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THE NAR SETTLEMENT AGREEMENT EXPLAINED




Misinformation has circulated in the media regarding real estate commissions. Here are the important facts to be aware of.


The ongoing discussions regarding real estate commissions have intensified following the National Association of REALTORS® (NAR) revealing a settlement agreement. This agreement aims to settle legal disagreements concerning broker commissions for home sellers. As a result, brokers and agents are contemplating the future of their businesses while addressing client inquiries. Unfortunately, numerous headlines are blurring the line between facts and fiction, confusing for professionals and their clients alike.


Let’s clarify things: Undoubtedly, the litigation, which includes additional lawsuits following the Sitzer-Burnett verdict, has introduced significant uncertainty into an industry already grappling with challenges like low inventory and rising interest rates. The settlement, subject to judicial approval, offers a way forward for real estate professionals, REALTOR®. ("Realtor” is a term exclusively associated with real estate agents that are members of NAR), Multiple Listing Services (MLSs), and other industry stakeholders. Crucially, it allows NAR members to refocus on their primary mission, which is supporting buyers and sellers.


Facts First: There have been inaccuracies in the media regarding NAR's settlement, which involves a payment of $418 million over four years by the association. Some reports have suggested that NAR previously set or influenced commissions at a fixed rate of 5% - 6%.


This is incorrect. NAR does not establish commissions, and commissions have always been negotiable well before this settlement. They have been and will remain entirely negotiable between brokers and their clients. Additionally, housing prices are determined by market forces beyond NAR's influence.


Accurate information is crucial, especially since the settlement agreement is complex. Therefore, it is essential to refer to resources like https://www.nar.realtor/the-facts and https://www.nar.realtor/the-facts/nar-settlement-faqs, which offer precise and current details about the settlement and its implications for consumers.


The settlement agreement introduces two key changes to how Realtors and MLS participants conduct business:


  1. NAR has committed to establishing a new MLS rule that prohibits the communication of compensation offers on the MLS. This means that offers of compensation cannot be conveyed through an MLS, but consumers can still explore compensation options through off-MLS negotiations and consultations with real estate professionals.

  2. NAR has also agreed to implement a new rule mandating that agents working with buyers must enter into written agreements with their buyers before touring a home.


While NAR has maintained its innocence throughout litigation, it considered various legal routes, including settling or appealing the Sitzer-Burnett verdict and addressing related copycat cases. The latter option could have led to NAR filing for Chapter 11 bankruptcy protection, leaving members, associations, MLSs, and brokerages vulnerable.


During the implementation phase of the settlement, uncertainties may lead to alterations in buyer agent compensation models. This marks a notable change in the real estate industry, stimulating discussions on fresh business tactics. At Ruthian Investment Fund, aim to inform our clients and stay at the forefront as we navigate through these changes.

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