Trouble for National Association of Realtors

By: J. David Chapman/November 17, 2023

I have been a member of the National Association of Realtors since 2003. Frankly, I didn’t give the decision much credence because you must join the NAR, Oklahoma Association of Realtors, and a local board of Realtors to have access to the Multiple Listing Service to list homes in the database and to receive commissions on co-brokered sales from members. That is a lot of memberships dues just to participate in the business, but I appreciate the camaraderie, training, networking and lobbying those organizations provide, and I have never complained about the dues structure and I continue paying them to this day.

Recently a Kansas City jury found the NAR, HomeServices of America and Keller Williams guilty of colluding to inflate or maintain high commission rates through NAR’s Clear Cooperation Rule. The decision in the lawsuit, known as the Sitzer/Burnett buyer commission lawsuit, ordered the defendants to pay damages of $1.78 billion. It is not clear yet what effect this verdict will have on our industry, because the judge has not issued his final judgment on the case. His decision possibly could affect the way residential real estate is conducted in the U.S.

At issue in this case is the 100-year-old practice of seller’s agents offering commissions to other agents who help them market and sell homes called cooperative compensation. In this case, the plaintiff argued that NAR is forcing home sellers to pay an inflated commission that is then split between their agent and the buyer’s agent. The home sellers argued commission sharing as a condition for access to the Multiple List Service was unfair and kept commissions artificially high.

As for impact on our industry, I don’t believe we will see much change in the near-term. However, I think the writing is on the wall that long-term change is coming. My listing fees always have been negotiable and will continue to be. I believe that the pairing of buyer’s agent commission and seller’s agent commission eventually will be separated. This is the case in many of my off-market transactions where the seller is not willing to pay the buyer’s commission for representation. This is also the case with many commercial transactions. The real estate industry will experience disruption, but probably not the devastation that some are predicting.

J. David Chapman is professor of finance and real estate at the University of Central Oklahoma (jchapman7@uco.edu).