Real Estate Drama: The NAR Lawsuit Unpacked

Real Estate Drama: The NAR Lawsuit Unpacked


By now, you’ve heard lots of things regarding the lawsuit and the National Association of Realtors. Many rumors are circulating about real estate commissions and what this lawsuit means. We are here to unpack the NAR lawsuit for all our clients and future clients! (NAR is short for National Association of Realtors)



What was the lawsuit against NAR all about? 

The lawsuit began in Missouri when homeowners decided to sue NAR and other nationwide brokerages, accusing them of price fixing. The complaints also stated that sellers were required to pay commissions for both the listing agent and the buyer’s agent and that the commission was inflated.

After the plantiffs won this lawsuit (to the tune of $418M in damages), NAR decided to appeal. Many other cases popped up in different states after this victory. On Friday, March 15, 2024, NAR announced it would settle the case instead.

In our opinion, the National Association of Realtors has decided to settle, as this will prevent an onslaught of cases across the country.

[Read the settlement here: NAR lawsuit settlement]



What does this mean if NAR is offering a settlement? 

The association will still have to pay the $418M in this class action lawsuit; however, they have four years to do so.

Another term they agree to is that any compensation offered cannot be disclosed in the MLS. (MLS stands for Multiple listing service. This is where agents list your home for sale, and it allows it to filter to Zillow, Realtor, and other websites for advertising) This does not mean a seller will not offer a buyer’s agent commission for bringing a buyer. It is only stating that it cannot be listed in the MLS.

Buyer brokerage agreements will also become mandatory in this settlement. A buyer brokerage agreement must be signed before a real estate agent can show a potential home buyer any property. These agreements have existed for a long time in many areas, and some states have also made them obligatory. This form states that buyers work exclusively with their chosen real estate agent.

Lastly, on listing documents and likely the buyer’s brokerage agreement, verbiage stating that commissions are not legally set and are negotiable must be included.

[See an example of a buyer brokerage agreement here: Louisiana Buyer Brokerage Agreement]




How is this different from what was in place before the lawsuit? 

Well… let’s dive into this…

  1. Buyer brokerage agreements should already be mandatory. Team Be New Orleans began using them before this settlement because we knew their importance.
  2. Compensation offered to a buyer’s agent was always negotiable. No seller ever had to agree to provide any money toward this. Many sellers didn’t realize this and, in our opinion, wanted more transparency.
  3. The language to be added to our documents moving forward is excellent! We applaud more clarity in this business!




Does this mean sellers are no longer paying a buyer’s agent?

There are many different sides to this coin. Some will argue that a seller never truly paid a buyer’s agent. While, yes, the commission was deducted from the seller’s proceeds, the buyer was paying the price for it. Most people who state this will also say the price of the home already includes commission.

Sellers will still have the option to compensate a buyer’s agent for bringing a ready, willing, and able buyer to purchase their house. However, the new change will make it harder for a buyer’s agent to determine if money is being offered and how much. (From reading the settlement, if a seller is to provide money, it must be determined when signing a listing agreement. This is our opinion of how the settlement reads and may change as things unfold!)




What happens if a seller does not offer a buyer’s agent money? 

We have a couple of scenarios for this question.

  1. If a seller is not offering compensation, the buyer can elect to pay their agent for representing them throughout the transaction.
  2. If the seller is not offering money to a buyer’s agent and the buyer cannot pay their agent, the buyer may opt not to pursue that home.
  3. If the seller is not offering anything to a buyer’s agent and the buyer cannot pay their agent, they may try to navigate buying this home without representation. This is what scares us! Most homebuyers don’t know what they don’t know and could get themselves into a real pickle.




How will this affect home buyers?

Honestly, this is our largest concern. If we see a trend of more home sellers not offering a buyer’s agent commission and the buyer is responsible for paying their agent, many will no longer be able to afford homes. First-time home buyers, or those with lower budgets, usually scrape together every penny to get into a home. Coming up with additional funds is almost impossible.

This will increase the buyer’s burden and make homeownership impossible for many.

Noteworthy, homebuyers using VA loans are specifically barred from paying commissions to agents. This is in the terms of using a VA loan.

But, on top of the money issue, we are concerned about home buyers’ self-representation. Over the years, many buyers have tried to handle their own transactions. Many decide to get an agent along the way because they realize how overwhelming it can be! (We have even seen attorneys try to self-represent and then royally mess up contracts)




Do we think sellers will stop offering compensation for a buyer’s agent? 

No. We do not think the majority of home sellers will stop offering compensation as their buyer pool would shrink considerably, especially in the New Orleans metro area. The cost of insurance to get into a home here would make it an uphill battle for buyers to be able to purchase ANY home.




Will this lead to home price reductions? 

We think this is VERY unlikely. While housing prices in New Orleans are affected by our insurance crisis, many other cities still deal with substantial housing shortages.




What happens next? 

First, this settlement has to be approved by the courts, which we anticipate will happen. After approval, NAR will have a set timeline for implementing these new rules. They are telling us to be prepared for the changes by mid-July 2024.

As for your favorite New Orleans real estate agents, we are ready to keep working! If you’re a home seller, we will tell you how vital a buyer’s agent is and why you should compensate them. If you choose not to, that’s your choice!



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