What it Means for the Real Estate Industry

On March 15, 2024, the National Association of Realtors (NAR) announced a proposed $418 million settlement agreement in the Sitzer-Burnett verdict that would end a lawsuit brought by home sellers related to broker commissions. The plaintiffs claimed that real estate commission rates are too high, buyers’ representatives are paid too much, and NAR’s Code of Ethics and MLS Handbook, along with the corporate defendants’ practices, lead to inflated commission rates. In October 2023, a jury ordered the defendants to pay nearly $1.8 billion.

It is important to note, the settlement is subject to a judge’s approval. The approval could take several months. In a previous news release, interim NAR CEO Nykia Wright said, “the settlement achieves two of the organization’s goals: preserving consumer choice and protecting members.” In addition to release from liability, the proposed settlement includes:

• Compensation offers moved off the MLS
• Written agreements for MLS participants acting for buyers
• Settlement payment
• NAR continues to deny any wrongdoing

The settlement agreement also mandates two key changes to the way Realtors, Brokers and MLS participants do business.

NAR agreed to create a new MLS rule prohibiting offers of compensation on the MLS. This would mean that offers of compensation could not be posted via an MLS, but they could continue to be an option consumers could pursue off-MLS through negotiation and consultation with real estate professionals.

NAR also agreed to create a new rule requiring MLS participants working with buyers to enter into written representation agreements with their buyers before the buyer tours a home. NAR has long encouraged its members to use written agreements to help consumers understand exactly what services and value they provide, and for how much.

Unless you are in the business, that may not be all that clear. Here are simpler terms:

• Sellers and their agents won’t be allowed to offer a commission to buyers’ agents within their listing. However, that doesn’t mean that a seller isn’t allowed to pay buyers’ agents a commission. It just can’t be published in the listing.
• Buyers will now be required to sign a written agreement with an agent in order to work with them, which will likely require them to agree to a certain amount of compensation. That doesn’t necessarily mean the compensation has to be paid out of the buyers’ pocket; it could be an agreed upon amount that will be negotiated into the purchase price paid for through the proceeds of the sale.

Because the settlement is subject to the court’s approval, sellers in Florida will continue to work with their Realtor to outline Broker compensation using a listing agreement. The real estate industry has evolved multiple times during history. Fortunately, all buyers and sellers can continue to hire their own representation to have a Realtor look out for best interests and assistance through the home buying/selling process.