NAR Lawsuit Update: What to Know

NAR Settlement Update | Q&A

The recent settlement agreed upon by the National Association of Realtors (NAR) is soon poised to reshape the U.S. real estate landscape, including the relocation industry. This landmark decision will dismantle established commission structures, leading to an era of increased transparency, competition, and consumer protection.

Below are common Questions & Answers regarding NAR’s settlement practice as of today:

When does it take effect?

  • The NAR Lawsuit is currently scheduled to go into effect on August 17, 2024, but this date may be pushed back again. By September 16, all Realtors (NAR members) and NAR related MLS organizations will be required to comply with NAR settlement provisions.

What is NEI’s position on the real estate agent commission ruling?  

  • NEI recommends approaching this topic on an “as needed” basis for the next several months. Once the settlement is finalized and any Department of Justice requirements are clarified, NEI will have a better sense of the longer-term impact on who pays the buyer agent’s commission.  
  • Eventually, policy updates may be needed to clarify exactly what is covered in those cases, but it is still too soon to make those adjustments at this time.

How is the ruling going to change the industry for both buyers and sellers beyond the commission fee structure?  

  • A primary concern for buyers is the ability to come up with the cash needed for the agent’s compensation on top of the challenge of saving for a down payment. This is likely to have the most impact on both lower income and first-time home buyers. Yet, relocating employees who lack new home closing cost benefits will also see their purchasing power diminished.
  • Even if sellers continue to cover commission in many cases, this change puts the burden of negotiating that “concession” into the contract squarely on the buyers and their agents.  
  • For buyers, using an experienced, highly trained agent becomes even more critical than ever, but many may look to save money by working directly with the listing agent or “going it alone.”  
  • Without representation, buyers are at a disadvantage: relocation policies should require the use of a qualified agent to be eligible for benefits.
  • Sellers unwilling to negotiate the buyers’ agent commission may find their home takes longer to sell.  
  • It has been a “sellers’ market” for a number of years, however, if many buyers drop out of searching for a new home, that sellers’ market could shift.

How will this ruling impact domestic U.S. corporate relocation programs? Are there international program implications?  

  • The expectation is, if buyer agent commissions are not paid by sellers or clients, the financial structure of client contracts will revert to the days of clients paying fees for services, rather than Relocation Management Companies (RMCs) covering their costs from real estate referral fees.  
  • For clients with robust programs, covering commission on the buyer side will become common and policies will reflect that, despite the additional cost: buyer agent compensation plus gross-up.  As a condition of covering new home closing costs, including commission, companies should require the use of relocation trained agents referred by NEI.  
  • Clients that do not cover new home closing costs or buyer agent compensation may see an impact on recruiting and retention as additional costs to a relocating employee may result in fewer home purchases.
  • Internationally, this should only impact those assignees moving to the U.S. with an intent to purchase a single-family home, which is typically a fairly small population.  

What steps should companies with relocation programs take to ensure no disruption to employee relocation/home sale?

Education is critical:

  • NEI has been training its single point of coordination Account Executives for months on the changes, impacts, and what to watch for in buyer agency agreements.  
  • NEI provides talking points to its Account Executives, an email with guidance to the relocating employee on what to look out for in those contracts, and an optional Addendum to Buyer Agency Agreement that relocating employees can use with the contract to help limit their risk.  
  • This NEI process is on-going and it will continue to be so until the market has absorbed the new processes and stabilizes.

Are there financial risks to corporate clients or RMCs? Is there an impact on home-sale rebates?

  • The financial risk to RMCs is the potential revenue loss from buyer agent referral fees. If companies do not cover that commission, the relocating employee will be responsible. In those cases, RMCs may not be able to collect the referral and will need to charge clients higher exception fees.  
  • Also, home sale rebates will likely be reduced or eliminated over time as those calculations assume a certain percentage of referral collection from agents on BOTH the selling and buying sides of each relocation.

Are there any NAR implications that the general public are not aware of/thinking about?

  • Yes; the ruling not only impacts buyers and sellers, but can impact relocating renters as well.  Many NEI clients already cover rental agent commission in markets where it is typical (e.g., New York, New Jersey, Boston, San Francisco, etc.) and this will not change. However, there may be more markets where this becomes common in the future. Renters may ultimately find themselves asked to sign agency agreements, if they are looking for single-family units.  

What is the industry mood towards the NAR ruling?

  • The industry is highly engaged with all the parties and decision makers, and is working behind the scenes to be prepared for a variety of “most likely” outcomes.  
  • It will require change, but that’s not new to relocation or real estate: both are resilient and will find ways to best serve clients and relocating families.
  • The Worldwide Employee Relocation Council has formed five subcommittees of nearly 60 industry volunteers who are monitoring the ruling and the impact on the industry.

Subcommittees consist of:

  • Brokers
  • Corporations
  • Mortgage & Lending
  • Real Estate Related Services
  • Relocation Management Companies: NEI’s Connie Pearson, Director Domestic Operations, is on the committee for RMCs  

NEI will continue to work in close partnership with service partners to educate clients and relocating employees to avoid surprises and frustration with the new ruling.  If you have any question about this developing situation, please contact your NEI Client Relations Manager at 800.533.7353 at any time.

Older Posts: March 15, 2024


National Association of Realtors Lawsuit Update

A significant development unfolded within the real estate industry as the National Association of REALTORS® (NAR) disclosed a comprehensive nationwide settlement addressing commission lawsuits initiated by sellers across various states. It is imperative to note that the settlement is not final; its final approval by the court is pending, and the court is unsure when this may happen.

The proposal includes two pivotal rule changes as part of this new settlement. Firstly, NAR has committed to implementing a new regulation prohibiting compensation offers on the MLS.  With the rule change, brokers and agents must directly negotiate compensation terms with their respective clients. Secondly, agents must formalize written buyer agreements with potential buyers before facilitating property tours.

These proposed rule changes would take effect mid-July, marking a significant shift in industry practices.

Key Practice Changes:

  • Consumers retain the right to opt for cooperative compensation, provided it is pursued off-MLS through negotiations and consultations with real estate professionals.
  • A new rule barring compensation offers on the MLS will be enforced, effective mid-July 2024.

Implications:

  • Despite the prohibition of communicating compensation offers through the MLS, various avenues for compensating buyer brokers will persist.
  • Compensation for buyer brokers will remain diverse and subject to negotiation between brokers and consumers. Compensation may include fixed-fee commissions paid directly by consumers, seller concessions, or a portion of the listing broker’s compensation.
  • Negotiating compensation terms between agents and the consumers they represent will remain paramount.
  • The industry may see reduced listing commissions and buyers responsible for paying their own representative.
  • With these rapid changes to the real estate sales process, it is more important than ever to work with highly trained and qualified relocation agents for both selling and buyer.
  • This announcement heralds a significant real estate paradigm shift, necessitating all stakeholders’ adaptation and diligence.

NEI has observed more locations implementing buyer agency agreements in recent months.  We increased counseling to buyers regarding these contracts with the early rulings on the NAR lawsuits and will continue to offer support to help avoid financial surprises at closing.  

Longer term, we anticipate a need for companies to review their policies to determine any benefit changes as the impacts of these industry disruptions become clearer.  

NEI continues to monitor the situation and will offer updates to our clients as they become available. Please get in touch with your NEI representative if you have any questions or want to discuss this further.

Older Posts: October 31, 2023


National Association of Realtors Found Liable

A jury reached a decision that could potentially change how real estate transactions are conducted in the U.S., creating opportunities for significant changes to commissions paid to real estate agents. In the case, Burnett v. NAR et al, the Kansas City, MO, jury found the National Association of Realtors (NAR), and some of the largest national real-estate broker franchisors conspired to artificially inflate home-sale commissions.

The basis of the conspiracy is the condition that a home seller must agree to pay a commission to the buyer’s agent before the home can be listed on NAR’s nationwide Multiple Listings Service database – a database controlled by local NAR associations. And, since most home sales are through the MLS marketplace, the plaintiffs claim home sellers are forced to pay a cost that should be paid by the buyer.

Under the new model, sellers may no longer be responsible for covering the seller’s and buyer’s agents’ commissions, allowing negotiation of different compensation models, and having buyers assume the responsibility of directly compensating their agents.

The NAR believes this could be a substantial challenge for first-time and low-income buyers who might lack the upfront funds to pay an agent, potentially depriving them of valuable expertise.

According to Worldwide ERC, the resolution of this and other related lawsuits could potentially change today’s real estate business by bringing competition, cutting costs, and providing customers with more options.

With uncertainty on how the ruling plays out, and NAR planning to appeal the decision with confidence, NEI will continue to monitor the situation and will offer updates as they become available. If you have any questions, please contact your NEI Client Relations Manager or NEI Client Development Contact at 800.533.7353.

NAR Settlement Update | Q&A

The recent settlement agreed upon by the National Association of Realtors (NAR) is soon poised to reshape the U.S. real estate landscape, including the relocation industry. This landmark decision will dismantle established commission structures, leading to an era of increased transparency, competition, and consumer protection.

Below are common Questions & Answers regarding NAR’s settlement practice as of today:

When does it take effect?

  • The NAR Lawsuit is currently scheduled to go into effect on August 17, 2024, but this date may be pushed back again. By September 16, all Realtors (NAR members) and NAR related MLS organizations will be required to comply with NAR settlement provisions.

What is NEI’s position on the real estate agent commission ruling?  

  • NEI recommends approaching this topic on an “as needed” basis for the next several months. Once the settlement is finalized and any Department of Justice requirements are clarified, NEI will have a better sense of the longer-term impact on who pays the buyer agent’s commission.  
  • Eventually, policy updates may be needed to clarify exactly what is covered in those cases, but it is still too soon to make those adjustments at this time.

How is the ruling going to change the industry for both buyers and sellers beyond the commission fee structure?  

  • A primary concern for buyers is the ability to come up with the cash needed for the agent’s compensation on top of the challenge of saving for a down payment. This is likely to have the most impact on both lower income and first-time home buyers. Yet, relocating employees who lack new home closing cost benefits will also see their purchasing power diminished.
  • Even if sellers continue to cover commission in many cases, this change puts the burden of negotiating that “concession” into the contract squarely on the buyers and their agents.  
  • For buyers, using an experienced, highly trained agent becomes even more critical than ever, but many may look to save money by working directly with the listing agent or “going it alone.”  
  • Without representation, buyers are at a disadvantage: relocation policies should require the use of a qualified agent to be eligible for benefits.
  • Sellers unwilling to negotiate the buyers’ agent commission may find their home takes longer to sell.  
  • It has been a “sellers’ market” for a number of years, however, if many buyers drop out of searching for a new home, that sellers’ market could shift.

How will this ruling impact domestic U.S. corporate relocation programs? Are there international program implications?  

  • The expectation is, if buyer agent commissions are not paid by sellers or clients, the financial structure of client contracts will revert to the days of clients paying fees for services, rather than Relocation Management Companies (RMCs) covering their costs from real estate referral fees.  
  • For clients with robust programs, covering commission on the buyer side will become common and policies will reflect that, despite the additional cost: buyer agent compensation plus gross-up.  As a condition of covering new home closing costs, including commission, companies should require the use of relocation trained agents referred by NEI.  
  • Clients that do not cover new home closing costs or buyer agent compensation may see an impact on recruiting and retention as additional costs to a relocating employee may result in fewer home purchases.
  • Internationally, this should only impact those assignees moving to the U.S. with an intent to purchase a single-family home, which is typically a fairly small population.  

What steps should companies with relocation programs take to ensure no disruption to employee relocation/home sale?

Education is critical:

  • NEI has been training its single point of coordination Account Executives for months on the changes, impacts, and what to watch for in buyer agency agreements.  
  • NEI provides talking points to its Account Executives, an email with guidance to the relocating employee on what to look out for in those contracts, and an optional Addendum to Buyer Agency Agreement that relocating employees can use with the contract to help limit their risk.  
  • This NEI process is on-going and it will continue to be so until the market has absorbed the new processes and stabilizes.

Are there financial risks to corporate clients or RMCs? Is there an impact on home-sale rebates?

  • The financial risk to RMCs is the potential revenue loss from buyer agent referral fees. If companies do not cover that commission, the relocating employee will be responsible. In those cases, RMCs may not be able to collect the referral and will need to charge clients higher exception fees.  
  • Also, home sale rebates will likely be reduced or eliminated over time as those calculations assume a certain percentage of referral collection from agents on BOTH the selling and buying sides of each relocation.

Are there any NAR implications that the general public are not aware of/thinking about?

  • Yes; the ruling not only impacts buyers and sellers, but can impact relocating renters as well.  Many NEI clients already cover rental agent commission in markets where it is typical (e.g., New York, New Jersey, Boston, San Francisco, etc.) and this will not change. However, there may be more markets where this becomes common in the future. Renters may ultimately find themselves asked to sign agency agreements, if they are looking for single-family units.  

What is the industry mood towards the NAR ruling?

  • The industry is highly engaged with all the parties and decision makers, and is working behind the scenes to be prepared for a variety of “most likely” outcomes.  
  • It will require change, but that’s not new to relocation or real estate: both are resilient and will find ways to best serve clients and relocating families.
  • The Worldwide Employee Relocation Council has formed five subcommittees of nearly 60 industry volunteers who are monitoring the ruling and the impact on the industry.

Subcommittees consist of:

  • Brokers
  • Corporations
  • Mortgage & Lending
  • Real Estate Related Services
  • Relocation Management Companies: NEI’s Connie Pearson, Director Domestic Operations, is on the committee for RMCs  

NEI will continue to work in close partnership with service partners to educate clients and relocating employees to avoid surprises and frustration with the new ruling.  If you have any question about this developing situation, please contact your NEI Client Relations Manager at 800.533.7353 at any time.

Older Posts: March 15, 2024


National Association of Realtors Lawsuit Update

A significant development unfolded within the real estate industry as the National Association of REALTORS® (NAR) disclosed a comprehensive nationwide settlement addressing commission lawsuits initiated by sellers across various states. It is imperative to note that the settlement is not final; its final approval by the court is pending, and the court is unsure when this may happen.

The proposal includes two pivotal rule changes as part of this new settlement. Firstly, NAR has committed to implementing a new regulation prohibiting compensation offers on the MLS.  With the rule change, brokers and agents must directly negotiate compensation terms with their respective clients. Secondly, agents must formalize written buyer agreements with potential buyers before facilitating property tours.

These proposed rule changes would take effect mid-July, marking a significant shift in industry practices.

Key Practice Changes:

  • Consumers retain the right to opt for cooperative compensation, provided it is pursued off-MLS through negotiations and consultations with real estate professionals.
  • A new rule barring compensation offers on the MLS will be enforced, effective mid-July 2024.

Implications:

  • Despite the prohibition of communicating compensation offers through the MLS, various avenues for compensating buyer brokers will persist.
  • Compensation for buyer brokers will remain diverse and subject to negotiation between brokers and consumers. Compensation may include fixed-fee commissions paid directly by consumers, seller concessions, or a portion of the listing broker’s compensation.
  • Negotiating compensation terms between agents and the consumers they represent will remain paramount.
  • The industry may see reduced listing commissions and buyers responsible for paying their own representative.
  • With these rapid changes to the real estate sales process, it is more important than ever to work with highly trained and qualified relocation agents for both selling and buyer.
  • This announcement heralds a significant real estate paradigm shift, necessitating all stakeholders’ adaptation and diligence.

NEI has observed more locations implementing buyer agency agreements in recent months.  We increased counseling to buyers regarding these contracts with the early rulings on the NAR lawsuits and will continue to offer support to help avoid financial surprises at closing.  

Longer term, we anticipate a need for companies to review their policies to determine any benefit changes as the impacts of these industry disruptions become clearer.  

NEI continues to monitor the situation and will offer updates to our clients as they become available. Please get in touch with your NEI representative if you have any questions or want to discuss this further.

Older Posts: October 31, 2023


National Association of Realtors Found Liable

A jury reached a decision that could potentially change how real estate transactions are conducted in the U.S., creating opportunities for significant changes to commissions paid to real estate agents. In the case, Burnett v. NAR et al, the Kansas City, MO, jury found the National Association of Realtors (NAR), and some of the largest national real-estate broker franchisors conspired to artificially inflate home-sale commissions.

The basis of the conspiracy is the condition that a home seller must agree to pay a commission to the buyer’s agent before the home can be listed on NAR’s nationwide Multiple Listings Service database – a database controlled by local NAR associations. And, since most home sales are through the MLS marketplace, the plaintiffs claim home sellers are forced to pay a cost that should be paid by the buyer.

Under the new model, sellers may no longer be responsible for covering the seller’s and buyer’s agents’ commissions, allowing negotiation of different compensation models, and having buyers assume the responsibility of directly compensating their agents.

The NAR believes this could be a substantial challenge for first-time and low-income buyers who might lack the upfront funds to pay an agent, potentially depriving them of valuable expertise.

According to Worldwide ERC, the resolution of this and other related lawsuits could potentially change today’s real estate business by bringing competition, cutting costs, and providing customers with more options.

With uncertainty on how the ruling plays out, and NAR planning to appeal the decision with confidence, NEI will continue to monitor the situation and will offer updates as they become available. If you have any questions, please contact your NEI Client Relations Manager or NEI Client Development Contact at 800.533.7353.

Published on
June 17, 2024
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