NAR settles lawsuit over broker commission fees

The Chicago-based National Association of Realtors will pay $418 million as part of a settlement agreement to resolve lawsuits filed against the organization and its members on behalf of home sellers over broker commissions.

The settlement comes after a Missouri federal jury handed down a landmark $1.8 billion verdict in October last year, finding that the National Association of Realtors and several major real estate brokerages conspired to artificially inflate home sales commissions. While the association announced that it would appeal the decision, a similar case was expected to be heard in Illinois federal court this year.

“NAR has worked hard for years to resolve this case in a way that benefits our members and American consumers,” NAR interim CEO Nykia Wright said in a statement Friday announcing the settlement. “It has always been our goal to protect consumer choice and protect our members to the fullest extent possible. “This solution achieves both of these goals.”

The deal is subject to court approval and would fundamentally change the way homes are bought and sold by eliminating the industry-standard practice that buyer and seller agents will split a 6% commission on home sales.

NAR also agreed to create a new multiple listing service rule that “prohibits broker compensation offerings on the MLS.” Real estate professionals can also discuss broker compensation with their clients outside of the MLS.

Additionally, NAR will require MLS participants working with buyers to enter into written agreements with buyers. These agreements determine how real estate professionals are paid and are already used in Illinois.

Wright said continuing the lawsuit would “hurt members and their small businesses.”

“While not a perfect outcome, this agreement is the best we could achieve under the circumstances. “This provides a path forward for our industry,” Wright said in the news release.

Real estate firms RE/MAX and Anywhere Real Estate (formerly Realogy Holdings Corp.) have 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 case has contributed to turmoil at NAR, which has recently undergone a series of leadership changes. Over the past few months, NAR has seen two presidents and a CEO resign following sexual harassment allegations against former president Kenny Parcell.

“NAR is firmly focused on the future and moving this industry forward,” Kevin Sears, NAR’s president, said in the news release. “This will be a time of adjustment, but the basics will remain the same: Buyers and sellers will continue to have many options when deciding to buy or sell a home, and NAR members will continue to use their skills, diligence, and diligence to protect the interests of their clients.”