A lot has happened in the real estate compliance arena the last 12 months – some would argue more than in the last 12 years. And like everything these days, there’s more to it than what can be relayed in an “elevator” pitch.

One of the biggest changes has been the discontinuation of the National Association of Realtors’ (NAR) requirement that buyers’ agent compensation be listed on the multiple listing services (MLSs). What was par for the course has now been altered, and the past few months have been filled with questions while brokers and real estate agents adjust to a new normal.

How did we get here, and what was the problem? RESPA News’ NAR Settlement Resource Center will provide you with the context behind this change, as well as insight from industry experts on what these changes mean for your business.

What was the rule at issue?

NAR’s 2019 Handbook on Multiple Listing Policy, the policy at issue in Sitzer-Burnett v. NAR, et al., defined an MLS as, among other things, a “facility for the orderly correlation and dissemination of listing information so participants may better serve their clients and customers and the public.”

According to the handbook, “[T]he basis of the multiple listing activity is the creation of a facility whereby Realtors may most effectively invite other brokers to enter into cooperative agreements with them for the sale of their listings and provide information necessary to permit such cooperation; by which information is accumulated and disseminated to enable authorized participants to prepare appraisals and other valuations of real property; and by which participants engaging in real estate appraisal contribute to common databases.”

“[An MLS] is a platform on which members identify properties for which they are acting as the broker for its sale,” Saul Ewing, LLP Partner Francis “Trip” Riley, part of one of the Sitzer-Burnett defendants’ legal team, explained. “The property’s details are supplied, as well as any condition for purchasing.”

The policy at issue in this case was NAR Policy Statement 7.23, which contained information on specifying compensation on each listing filed in an MLS.

“In filing property with the MLS, participants make blanket unilateral offers of compensation to the other MLS participants and shall therefore specify on each listing filed with the service the compensation being offered by the listing broker to the other MLS participants,” the handbook stated. “This is necessary because cooperating participants have the right to know what their compensation will be prior to commencing their efforts to sell.

“The listing broker retains the right to determine the amount of compensation offered to subagents, buyer agents, or to brokers acting in other agency or nonagency capacities, which may be the same or different,” it added. “This shall not preclude the listing broker from offering any MLS participant compensation other than the compensation indicated on his listings as published by the MLS, provided the listing broker informs the other broker in writing in advance of their submitting an offer to purchase and provided that the modification in the specified compensation is not the result of any agreement among all or any other participants in the service …

“Multiple listing services shall not publish listings that do not include an offer of compensation expressed as a percentage of the gross selling price or as a definite dollar amount, nor shall they include general invitations by listing brokers to other participants to discuss terms and conditions of possible cooperative relationships.”

The initial complaint argued the requirement for brokers to adhere to and implement these terms to have access and utilize NAR’s MLSs was an impermissible restraint on competition. The plaintiffs argued:

• NAR and the national brokers’ conspiracy forced homesellers to pay a cost that, in a competitive market and were but for the defendants’ anticompetitive restraint, would be paid by the buyer.
• Most buyer brokers would not show homes where the seller was offering a lower buyer commission or would give priority to showing homes with higher commission offers first. “As a result, to gain the cooperation of buyer brokers, selling brokers are incentivized to offer a higher adversary/buyer broker commission as part of complying with NAR’s mandatory adversary commission rule.”
  

“If NAR’s adversary commission rule were not in place, then the cost of buyer broker commissions would be paid by their clients (homebuyers),” the complaint stated. “Buyer brokers would thus have to compete with one another by offering a lower commission rate. The adversary commission rule thereby restrains price competition among buyer brokers because the person who actually retains the buyer broker – the homebuyer – does not negotiate or pay the commission for his or her broker.”

Throughout its explanation of the cooperative compensation rule in its handbook, NAR referred its members to the MLS antitrust compliance policy, the first policy provided. The policy explicitly stated the boards and association of Realtors and their MLSs could not:

• Fix, control, recommend, or suggest the commissions or fees charged for real estate brokerage services.
• Fix, control, recommend, or suggest the cooperative compensation offered by listing brokers to potential cooperating brokers.
• Base dues, fees, or charges on commissions, listed prices, or sales prices. Initial participation fees and charges should directly relate to the costs incurred in bringing services to new participants.
• Modify, or attempt to modify, the terms of any listing agreement; this does not prohibit administrative corrections of property information necessary to ensure accuracy or consistency in MLS compilations.
• Refuse to include any listing in an MLS compilation solely on the basis of the listed price.
• Prohibit or discourage participants from taking exclusive agency listings or refusing to include any listing in an MLS compilation solely on the basis that the property is listed on an exclusive agency basis.
• Prohibit or discourage participants from taking “office exclusive” listings; certification may be required from the seller or listing broker that the listing is being withheld from the MLS at the direction of the seller.
• Give participants or subscribers blanket authority to deal with or negotiate with buyers or sellers exclusively represented by other participants.
• Establish, or permit establishment of, any representational or contractual relationship between an MLS and sellers, buyers, landlords, or tenants.
• Prohibit or discourage cooperation between participants and brokers that do not participate in the MLS.
• Prohibit or discourage participants or subscribers from participating in political activities.
• Interfere in or restrict participants in their relationships with their affiliated licensees.

“The purpose of multiple listing is the orderly correlation and dissemination of listing information to participants so they may better serve the buying and selling public,” NAR’s MLS antitrust policy stated. “Boards and associations of Realtors and their MLSs shall not enact or enforce any rule which restricts, limits, or interferes with participants in their relations with each other, in their broker/client relationships, or in the conduct of their business [in the ways described above.]”

Riley pointed out in an email to RESPA News that, as was stated in NAR’s antitrust compliance policy, the commission/compensation paid to the buyer’s agents was always negotiable, and so there could be no “collusion” to maintain certain commission amounts, as the complaint alleged.

Despite the antitrust compliance policy, when the settlement was announced, media outlets were reporting NAR set or guided commissions at a standard rate (the usual quoted amount was 6 percent, divided between the seller and buyer broker). NAR spent a significant amount of time and resources to correct this assumption, stating it does not set commissions, and the cooperative compensation rule never prevented commission negotiations between brokers and their clients.

Legal action begins

The first case filed was Moehrl v. National Association of Realtors, et al. in March 2019. The next month, another was filed on behalf of Joshua Sitzer and Amy Winger against NAR, Realogy Holdings Corp., HomeServices of America, Inc., RE/MAX Holdings, Inc., and Keller Williams Realty, Inc. – the case that would eventually become Sitzer-Burnett v. NAR.

Litigation for Sitzer-Burnett continued for four years, and on Sept. 5, 2023, Anywhere, one of the broker defendants, agreed to a settlement to resolve the allegations just weeks before the trial. RE/MAX followed soon after on Sept. 18.

It was Oct. 31 when a jury found NAR and the brokerage defendants liable for violations of antitrust laws and engaging in a conspiracy to artificially inflate commissions paid to real estate agents.

Riley, a member of the defendants’ legal team, noted the jury may not have had all the facts as it deliberated.

“The judge did not permit defendants to present evidence of the benefits of the seller allowing the listing broker to offer to pay some of its commission to the buyer brokerage,” Riley said. “Thus, the jury was left with one question on liability: was there an understanding between NAR and defendants that caused commissions to be maintained at an average rate? Then the jury just used the total commissions earned by all defendants as damages regardless of the fact that some amount of compensation would have been paid regardless of alleged offer rule.”

After the verdict was announced, other broker defendants also settled, favoring smaller penalty payouts. NAR and the Sitzer-Burnett plaintiffs proposed a settlement in March 2024, and in April the last defendant in the case, HomeServices of America, settled as well.

NAR’s settlement terms went into effect Aug. 17 and are scheduled for final court approval Nov. 26.

Aftermath

Copycat cases, cases on behalf of homebuyers, and other litigation matters related to the settlement have continued. An antitrust investigation started by the U.S. Justice Department (DOJ) in 2018 also picked up steam, with the U.S. Court of Appeals for the District of Columbia determining in April 2024 the DOJ was able to reopen its inquiry into substantially the same issues raised by the Sitzer-Burnett plaintiffs.

NAR has been fighting this investigation alongside the civil actions and stated its intent to petition for writ of certiorari from the U.S. Supreme Court to resolve the dispute, arguing the DOJ violated an agreement that it would not reopen its antitrust inquiry.

Beyond the court room, state legislatures have been introducing bills to implement new requirements for buyers’ agreements and trade organizations have released updated standardized forms to comply with these changes.

It is still the early days of this transition, and these settlement terms will continue to impact the real estate and title communities as they adjust.

Be sure to bookmark RESPA News’ NAR Settlement Resource Center and check back regularly for the latest updates.