NAR Settlement and Its Impacts on U.S. Real Estate and Talent Mobility

Michael T. Jackson, SHRM-CP - Mar 21 2024
Published in: Global Workforce
| Updated Mar 21 2024
The National Association of Realtors announced a proposed settlement to landmark lawsuits, agreeing to pay $418 million and amend several rules around broker commissions. If approved by the courts, it would result in process changes significantly altering the U.S. real estate sector and impacting the talent mobility industry.

On 15 March 2024, the National Association of Realtors (NAR) announced that it reached a preliminary settlement agreement related to a range of ongoing litigation pertaining to broker commissions associated with U.S. residential home transactions. The settlement, which is still pending court approval, would result in NAR paying $418 million in damages and implementing process changes that would significantly expand buyer representation/agency agreement requirements across the country and remove cooperative compensation information from Multiple Listing Services (MLS) listings subject to the agreement.

According to NAR, the settlement would address claims not only against the organization but also against its state and local affiliate associations, all association-owned MLSs, over 1 million individual NAR members, and select brokerages that meet certain identified requirements.

The scope of the settlement would include most major cases that have been tried or that are pending in U.S. courts, including the Sitzer/Burnett, Moerhl, and Nosalek cases. However, the agreement does not address all filed litigation, and, in particular, lawsuits involving home buyers are not impacted. NAR has publicly released a copy of the proposed settlement and has also published frequently asked question documents around both the settlement and financing considerations.

Process Changes With Settlement

Under the proposed settlement, many of the MLSs across the country and the agents that list or show houses on those networks would see changes that impact their processes and operations. Many of the 800-plus MLS networks in the United States are owned by NAR-affiliated associations, and this settlement would encompass those networks along with others that elect to opt-in to the settlement.

The process changes, which NAR has indicated would go into effect in mid-July, would cover:

Buyer agency/representation agreements: A signed buyer agency/representation agreement would be required prior to an agent showing a property listed on an MLS covered under this settlement. Agreements would need to list a set compensation amount or rate that the agent will receive and indicate how that amount will be determined. Once agreed to in the buyer agency/representation agreement, the agent would not be permitted to receive compensation from any source higher than the amount indicated in the agreement.

Currently, 18 states across the United States have existing requirements for buyer agency/representation agreements. Indiana has approved a law that will require buyer agency agreements effective 1 July 2024. Oregon approved a law earlier this year that would require buyer agency/representation agreements starting in January 2025, and other states are also considering legislation. With this settlement, additional states are likely to enact requirements around buyer agency/representation agreements in the coming months.

Compensation data in MLS listings: Once the agreement is enacted, property listings in an MLS covered under the scope would be prohibited from making offers of compensation to brokers or disclosing broker compensation or total brokerage compensation on an MLS listing. MLS platforms would have to remove any broker compensation fields from a listing and could not use another listing field to share an offer of compensation. Seller-approved offers of buyer compensation would be allowed on non-MLS listings, including those posted directly on a brokerage’s website.

Potential Impacts on Talent Mobility

In the wake of NAR’s proposed settlement, WERC has connected with dozens of leaders and experts that are part of its recently formed ad hoc group focused on the litigation and its impacts to assess potential ramifications and considerations resulting from this announcement. 

Members of the ad hoc group identified a number of insights and considerations for talent mobility professionals and their organizations, including:

  • Changes stemming from the settlement are going to require greater transparency with transferees regarding relocation-related home transactions.
  • Buyer agency/representation agreements will be required for many, but not all, locations where a mobility-related home transaction may occur. Buyer agency/representation agreements would have to not only comply with standards outlined in the terms of the settlement but also account for state requirements that are either currently in place or that will be enacted.
  • Real estate agents will not be able to accept a compensation offer above the amount listed on the buyer agency/representation agreement.
  • Buyer agent compensation cannot currently be rolled into mortgage loans. Based on current agency requirements and policies, broker compensation cannot be financed under home loans, and this is not likely to change in the near term. As a result, buyers would have to directly provide funds for any compensation.
  • In the case of mobility-related relocation programs, employers may choose to provide a gross up to their transferees addressing this expense, but doing so would result in additional costs for the company and may result in having to enact policy changes to facilitate. Additionally, under current regulations, this would be a taxable benefit that could potentially have tax implications for the transferee.
  • Education surrounding the requirements and processes will be critical not just for transferees but also for other stakeholders involved across the mobility life cycle. In-house mobility practitioners, relocation management company (RMC) counselors, and real estate agents supporting transferees all will be vital resources for helping transferees understand how the evolving processes will impact them and their mobility benefits and ensuring that these key groups are prepared to provide this support will be essential.
  • Communication and collaboration between the various elements of the mobility process will be critical for navigating the evolving landscape. Companies that that do not manage their programs in-house will need to actively work with their RMC partners to review their organization’s particular circumstances. Additionally, close collaboration between RMCs and their broker, title, mortgage, and appraisal partners will be critical for understanding and navigating the range of requirements across the country.

WERC will continue to closely monitor this issue and engage with members of the buyer broker subcommittee and other industry stakeholders regarding this settlement and how it might impact talent mobility. Additional resources to help individuals and organizations across the industry understand, and prepare for changes are currently being developed for release in the coming weeks, and WERC will be organizing a webinar on this issue to be held in early April.

Michael T. Jackson is the vice president of member engagement and public policy with WERC. This article also includes input from leaders of WERC’s buyer broker litigation subcommittee.