Sorting facts from falsehoods about the NAR settlement
The conclusion of lawsuits brought against the National Association of Realtors will change the way commission structures are communicated and ensure greater transparency for consumers
You’ve likely heard by now that a pending resolution (still subject to court approval) to lawsuits brought against the National Association of Realtors (NAR) will change the way real estate is transacted across the country. But like many Americans, you may still have questions about what inspired the lawsuits, why the NAR agreed to a $418 million settlement, what it means to future home buyers and sellers—and specifically what it may mean for the local real estate market in Greenwich.
The NAR is the nation’s largest real estate association, representing more than 1.5 million members across residential and commercial segments. In addition to the NAR, there are also state-level Realtor associations. The town of Greenwich has its own Greenwich Association of Realtors—celebrating its 100th anniversary this week—as well as its own Greenwich Multiple Listing Service (GMLS). Many of the town’s real estate brokerages and agents belong to each tier of those associations, including the NAR.
The plaintiffs argued that the NAR had artificially inflated commission rates to a de facto standard 6%, and that the structure of how commissions are paid—with the seller typically incurring the buyer’s agent’s commission—inspired buyers’ Realtors to lead clients to higher-priced properties in order to boost those commissions.
The NAR contends— and cited documentation proving—it never set nor mandated commission structure or percentages. In a March 19, 2024 press release, the NAR referred to its Handbook’s MLS policy, which reads: “Boards and associations of Realtors and their MLSs shall not: 1. Fix, control, recommend, or suggest the commissions or fees charged for real estate brokerage services. 2. Fix, control, recommend, or suggest the cooperative compensation offered by listing brokers to potential cooperating brokers.”
The Washington Post’s Editorial Board had a differing opinion. In a March 20, 2024 editorial, they wrote, “The National Association of Realtors last week committed to abandoning a century-old tradition: requiring sellers’ agents to split a service fee, expressed as a percentage of the sales price, with buyers’ agents. Though in theory the rate is negotiable, in practice it has been anything but because of rules the NAR enforces through conditions it places on access to the databases on which nearly all properties for sale are listed. This has led Realtors to agree on a standard commission—that 6% or so. This practice limited competition among agents on price and service quality.”
In the interest of its members and moving the industry forward, the NAR agreed to settle the cases, while denying any wrongdoing. In addition to the $418 million paid for damages, the settlement prohibits listing agents from advertising—for example, on Multiple Listing Services—the commission percentage sellers will pay to buyers’ agents, if they’ll pay that commission at all. In the March 20 editorial, The Washington Post’s Editorial Board saw a silver lining for home buyers across the county and even in Greenwich, where they’ve been challenged by low inventory and stiff competition: “Lower transaction costs could also encourage [sellers] to sell more often, bringing badly needed supply to the housing market—and driving down prices even further.” Stacey Loh is the executive vice president and CEO of the Greenwich Board of Realtors (GAR), She’s been keenly following the NAR news and noted that there’s a lot of misinformation surrounding the settlement, from national news outlets and pundits. Loh pushed back on the Washington Post’s op-ed specifically: “Transaction costs don’t keep sellers from selling,” she told Greenwich Time. “Lack of inventory and recent higher interest rates keep sellers from selling because they have a lack of options on the other side. Further, no homeowner is required to work with a broker to sell their home, yet 89% of sellers chose to use one according to NAR’s most recent profile of home buyers and sellers. The home buying and selling process can be complex. Working with an expert helps to ensure you have a fiduciary representing you and looking out for your best interests.”
Loh pointed out that Connecticut—like at least 17 other states—requires buyer agency agreements, which clearly define the terms of their broker’s compensation. The original suit and subsequent “copycat” cases were filed in states that did not have this requirement, she noted. Loh suggested being wary of pundits predicting that the settlement will have a profound impact on home prices. She said there’s no way to know if that will prove out. Still, she said, “All of this is better for transparency.”
What might all this mean for home buyers and sellers in Greenwich, specifically? Coldwell Banker Realtor and Greenwich Time Sound Off columnist Cynthia De Riemer said, “In most ways, the NAR settlement won’t fundamentally change how real estate is transacted in Greenwich. This is because for more than 20 years, Connecticut has required buyer representation, unless a buyer specifically opts out of being represented by a real estate agent. Real estate brokers are overseen by the Department of Consumer Protections (DEP), which has strong laws and ethics rules for Realtors to follow and to protect sellers and buyers.
“What will change is how cooperating broker fees will be communicated to other brokers,” she continued. “The current system allows offers of compensation to be listed on the MLS, which has been very efficient. The proposed new rules won’t allow the offers of compensation to be shared on the MLS; it is yet to be determined how this information will be shared.”
GAR’s Loh pointed Greenwich Time readers to a helpful resource (www.nar. realtor/competition-in-real-estate) for more information about how local MLS broker marketplaces work, the economics of buying a home, and the value of working with Realtors.