NAR Lawsuits Update – new guidance for REALTORS®
In the wake of a just verdict in Minnesota, many REALTORS® are asking “what’s next?”
STATEMENT from NAR President Tracy Kasper
To this, the National Association of REALTORS® legal team presented an update during the NAR NXT meetings in Anaheim.
Here is a synopsis of that presentation:
In the case of Burnett v. NAR et al, on Tuesday, Oct. 31, the jury found NAR and the co-defendants liable. The plaintiffs claimed real estate commission rates are too high, buyer brokers are being paid too much and that NAR rules and corporate defendants’ practices lead to set pricing.
The reality is that NAR rules prioritize consumers, support market-driven pricing and promote business competition. We stand by the fact that NAR’s guidance for local MLS broker marketplaces ensures consumers get comprehensive, equitable, transparent and reliable home information and that brokerages of any size, service or pricing model get a fair shot at competing.
- What are next steps legally and the timing? This matter is not close to being final as we will appeal the jury’s verdict, and we remain confident we will ultimately prevail. In the interim, we will ask the court to reduce the damages awarded by the jury. Due to the nature of appeals, this case likely will not be concluded for several years.
- Is there anything REALTORS®, brokers, state/local associations or MLSs need to do differently because of this verdict? Not because of this verdict. But NAR has emphasized for many years two important things. One is the use of buyer representation agreements, which maximize transparency by putting all agreements in writing to ensure clarity and understanding, as all members are obligated to do pursuant to the NAR Code of Ethics. These agreements formalize the professional working relationship with clients and detail what services consumers are entitled to and what the buyer agent expects from their client in return. Second, it’s also an imperative for members to continue to express that commissions are negotiable and set between brokers and their clients; explain how local MLS broker marketplaces promote equity, transparency and market-driven pricing for consumers; and persistently communicate the incredible value agents who are REALTORS® provide.
- What does the future of buyer representation look like as a result of the verdict? This verdict does not require a change in our rules, but if class action attorneys had it their way, buyer representation would be very much at risk because many first-time home buyers, among others, couldn’t afford to pay for representation out of pocket. It’s important that members take every opportunity to express how they are experts who guide consumers through the financial, legal and community complexities of buying or selling a home.
- How does this verdict affect other ongoing litigation, including the other seller lawsuit? It doesn’t. Cases are tried separately, and we remain confident we will ultimately prevail because we have a strong case we’ll present on appeal and because our rules are pro-consumer and pro-business competitive.
- Is there any scenario where NAR would consider settling? NAR always has been open to a resolution that maintains a way for buyers and sellers to continue to benefit from the cooperation of real estate professionals and eliminates our members’ risk of liability for the claims alleged. That being said, we remain confident we will prevail on our appeal.
- What’s the status with the Department of Justice and has anything changed with this verdict? We reached an agreement with the DOJ nearly two years ago. NAR has upheld our end of the agreement, and we expect the DOJ to do the same as affirmed by a federal court’s careful ruling. That is a separate matter from the case of Burnett v. NAR et al.
“This verdict does not change anything about our rules or our practices. But we must double down on our explanation of services and our level of compensation”
– Lesley Muchow NAR VP of Legal Affairs
Advice for REALTORS®
What does this mean for me and my business?
- We all should continue to express that commissions are negotiable and set between a broker and their client. make sure your marketing includes ther word “Choice.”
- As always, it is critical to maximize transparency with your clients about their choices and your terms.
- Continue to use your listing and buyer agreements to help them understand 1) exactly what services and value you are providing and 2) how much you charge.
- For buyers, this includes options for offers of compensation from a listing broker or paying for your services directly or a combination.
- For sellers, this includes options to allow offers of compensation to be made by their listing broker to a buyer’s broker, and if so, how much and under what terms.
Here are two great sources for developing a list of services a buyer agent performs – RealEstateCommissionFacts.com and Compensation.realtors