The Chicago-based National Association of Realtors will pay $418 million as a part of a settlement agreement to resolve litigation against the organization and its members brought on behalf of home sellers related to broker commissions.
The settlement comes after a Missouri federal jury issued a landmark $1.8 billion verdict in October of last year, finding the National Association of Realtors and several large real estate brokerages conspired to artificially inflate commissions on home sales. The association had said it was appealing the verdict, while a similar case was expected to go on trial this year in Illinois federal court.
“NAR has worked hard for years to resolve this litigation in a manner that benefits our members and American consumers,” said Nykia Wright, interim CEO of NAR, in a Friday news release announcing the settlement. “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.”
The settlement is subject to court approval and will fundamentally change how homes are bought and sold by removing the assumption that buyers and sellers agents will split a 6% commission on home sales, which had been standard practice in the industry.
NAR has also agreed to create a new multiple listing service rule, which “prohibits offers of broker compensation on the MLS.” Real estate professionals can still discuss broker compensation with their clients off of the MLS.
Additionally, NAR will require MLS participants working with buyers to enter into written agreements with buyers. These agreements dictate how real estate professionals will be paid and are already in use in Illinois.
Wright said 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,” Wright said in the news release.
Real estate firms RE/MAX and Anywhere Real Estate (formerly known as Realogy Holdings Corp.) already agreed to settle both the Missouri and Illinois cases. Anywhere agreed to pay $83.5 million, and RE/MAX agreed to pay $55 million.
The litigation has contributed to turmoil at NAR, which has recently undergone a series of leadership changes. Over the past several months, NAR has seen two presidents and a CEO resign following allegations of sexual harassment against its former president Kenny Parcell.
“NAR is focused firmly on the future and on leading this industry forward,” said Kevin Sears, NAR’s president, in the news release. “This will be a time of adjustment, but the fundamentals will remain: buyers and sellers will continue to have many choices when deciding to buy or sell a home, and NAR members will continue to use their skill, care, and diligence to protect the interests of their clients.”
Story by Lizzie Kane, Chicago Tribune
