The NAR settlement in two class action lawsuits in the amount of $418 million has shaken the foundations of the MLS systems across the U.S. as well as the way the NAR, the National Association of Realtors, and major brokerages do business. It has huge implications for both listing agents and buyer’s agents, and it raises questions for sellers and buyers. This article will succinctly explain the claims in the lawsuits, the terms of the settlements, and the implications for brokers who list and sell, and for home sellers and home buyers. As always, I will get to the bottom line and explain how this will all shake out in real life where the rubber meets the road.
What are my credentials for authoring an article like this? I have four decades in real estate, including a long career as a real estate attorney and a continuing career as a real estate broker and owner of a boutique real estate brokerage. I am the author of over 2,000 online articles written for home buyers, 9 real estate books written for buyers (and one for sellers), and 100’s of educational videos for buyers. I’ve been living and breathing real estate since the mid-’70s, and I know how buyers and sellers think, and I know the business models and practices of all the major brokerages. I also know the legal community and lawyers.
Understanding the NAR Settlement With This Summary
Burnett v. National Association of Realtors, et.al.: The plaintiffs in the first lawsuit alleged primarily that the defendants were liable “for agreeing, combining, and conspiring to impose and enforce an anti-competitive restraint that requires home sellers to pay the broker representing the buyer of their homes, and to pay an inflated amount, in violation of federal antitrust law and in violation of Missouri law.”
On October 31, 2023, a Kansas City jury found that the defendants had violated antitrust laws by conspiring to fix real estate commission rates. The jury awarded the plaintiffs $1.78 billion in damages.
Moehrl v. National Association of Realtors, et.al.: The plaintiffs in the second of the two lawsuits claimed that the NAR (National Association of Realtors) and MLS organizations around the country were involved in anti-competitive practices that forced home sellers into paying buyer’s agents commissions. Plaintiffs were home sellers who listed their homes on one of twenty MLSs and filed the lawsuit against the National Association of Realtors (NAR) and the four largest national real estate broker franchisors, Realogy Holdings Corp., HomeServices of America, Inc., RE/MAX Holdings, Inc., and Keller Williams Realty, Inc., for allegedly conspiring to require home sellers to pay the broker representing the buyer of their homes, and to pay an inflated amount, in violation of federal antitrust law.
Plaintiffs alleged that Defendants’ conspiracy centered around NAR’s adoption and implementation of a mandatory rule that required all brokers to make a blanket, non-negotiable offer of buyer broker compensation (the “Buyer Broker Commission Rule”) when listing a property on a MLS. This second lawsuit never got to the trial that was scheduled for early in 2025 as a settlement was reached following the $1.78 billion award in the first case.
Understanding The NAR Settlement for $418 Million
A final NAR settlement was reached with the plaintiffs of both class action lawsuits as part of a comprehensive settlement for the NAR only in the amount of $418 million. Other defendants have negotiated their own settlements with the plaintiffs in these lawsuits, which may total half a billion dollars by the time the dust settles.
Understanding the NAR Settlement Practical Implications
As a real estate attorney and broker, I will tell you the claims in both of these class action lawsuits were totally bogus. Listing agents have not been conspiring to require sellers to pay buyer’s agents a specific fee in violation of Federal anti-trust law, and the NAR never required listing brokers to force sellers to pay a specific fee to buyer’s agents who brought them a buyer. Listing agents were obligated to include something for buyer’s agents rather than input zero into the MLS, but that was common sense, not a grand conspiratorial scheme. If a seller wanted buyers’ agents to show their homes, everyone understood they ought to offer them something to motivate them, and that something could have been a fraction of what the listing agent was getting paid. But in any free enterprise system, there has to be a motivation to help a seller get their home sold, otherwise why bother?
As with far too many lawsuits, the outcome of these cases were colored by the current popular political causes, and too often guided by misrepresentations of facts and law to the jurors by plaintiffs’ attorneys. Add to this the harsh reality that judges are no longer objective and fair and wise, and what do you get? Today the big cases that are hot beds of political passion are almost always determined in advance in the court of public opinion and later rubber stamped in a venue that is conducive to the cultural influences. Fortunes are made, books are written, movies made, and nobodies become famous following the outcome of such cases.
What really has been happening between listing agents and their sellers on the subject of paying buyer’s brokers?
The conversations between a listing agent and a seller for decades have gone something like this. “We charge 2.5% on the listing side of the transaction, and I would suggest we include 2.5% to pay a buyer’s agent for a total of 5.0%. The reason we suggest 2.5% for the buyer’s agent is because we want to motivate buyer’s agents to show your home and sell it. Does that make sense,” to which every home seller I know of for decades always said, “Yea, sure.”
There was no pressure, no demand that they pay a buyer’s agent a certain fee. In the law it would be called “force and duress” to make someone sign a listing contract agreeing to pay a buyer’s commission when they didn’t want to. That never happened, and I go back 40 years in this business across three states.
Discount brokers have never been kept out of the industry, and many homeowners have listed with discount brokers while others have chosen to list their homes on a FSBO (for-sale-by-owner) site or with a broker in the MLS who offered to list FSBO homes and only charge a few hundred dollars.
What the NAR settlement actually does is turn things upside down for home sellers and home buyers since it no longer allows transparency and full disclosure on what the seller is offering a buyer’s agent. One of the key elements of the settlement agreement is that listing agents can no longer include the seller’s offer to buyer’s agents in the MLS. In other words, prior to the settlement agreement, listing agents could include in their MLS listing a note to buyer’s agents that they will be paid 1.5% or 2.0% or 2.5% or 3.0%, or whatever the seller was offering to pay them. Now the terms of the settlement agreement prohibit a listing agent from including that disclosure, which means the rule is now secrecy and lack of transparency and non-disclosure to buyers and buyer’s agents. You see, listing agents can still sign a listing agreement with their home sellers in which the seller agrees to pay a split to a buyer’s agent, but the listing agent must now keep that a secret from the public and from all who look at the MLS. But the loophole is that a buyer’s agent is not prohibited from calling and asking the listing agent if the seller will pay a buyer’s fee, and the listing agent is free to share that information. They just cannot type it in the MLS listing.
This is hypocrisy of the highest order, and while the lawyers structured the class action lawsuits as though they are making a herculean effort to protect consumers, in fact, the lawsuits sought to scam consumers and hide information from them. Why would the attorneys do that? I’ll tell you exactly why.
Understanding the NAR Settlement and Who The Real Winners Are
The claims of the plaintiffs in the lawsuits were full of specious arguments perpetrated by the only winners in the huge settlements, and we all know who those winners are. The plaintiff’s attorneys will take a huge percentage of the $418 million (and the remaining $500 million), and if they had a typical agreement with their clients, they will take 40% or $392 million in total. It appears the plaintiffs’ attorneys will divvy up $392 million. They may get more than that, but the point is the lawyers become filthy rich, but no one else in these lawsuits did. The plaintiffs in a class action are usually so numerous, their split amounts to pocket change compared to what the lawyers get. The attorneys also deduct all costs and expenses of the lawsuit out of the plaintiffs’ split.
The only winners in these class action lawsuits are the plaintiffs’ attorneys.
Class action lawsuits are the biggest racket in the legal business, and attorneys don’t just make a few million: They can make hundreds of millions. And this is exactly what is going on here. This is the reason these lawsuits were commenced, and it is the reason the claims were crafted as they were. The plaintiffs had no idea what the legal claims could or should be to convince a naïve jury to award a massive judgment against the evil industry deep pockets. It is likely that the plaintiffs’ attorneys actually went out and generated interest by selling the idea to a handful of plaintiffs who had nothing to lose but everything to gain, and once a handful of plaintiffs signed retainer agreements, the plaintiffs’ attorneys then go to a judge and get a certification as a class action lawsuit, and now they can go out and advertise to generate as many plaintiffs as possible to participate in the class action. It’s all a hoax. The attorneys create a below-the-radar marketing campaign to promote the idea of their lawsuit, and this phase of the pre-litigation often happens years before the defendants are even named.
Understanding the NAR Settlement: The NWMLS is The Only MLS With Guts To Refuse to Settle
Thank God for the NWMLS (the Northwest MLS) which refused to settle by paying out millions to the plaintiffs’ attorneys. I am proud to say I am a member of the NWMLS and have been for a long time. I’ve written many articles praising the NWMLS for how they stand tall in ethics and with their rules and practices. Here is a quote from a recent NWMLS publication:
NWMLS will not opt-in to NAR’s proposed settlement agreement. NWMLS is owned by its member real estate firms and not affiliated with NAR.
NWMLS has led the industry with initiatives that afford sellers and buyers transparency, meaningful choice and clear opportunities to negotiate their broker’s compensation. In 2019, NWMLS eliminated the requirement that a seller offer compensation to the buyer’s broker. At the same time, NWMLS made public any amount of compensation offered to the buyer’s broker to inform buyers of any such offer.
In 2022, NWMLS again led the industry by providing even more transparency and flexibility for buyers, sellers and brokers. The most notable changes included:
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- “De-coupling” broker compensation, meaning that any compensation the seller chooses to offer the buyer broker is set and paid by the seller — not the listing broker
- Any compensation offered by the seller to the buyer broker is prominently stated on the first page of the purchase and sale agreement, with an opportunity for that compensation to be negotiated by the buyer and the buyer’s broker.
NWMLS’ most recent consumer initiative was revising Washington’s “Agency Law” effective January 1, 2024. The new law requires brokers to enter into a written services agreement to represent either a buyer or a seller (previously only required for sellers). All services agreements must be entered into at the outset of the parties’ relationship and comprehensively address broker compensation and the details of representation.
NWMLS’ rules and forms, together with the revised Agency Law, provide for consumer-friendly brokerage relationships. Sellers negotiate how much to compensate the listing firm and decide whether to offer to contribute toward the buyer’s broker compensation and the amount of any such offer. Buyers agree how much to pay their own brokers at the outset of their relationship and can then negotiate for the seller to help cover that cost as part of the purchase.
NAR’s removal of compensation transparency from the MLS pushes consumers and brokers to make secret deals off MLS, inviting deceptive practices, discrimination and unfair housing. Depriving buyers of information about the transaction risks harming buyers, especially those buyers who are already disadvantaged, including first-time home buyers and members of protected classes. Prohibiting offers of compensation in the MLS also unnecessarily restrains the seller’s choice and absolute right to offer compensation to a brokerage firm representing the buyer.
Instead of restricting consumer choice, NWMLS has seized every opportunity to enhance the quality of real estate brokerage services in the Northwest and will continue to do so.
The NWMLS has it exactly right when it says, “NAR’s removal of compensation transparency from the MLS pushes consumers and brokers to make secret deals off MLS, inviting deceptive practices, discrimination and unfair housing.”
Understanding the NAR Settlement and What Listing Agents Are Doing Now
How does all this work out in practice where the rubber meets the road? Listing agents will continue to have the kinds of conversations I played out above with their home sellers, and the sellers will agree that they want to offer to pay a buyer’s agency fee equal to half of the total commission, or some similar amount, and buyer’s agents will text the listing agent when they are getting ready to draft an offer for their buyers and ask how much the seller is paying to the buyer side. The listing agent will text back the amount, and it will be the same amount we as buyer’s agents would expect to get paid as we always have. That’s it. Nothing has changed, except that the MLS’s that participated in the settlement agreement, the brokerages that signed settlement agreements, and the NAR participating brokerages will now be involved in secrecy, non-disclosure, and possibly deceptive practices.
Fortunately, if you’re in Washington State and a member of the NWMLS as I am, you don’t have to be involved in any of that nonsense and chicanery, because listing agents can input the commission offered by sellers in the MLS listing detail sheet, as we always have.
Understanding the NAR Settlement and How it Effects Home Buyers and Home Sellers
Contrary to claims of the lawsuit’s attorneys and pleadings, none of this will actually effect home buyers or home sellers. Life will go on as usual. Buyers and sellers won’t notice any changes, and any promises that sellers will save commissions was all a hoax. Fair market value is fair market value, and supply and demand governs the prices in a free enterprise system, so buyers will pay fair market value, and sellers will pay commissions to list and commissions to motivate buyer’s agents to bring buyers.
What then was the years of litigation and posturing all about? That’s easy. Follow the money.
Sources and More Reading:
Moehrl v. National Association of Realtors, et al.
Consolidated Class Action Complaint
Third Amended Comlaint in Burnett
Burnett Court Preliminary Approval of Settlement
RE/Max Settles Claims for $55 Million
Important Court Documents in Burnett
Last Updated on July 6, 2024 by Chuck Marunde
