NAR Lawsuit Simplified: What It Is and What It Isn’t
There is a lot of confusion and misinformation surrounding the NAR lawsuit settlement, that’s why we put this simplified explanation together.
The antitrust lawsuits and various settlements have been a rollercoaster of information and misinformation, with many agents feeling left confused and even afraid of what it means to their clients, their businesses, and their livelihoods. Let’s break it down.
The lawsuit against the National Association of REALTORS® (NAR) was centered on complex issues within the real estate industry, particularly focusing on alleged antitrust violations.
According to the attorneys for the plaintiff, the lawsuit raised concerns about potential price-fixing and lack of transparency in commission rates, suggesting that the standard practices in the industry might lead to higher costs for buyers and sellers. They called for a more competitive market where commission rates are transparent and negotiable, believing this would lead to better services and lower costs in real estate transactions.
On the other hand, from the real estate professional’s perspective, the lawsuit was seen as a challenge to the traditional compensation model that has been a foundation of the real estate market. Agents argue that the commission structure, which often involved the seller paying the buyer’s agent’s fee (usually split from the listing agent’s commission), facilitated a cooperative environment that benefits all parties involved in a transaction. They contend that the commission reflects the extensive work, expertise, and risk agents undertake in each transaction and that the market naturally regulates these fees through competition and negotiation.
The NAR Settlement Terms
When the dust settled on the settlement, only two relatively small changes occurred in our practice. First, offers for buyer’s agent compensation can no longer be put in the MLS. Second, MLS participants acting for buyers, (Buyer’s Agents) must have a written representation agreement (Buyer’s Agency Agreement) with buyers in place.
That’s it. All that bluster to settle on these two things.
What do these terms mean for consumers? Real estate listing agents will have to communicate with buyer’s agents differently, particularly around commissions, and that buyers in this market will need to have a signed written agreement with agents regarding commissions and expectations.
Signing a Buyer Agency Agreement is not new at all. In fact, it’s long been a best practice for buyers’ agents to best serve their clients as well as ensure they will be paid for their efforts. Without that agreement, agents, in most states, have a fiduciary responsibility to the seller and cannot serve the interests of the buyer. They also have no guarantee their buyers won’t “cheat” and buy with another agent. We have taught for years that every agent should have their buyers sign one, and now it’s becoming mandatory.
What was this lawsuit NOT about?
This was not about making the industry better for buyers and sellers, getting the plaintiffs’ money back, or unethical practices of real estate professionals. It was a class-action lawsuit, which is, by design, in most cases, a money maker, mostly for attorneys.
In this case, let’s understand a little more about the attorneys for the plaintiffs. The law firm that initiated this lawsuit, Ketchmark, and McCreight, P.C. is a four-man firm.
Originally winning a judgment of $1.8 billion dollars, in March 2024, it dropped to a settlement of $418 million. The attorney fees based on the settlement come to around $256,000,000. Now, that number may change based on future rulings and judgments, but that is the amount THEY are making on the settlement.
By comparison, dividing up the $162 million that remains AFTER attorney fees, the 500,000 plaintiffs stand to receive just $324 a piece. That number is subject to change as more plaintiffs are added to the lawsuit, which is normal for class action suits. The more people that are added to the suit, the smaller the piece of the settlement pie for each plaintiff.
HOWEVER, it’s important to note that the attorney fees are taken off the top. So, regardless of how small the eventual consumer’s check will be, the attorney fees are not decreased. Ketchmark has inferred that this is just the beginning of the suits he intends to file.
What’s also important to note is that they started with a judgment of $1.8 billion but settled for $418 million. That’s a big drop, which is telling in and of itself. You have to ask why they would do that, and many believe it was because they weren’t as sure they would have gotten that larger number on appeal.
If it’s not true, why did the jury award the plaintiffs?
The truth is that the NAR attorneys were out-lawyered. Of the jury of eight people, six out of eight jurors had never worked with a REALTOR® before. So, here you have six out of eight people who don’t even understand the process of buying and selling real estate using an agent in the jury box. Add to that in a class action suit, there has to be 100% agreement on the verdict, and those particular eight people said, “This is a violation; here’s $1.78 billion.” Let’s keep in perspective that it was just EIGHT people, or as we said in a recent Inman article, “It wasn’t 8 million, 80,000, or even 80 people who decided against the defendants. It was only 8 people in a box. Don’t allow the opinions of 8 people in a box to define your worth or dictate who you are.”
Ketchmark, the plaintiff’s attorney, did a great job convincing them that NAR was guilty, and unfortunately, NAR’s lawyers failed to counter his claims effectively. NAR’s choice to settle and help not only real estate agents but also consumers move on was a prudent move rather than allowing this case to drag on for years to come.
Read full settlement information from NAR here.
Now, as we navigate a new “normal” post-lawsuit, it’s crucial to stay informed and proactive. The adjustments to real estate practices mandated by the settlement—particularly concerning buyer’s agent compensation and the necessity of Buyer Agency Agreements—are important for maintaining transparency and fairness in the industry. These changes underscore the need for both real estate professionals and consumers to adapt and understand their rights and responsibilities in property transactions.
We’re committed to helping agents stay in the loop and steer clear of legal pitfalls, and we challenge agents to continuously stay engaged, ask questions, and seek clarity when they are unsure of the next steps. We’re here to help agents be more confident and effective in serving their clients and communities through the ebb and flow of this industry, no matter what changes come.
Explore more about real estate regulations and stay updated with NAR’s guidance here.
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