NAR’s Proposed Settlement and Your Real Estate Practice

Takeaways for Wisconsin REALTORS® from NAR’s proposed settlement


 Cori Lamont, WRA Vice President of Legal and Public Affairs  |    May 06, 2024
Takeaways

On March 15, 2024, the National REALTORS® Association (NAR) announced it reached a proposed settlement agreement for $418 million that would end the litigation against some defendants relating to federal antitrust conspiracy claims regarding all the home seller lawsuits such as Sitzer/Burnett and Moehrl.

There will be a lot of information from both the WRA and NAR about the proposed settlement in the next several months. The following is to provide you with some of the major takeaways from the proposed settlement. 

Release of liability

The following organizations are covered under NAR’s proposed settlement: 

  • NAR
  • Wisconsin REALTORS® Association (WRA) 
  • Local REALTOR® associations in Wisconsin 
  • All association-owned MLSs
  • All brokerages with a NAR member as principal that had a residential transaction volume in 2022 of $2 billion or below are released from liability for the types of claims brought in these cases on behalf of home sellers related to broker commissions. This includes the independent contractor agents, but not employees of these firms.

The following are not covered under NAR’s proposed settlement:

  • Agents affiliated with HomeServices of America and its related companies — the last corporate defendant — is still litigating the Sitzer/Burnett case. 
  • Employees of the remaining corporate defendants named in the cases covered by NAR’s proposed settlement.
  • All brokerages with a NAR member as principal that had a residential transaction volume in 2022 of $2 billion or more are not released under the proposed settlement. The agreement does provide a way for this group and MLSs not wholly owned by REALTOR® associations to obtain releases if they so choose.

Practice issues impacted by this proposed settlement

The agreement must still be approved by the federal court. However, there are certain practice changes that NAR has committed to implementing even if the court does not approve the agreement. The most notable changes would include:

Compensation offers off the MLS

NAR agreed to a new rule prohibiting offers of compensation on the MLS. Offers of compensation could continue to be an option consumers can pursue off the MLS through negotiation and consultation with real estate professionals. Sellers may offer buyer concessions on an MLS; for example, concessions for buyer closing costs. Per NAR, this will take effect in mid to late August 2024.

For Wisconsin REALTORS®, this will be a significant change. With offers of compensation no longer included in the MLS, there will be different methods of achieving the offer of compensation. For instance, an agreement can be entered into between the two firms as to the compensation, or firms can rely on standing policy letters or standing compensation agreements between firms.

At this time, it appears that sellers may compensate buyer’s agents. This will likely occur through the buyer including a request for the seller to compensate the buyer’s agent in the offers to purchase. 

Written buyer agency agreements

The policy change will require MLS participants working with buyers to enter into written representation agreements with their buyers before touring a home. Per NAR, this will take effect in mid to late August 2024. 

NAR did not admit any guilt as part of the proposed settlement

The proposed settlement clearly provides that NAR continues to deny any wrongdoing in connection with the litigation. NAR contends that the very reason the MLS cooperative compensation rule was introduced in the 1990s was “in response to calls from consumer protection advocates for buyer representation.”

The agreement does not override state law

The challenge with this proposed settlement agreement is that it is an agreement that applies to all REALTORS® and MLS participants in all 50 states, even though each state has different rules that impact how real estate is practiced. 

How is Wisconsin different?

Wisconsin already has in effect many of the pro-consumer policies identified in the proposed settlement agreement. For more than 30 years, Wisconsin law has required written buyer agency agreements prior to providing client services as a buyer’s agent. Moreover, our state-approved (WB) listing contracts and buyer agency agreements explain how commissions are earned and paid to real estate firms that cooperate in the transaction. 

The WB forms emphasize that there are no standard commission rates and that commissions and types of service vary and are negotiable based on the firm hired. Therefore, agents should continue to explain and discuss compensation with consumers while reminding the consumer there are no standard rates and commissions and each firm establishes its own commission structure based on the services provided. Commissions are not set by law and are fully negotiable.

The value of REALTORS® in the real estate transaction has not changed
  • Buyers and sellers have always had the option to hire REALTORS® to assist them in the real estate transaction.
  • Compensation for REALTOR® services has always been determined through negotiations between the REALTOR® and buyers or sellers.
  • Nothing about the settlement agreement created more inventory, made the market less competitive, made the transaction less complex or emotional, or made homeownership less important for the consumer.
  • REALTORS® continue to add value by assisting consumers through a number of ways as a professional, including navigating through complex paperwork, interpreting online information, managing deadlines and understanding the marketplace.

For more resources, including key points from the NAR proposed settlement for Wisconsin REALTORS® as well as other WRA and NAR resources about the NAR lawsuit and related proposed settlement agreement, visit the WRA’s antitrust resources webpage. 

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