Why Everyone Needs To Pay Attention to the NAR Lawsuits

The National Association of Realtors (NAR) has long been a powerful force in the real estate industry. With over a million members, it has played a significant role in shaping the way real estate transactions are conducted in the United States. It sets industry standards and codes of ethics, provides education and training, and advocates for policies that benefit its members. However, in recent years, the NAR has come under scrutiny, facing lawsuits that challenge some of its longstanding practices, particularly in relation to commissions.

The NAR Lawsuits to Watch

In 2019, the NAR faced a major lawsuit that alleged anti-competitive practices. The lawsuit, known as Moehrl v. NAR, claimed that the NAR’s rules and policies artificially inflated commission rates by requiring all member brokers to make a blanket, non-negotiable offer of buyer broker compensation when listing a property on a Multiple Listing Service (MLS).

This meant that even if a buyer’s agent were willing to accept a lower commission, the NAR’s rules effectively prevented this negotiation. Other lawsuits with similar claims have also popped up since with accusations around anti-competitive practices, with major ones including Sitzer/Burnett v NAR and REX v Zillow/NAR in 2021.

The NAR lawsuits could have the biggest impact on real estate commissions, including:

  1. Increased Competition: If the lawsuit forces the NAR to change its policies, it could open up the market to more competition. Buyers’ agents may be able to negotiate their commissions, potentially reducing the overall cost of real estate transactions.
  2. More Transparency: The lawsuit may lead to increased transparency in commission structures. Buyers and sellers may have a clearer understanding of how commissions are divided and may have more say in the negotiation process.
  3. Shift in Business Models: Real estate agents and brokerages may need to adapt their business models to remain competitive. Alternative models, like flat-fee or reduced commission structures, may become more common if the NAR’s rules change.
  4. Potential Savings for Consumers: If the lawsuit leads to lower commission rates, it could translate into savings for home buyers and sellers. For example, listing prices may come down since the buyer agent commission is no longer “baked-in” to the listing price. This would be particularly beneficial for first-time buyers and those on a tight budget.
  5. Impact on Buyer Agents: This is the biggest question mark if the commission structure is changed. Buyers will no longer be able to pay their agents from the proceeds of the purchase price, so the value of buyers agents and who pays them will be the biggest shift if these lawsuits are successful.

In Summary

The NAR lawsuits have the potential to reshape the real estate industry and how commissions are structured. While the outcome is uncertain, it’s clear that the real estate landscape could change significantly if the NAR is forced to modify its practices. Homebuyers and sellers, as well as real estate professionals, should keep a close eye on the developments in this lawsuit as it unfolds, as it could have a lasting impact on the industry.

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