11/02/23 Update: The CEO of NAR® resigned two days after the verdict, following the publication of this article.

Again, the National Association of Realtors® (NAR®) is in hot-money water, just weeks after the president resigned due to sexual harassment allegations. This time, NAR® is making headlines for losing an anti-trust lawsuit evolving from their cooperative compensation rules.

Now, NAR® is faced with payment of a minimum $1.8 billion in losses suffered by buyers and sellers of homes. This compensatory dollar amount may swell to up to $5.4 billion when the court decides to issue punitive treble damages.

Parties to the lawsuit claim the NAR® membership and compensation requirement for MLS participation violates anti-trust laws and amounts to a full-blown conspiracy to inflate broker fees.

These long-followed, industry-wide cooperative compensation rules create a number of questionable practices in violation of anti-trust law, namely:

  • preventing multiple listing services (MLSs) from disclosing fee rates to consumers;
  • misleading buyers into thinking the buyers broker’s services are free;
  • bundling the buyers and sellers brokers fees, essentially positioning the seller to always pay both fees;
  • allowing buyers brokers to filter MLS listings based on the sellers’ fee rates for buyer agents; and
  • limiting lockbox access to NAR members only, not MLS participants in general.

Surprised that a buyer needs to know the amount of compensation their agent is getting for their services? (Apparently, you aren’t alone, as this material fact in a home sales transaction was a “shocker” to NAR®).

While NAR® (as well as brokerages, Keller Williams and HomeServices) chose to fight this to the bitter end — and will continue to do so through the appeals process — some brokerages read the room and chose to settle out of court before it was too late.

Fortunately for the brokerages that decided to settle out of court — namely, the Re/Max brand, which includes brokerages like Coldwell Banker and Century 21, among others — they are not part of the $1.8 billion in losses suffered by sellers and buyers of homes. Instead, they will pay a relatively low $55 million to a settlement fund.

Further, as part of the settlement, Re/Max will no longer require its brokers or agents to be members of NAR. No good reason for them to contribute to the payment of NAR’s $1.8 billion judgment.

Related article:

NAR® members jump ship following sexual harassment allegations and more anti-trust lawsuits

What will change

While this court case was decided in Missouri, the implications are far reaching. In fact, the U.S. Department of Justice continues to look into NAR® practices and is likely to file another lawsuit following a 2020 lawsuit which was withdrawn “to permit a broader investigation of NAR’s rules and conduct” when their digging turned up more than they bargained for.

With some media pundits calling this “an earthquake” for the industry and others saying this was “just the beginning,” what will actually change as a result of this case?

Not much, and nothing soon.

NAR® was officially outlawed from price fixing in 1981 as a violation of anti-trust laws. [People v. National Association of Realtors (1981) 120 CA3d 465]

Here in California, the practice was outlawed yet again in 2003, when local associations of Realtors® attempted to sidestep the rules by banning brokerages offering fee discounts from participating in the MLS. [Freeman v. San Diego Association of Realtors (9th Cir. 2003) 322 F3d 1133]

However, as evidenced by this case, the practice persists.

Of course, NAR® remains confident it will ultimately win through the appeals process. In fact, in an internal memo reported in the New York Times, the new president said “this verdict does not require a change in our rules.” Really?

In a classic case of wearing your rose-colored glasses a little too tight, NAR’s® confidence in itself (read: hubris) continues to overwhelm any sense of reality. Worse, it will continue to do damage to consumers and real estate agents who are left with little choice but to deal with NAR® affiliated brokers in order to buy or sell a house or be an agent in transactions.

Related article:

The real estate agent rip-off


How your practice can change

NAR® and the California Association of Realtors® (CAR®) have been on the receiving end of anti-trust lawsuits for decades — and they will continue to come as long as NAR® fights them.

Stay ahead of the curve by removing yourself from these anti-trust behavior groups now.

But what about your access to CAR® forms, you ask?

CAR® publishes real estate forms and, over the years, firsttuesday has received many messages about Realtors® requiring agents to only submit purchase agreements on their trade-published forms.

However, RPI forms are free to download and use (no membership required). Further, the Department of Real Estate (DRE) requires agents to present all legitimate offers to their clients, no matter whether the form publisher is RPI, CAR®, another independent publisher — or even written up on scrap paper.

Agents who fail to submit all offers commit a reportable offense, as reiterated by the DRE again and again.

Editor’s note – Connor Wallmark, firsttuesday President and Production Manager, was subpoenaed in a trademark and copyright infringement lawsuit and countersuit between CAR and PDFiller to testify in 2018. firsttuesday was not a party to the litigation, but as a competitor, does publish real estate forms used for the same purpose as CAR forms. 

But the biggest takeaway from this lawsuit is: always be upfront — open — with the disclosure of your fee and cost-of-transaction disclosures with both buyer and seller clients. [See RPI Form 150 §16]

Disclosing all fees upfront helps you maintain trust among consumers of your services when it comes to their reliance on your brokerage practice.

Moreover, disclosure of all fees — whether it be on the buy side or sell side — is required by law. [California Business and Professions Code 10176(g); See RPI Form 102]

Related article:

Disclosure of buy-side fees: a compliance blindspot for some real estate brokers