In a surprising twist, the National Association of Realtors has announced a change in how interprets its Participation Rule, which requires listing brokers to provide buyer brokers an offer of compensation in order to list on the multiple listing service (MLS).
While previously NAR has stated that the offer of compensation could be as little as a penny or a dollar, in a reversal of this stance, NAR is now saying that listing brokers can offer nothing and still comply with the rule, as first reported by Inman News.
This change comes as the trade group prepares for the three-week trial of the Sitzer/Burnett class action buyer broker compensation lawsuit, which starts on Oct. 16.
Initially filed in April 2019, the lawsuit takes aim at NAR’s Participation Rule. According to the plaintiffs, commission sharing inflates the costs for consumers, in violation of the Sherman Antitrust Act. NAR contends that the current commission structure, which has been in place for over 100 years, actually helps consumers.
A second larger class action suit in Illinois, known as the Moehrl suit, makes the same allegations.
In addition to NAR, defendants in the lawsuit include HomeServices of America and Keller Williams. Both Re/MAX and Anywhere Real Estate were also named as defendants in both the Sitzer/Burnett and Moehrl suits, but have both filed settlement agreements.
According to an emailed statement from Michael Ketchemark, the lead trial counsel for the plaintiffs in the Sitzer/Burnett case, NAR has repeatedly stated that a compensation offer of $0 does not comply with NAR’s policies.
“NAR’s former general counsel Cliff Niersbach testified under oath that a seller’s agent cannot list a property on an MLS with an offer of zero. NAR has aggressively enforced this rule across the country. All this evidence will come out at trial. If there is now a sudden change in this long-standing policy it’s a stunning admission of guilt.”
Ketchmark argues that this change in policy will only further the Department of Justice’s argument that the MLS is used by large corporate brokers to steer buyers away from properties with low commission offers.
Notably the DOJ recently filed a statement of interest in the Nosalek suit, a third antitrust class action lawsuit dealing with buyer broker compensation. On Wednesday a U.S. District Court judge in Boston granted the DOJ’s request to extend the final approval hearing for the settlement agreement filed by defendant MLS Property Information Network.
NAR is not a defendant in the lawsuit, however Anywhere, Keller Williams, RE/MAX and HomeServices of America are. Additionally, unlike the other two buyer-broker compensation suits, Anywhere and RE/MAX have filed settlement agreements in the Moehrl and Sitzer/Burnett suits, they have not tried to settle the Nosalek suit.
The change in how NAR interprets its Participation Rule comes as the terms of Anywhere’s settlement in the Sitzer/Burnett and Moehrl lawsuits have finally been made public. Along with a $83.5 million payout, Anywhere has agreed to not require company owned brokerages, franchisees, or affiliated agents to belong to the NAR or follow the NAR Code of Ethics or MLS Handbook. The firm said it will also eliminate any minimum client commission requirements that company owned brokerages may have.
Additionally, Anywhere has agreed to “advise and remind company owned brokerages, franchisees, and affiliated agents that the company has no rule requiring offers of compensation.”
On Monday, Redfin announced it would require agents in areas where it was possible, to cancel their NAR membership, citing the recent allegations of sexual harassment at NAR, as well as the trade group’s buyer broker compensation policies.
In August, Bright MLS, the nation’s second largest MLS, began allowing listing agents to put in a blanket offer of compensation for buyer brokers of zero dollars or more.
At the time the company stated: “We are making this small change to underscore the complete flexibility of Bright subscribers to engage in transparent negotiations with their clients. Bright’s MLS supports the most efficient marketplace by making property information widely and transparently available, and by facilitating blanket offers of cooperative compensation available to all buyer brokers on an impartial basis.”
With NAR’s latest announcement other MLS’ may choose to follow suit.
NAR did not immediately return a request for comment.