All About The Ongoing National Association Of Realtors Case

By Ciprian Morariu Published: April 2, 2024

Ongoing National Association Of Realtors Case

The National Association of Realtors (NAR) for real estate professionals is among the largest associations of its kind in the USA. It represents all the members who are actively involved in the practice of real estate, whether it is residential or commercial properties.  

  1. History: NAR was founded in 1908. At that time it was known in general as the National Association of Real Estate Exchanges. Additionally, it adopted its current name, the National Association of Realtors, in 1974. It is headquartered in Chicago, Illinois. 
  2. Code of Ethics: Realtors have strict guidelines about ethical standards that must be followed by them. It includes the obligations of realtors to their clients and benchmarks of honesty and trustworthiness to be maintained. 
  3. Advocacy: NAR is an avid advocate for policies and legislation that support homeownership, private property rights, and the real estate industry. It lobbies at the federal, state, and local levels on issues affecting real estate.
  4. Education and Training: in terms of education and training, NAR provides a lot of various educational resources and professional development opportunities to its members. This mainly includes online courses, certifications, designations, and conferences.
  5. Research and Data: in the research and data department, NAR conducts research and publishes reports on housing market trends, economic indicators, and other topics that are relevant to the real estate industry. This data is valuable for Realtors, policymakers, and the public.
  6. Networking: as a body, it offers networking opportunities through local, state, and national events, as well as through its affiliated institutes, societies, and councils.
  7. Commercial Real Estate: In addition to residential real estate, NAR also serves professionals like you who are deeply involved in commercial real estate through its commercial division.
  8. Global Presence: NAR has partnerships and affiliations with real estate organizations around the world. This allows it to provide resources and support to Realtors that are working globally. 
  9. Public Outreach: as far as NAR’s engagement in public outreach is concerned, it organizes many relevant campaigns to promote the value of homeownership and the role of realtors in helping you and your families achieve your real estate goals.

Overall if we see, NAR plays a significant role in shaping the real estate industry in the United States. It does that by providing support and resources to its members. 

NAR’s Membership

NAR's membership has more than 1.4 million real estate professionals, which includes Realtors. A Realtor is a member who holds an active real estate license and is committed to upholding the organization's Code of Ethics. 

  1. Size: NAR has over 1.4 million members making it one of the largest trade associations in the USA as well as a powerful voice in the real estate sector.
  2. Realtors: The membership in NAR is restricted to real estate professionals only. In order to become a Realtor, you must hold an active real estate license and adhere to the association's strict Code of Ethics. This code sets standards for you as a professional to conduct your business with honesty, and integrity in your dealings with your clients, customers, and other Realtors.
  3. Real Estate Professionals: you must know that NAR membership is not limited to traditional real estate agents. It also includes a wide range of professionals who are involved in various aspects of the industry. This may include brokers, appraisers, property managers, real estate consultants, counselors, and others.
  4. Types of Membership: It offers different types of membership to accommodate the diverse roles within the real estate sector that you may want to play. These roles may include memberships for practitioners, as well as corporate memberships for real estate firms and organizations. Pick your choice. 
  5. Local, State, and National Associations: NAR's membership structure is organized hierarchically, with members belonging to local, state, and national associations. Local associations typically serve specific geographic areas, while state associations represent members within their respective states. The National Association, NAR, serves as the overarching entity that oversees these local and state associations. 
  6. Benefits: NAR membership offers you numerous benefits as an estate professional. These may include getting access to educational resources, professional development opportunities, industry research and data, advocacy on legislative and regulatory issues, networking events, and marketing tools.
  7. Continuing Education: It emphasizes the importance of ongoing education and professional development for its members. It offers a variety of educational programs, courses, certifications, and all the designations to help you as a member stay current with industry trends, enhance your skills, and maintain compliance with the licensing requirements.
  8. International Membership: While NAR primarily represents professionals in the United States, it also has a global presence and welcomes international members also. This allows you and all other real estate professionals from around the world to benefit from its resources, networking opportunities, and advocacy efforts.

As far as recent developments regarding NAR go, there have been many events in the past involving NAR legally. There have been several lawsuits that have involved the National Association of Realtors (NAR). They are typically related to antitrust concerns and alleged anti-competitive behavior. Read more about them here. 

1. Consent Decree (2008) 

Back in 2008, NAR entered into a consent decree with the DOJ to settle antitrust concerns related to its policies regarding online property listings. The consent decree required NAR to modify its rules to allow more competition among real estate brokers and online property listing services. This case is still ongoing till now. 

Settlement: 

  • In 2008, NAR entered into a consent decree with the U.S. Department of Justice to settle antitrust concerns. These are related to its policies that are regarding online property listings.
  • As part of the consent decree, NAR agreed to modify its rules to allow more competition among real estate brokers and online property listing services.
  • The specifics of the modifications and compliance measures were outlined in the consent decree, which aimed to address the antitrust concerns raised by the DOJ.

2. Class-Action Lawsuit on Commission Structures (2019)

In 2019, a class-action lawsuit was filed against NAR and several large real estate brokerages. The lawsuit against NAR alleged that NAR's rules regarding commission structures artificially inflated commission rates by requiring sellers to pay the commission for both their agent and the buyer's agent, regardless of the services provided by the buyer's agent. Fortunately, the case was settled in 2020, which resulted in changes to NAR's rules regarding commission disclosures.

Settlement:

  • In response to the class-action lawsuit regarding commission structures, NAR and several large real estate brokerages agreed to a settlement in 2020.
  • The settlement included changes to NAR's rules regarding commission disclosures. Under the settlement, real estate brokers are now required to disclose to buyers the commission offered to their agents.

3. U.S. Department of Justice Lawsuit (2020)

This was back in November 2020, when the U.S. Department of Justice (DOJ) filed an antitrust lawsuit against NAR. The lawsuit alleged that NAR's policies regarding multiple listing services (MLS) inhibited competition and harmed home sellers. Specifically, the issue that was highlighted was that the DOJ claimed that NAR's rules limited consumer choice and prevented innovative business models from emerging. This lawsuit is ongoing, and NAR has denied all the allegations against it.

Settlement:

In recent times, there has been a spate of lawsuits related to real estate commissions. Accordingly, NAR has agreed to pay $418 million in damages and abolish the traditional “Participation Rule” which mandated that sellers’ agents offer compensation to buyers’ agents.  

This is a significant development in the real estate industry, and it will be interesting to see how this change affects the market going forward.

How did it all begin?

The critics have been scrutinizing the model that the National Association of Realtors (NAR) follows, likening it to a cartel. A ruling by a federal court jury in Kansas City confirmed this cartelization theory and said this was a form of collusion between agents that inflated real estate fees artificially. The ruling resulted in a massive $1.78 billion judgment against NAR.

What does it change for homebuyers and sellers?

According to the recent announcement, if the proposed settlement is approved by a federal court, it would bring significant changes to the real estate industry. 

One of the major changes would be the elimination of the standard 6% commission, which sellers have to pay to their agents upon the successful sale of their property. As a result, sellers would no longer have to worry about this commission amount and can save a significant amount of money. 

Furthermore, under the proposed settlement, sellers would also be relieved from the obligation of presenting a compensation proposal to prospective buyers and their agents. This would not only simplify the transaction process but also make it fairer and more transparent for all parties involved.

In foresight, the new regulations are anticipated to take effect a few months after their approval. This is currently projected to happen around mid-July.

Good for consumers

The changes could result in savings for buyers by reducing commissions. This will potentially bring US fees more in line with other residential property markets globally.

It will lead to the commission falling from the current 50% to directly 25%. This will largely benefit online real estate brokers.

But for buyers?

It is a disadvantage for homebuyers. The process of negotiating with sellers will become more complicated, and buyers who have sufficient funds may find it easier to navigate the process than those who don't have much savings. 

Another concern that may erupt is that this change could have a greater impact on first-time buyers who have limited resources to pay for an agent.

This settlement has drawn a lot of flak from real estate professionals. They say it will undermine their role in helping buyers and sellers smoothly navigate real estate deals, thereby making the home buying and selling process more complex. 

These lawsuits highlight the ongoing scrutiny and legal challenges that are faced by NAR regarding its policies and practices within the real estate industry. As per a real estate agent, “This is someone telling us that we make too much money. This I believe is not their right.”

On the other hand, these settlements and agreements reflect NAR's efforts to address legal challenges and regulatory concerns while also seeking to uphold its mission of serving the real estate industry and its members.