusion, then what is?! That's the very thing that they supposedly built their case on.”

 

[adam909]

So it seems like its going to hurt the first time buyers and new investors.. I dont really understand it, so is a buyers agent going to ask for a 2.5/3 % up front? Not many first time buyers can just caugh up that much money as well as down payment..

 

[Englewood]

So it seems like its going to hurt the first time buyers and new investors.. I dont really understand it, so is a buyers agent going to ask for a 2.5/3 % up front? Not many first time buyers can just caugh up that much money as well as down payment..

Time will tell, but my personal belief is that buyers’ agents will start requiring “buyer representation agreements” with their buyers, similar to how listing agents have agreements with sellers.

I believe sellers will still offer a commission. The only difference is it won’t be posted in the MLS.

The best thing that could come out of this is that NAR goes away. But I highly doubt that will happen given that they are the 2nd biggest lobbyist group in the US.

Like you mentioned, a buyer isn’t gonna pay a commission. The bank wont allow them to add it into their loan. So we are back to square one where the seller pays it.

That’s my .02 at least.