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Realtor Association Settles Lawsuit on Commission Rules. Fresno Broker Fears the End of Market Transparency
Edward Smith updated website photo 2024
By Edward Smith
Published 1 year ago on
March 15, 2024

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The National Association of Realtors will pay $418 million to compensate U.S. home sellers and change rules around home listings.

One major Fresno broker says the ruling may make MLS obsolete, upending transparency.

The rule changes are set to go into effect in mid-July.


A $418 million settlement announced Friday between the National Association of Realtors and a group of U.S. home sellers and some brokerages comes with the biggest changes to the home buying process in decades.

Rule changes could make the NAR’s Multiple Listing Service obsolete, jeopardizing transparency in the marketplace, one Fresno Realtor says.

The settlement comes after a lawsuit saying NAR’s Multiple Listing Service unfairly propped up agent commissions. The rules also incentivized agents representing buyers to avoid showing their clients listing where the seller’s broker was offering a lower commission to the buyer’s agent, plaintiff’s attorneys argued.

As part of the settlement, beginning in July, brokers selling homes no longer have to offer upfront compensation to buyer’s agents. New rules also leave open the possibility for buyers and sellers to negotiate outside MLS entirely. The $418 million will help compensate home sellers nationwide.

Those rule changes could make the MLS obsolete, said J.P. Shamshoian, CEO of Realty Concepts. Should the MLS disappear, he said the transparency sellers and especially buyers have become accustomed to over the decades since its implementation could disappear.

“You’re going to limit the available buyer pool that sellers are marketing to,” Shamshoian said. “And for buyers, if MLS goes away, which I think is a real possibility, they will never again know whether or not they’re seeing all the available properties that are on the market.”

Without Agent Commission Guarantees, Value of MLS Diminishes

The rule changes, which are set to go into effect in mid-July, represent a major change to the way real estate agents have operated going back to the 1990s, and could lead to homebuyers and sellers negotiating lower agent commissions.

Currently, agents working with a buyer and seller typically split a commission of around 5% to 6% that’s paid by the seller. This practice essentially became customary as home listings included built-in offers of “cooperative compensation” between agents on both sides of the transaction.

Under new rules, sellers and buyers would negotiate agent commissions.

Without the guarantee of a buyer’s agent commission, there are questions about what value the MLS will add.

Without the MLS, Shamshoian said sellers will not get as much exposure for their listings and buyers won’t always know what’s on the market.

“What I think may end up happening is that MLSs go away altogether, and it just creates a massive amount of confusion about what’s actually on the market, who can represent the buyer, who can’t represent the buyer, again it will look a lot like how the commercial real estate industry looks right now, which will be a disaster for both buyers and sellers.”

Implications of the Settlement

But the rule changes the NAR agreed to as part of the settlement could give home sellers and buyers more impetus to negotiate lower agent commissions.

“It may take some time for the changes to impact the marketplace, but our hope and expectation is that this will put a downward pressure on the cost of hiring a real estate broker,” said Robby Braun, an attorney in a federal lawsuit brought in 2019 in Chicago on behalf of millions of home sellers.

Analysts with Keefe, Bruyette & Woods also anticipate that the NAR rule changes will lead to lower agent commissions and could persuade some homebuyers to skip using an agent altogether.

“In our view, the combination of mandated buyer representation agreements and the prohibition of blanket compensation offers made by listing agents and sellers should result in significant price competition for buyer agent commissions,” the analysts wrote in a research note Friday.

Other Lawsuits and Settlements

The NAR faced multiple lawsuits over the way agent commissions are set. In late October, a federal jury in Missouri found that the NAR and several large real estate brokerages conspired to require that home sellers pay homebuyers’ agent commissions in violation of federal antitrust law.

The settlement, if approved by the court, resolves that and similar suits faced by the NAR. It covers over one million of the NAR’s members, its affiliated Multiple Listing Services and all brokerages with a NAR member as a principal that had a residential transaction volume in 2022 of $2 billion or less.

“Ultimately, continuing to litigate would have hurt members and their small businesses,” Nykia Wright, NAR’s interim CEO, said in a statement. “While there could be no perfect outcome, this agreement is the best outcome we could achieve in the circumstances.”

The settlement does not include real estate agents affiliated with HomeServices of America and its related companies.

Last month, Keller Williams Realty, one of the nation’s largest real estate brokerages, agreed to pay $70 million and change some of its agent guidelines to settle agent commission lawsuits.

Two other large real estate brokerages agreed to similar settlement terms last year. In their respective pacts, Anywhere Real Estate Inc. agreed to pay $83.5 million, while Re/Max agreed to pay $55 million.

The Associated Press contributed to this story.

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Edward Smith,
Multimedia Journalist
Edward Smith began reporting for GV Wire in May 2023. His reporting career began at Fresno City College, graduating with an associate degree in journalism. After leaving school he spent the next six years with The Business Journal, doing research for the publication as well as covering the restaurant industry. Soon after, he took on real estate and agriculture beats, winning multiple awards at the local, state and national level. You can contact Edward at 559-440-8372 or at Edward.Smith@gvwire.com.

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