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The day is here at last: This afternoon, a judge in Missouri will decide if the National Association of Realtors’ landmark commission settlement gets final approval.
The moment comes after years of litigation and represents a culminating event in a story that has fundamentally changed the way agents practice business and collect compensation. It’s a big deal.
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That said, industry insiders who spoke with Inman for this story said that many of the industry’s rank and file have moved on. The NAR settlement was announced in March, and the resulting rules went into effect in August. Many agents are, apparently and consequently, ready for a new chapter.
However, the case is not closed and the commission lawsuit saga has not ended. Indeed, there are still legal issues to resolve and court fights to come — not to mention the fact that the era of disruption the settlement kicked off is ongoing.
In other words, even with the NAR settlement’s final approval likely imminent, this story of the commission lawsuit saga will continue reverberating in the industry for the foreseeable future. And as a result, it behooves real estate professionals to stay tuned.
So what actually is happening?
Early this afternoon, U.S. District Judge Stephen Bough will preside over a hearing, during which he is expected to give final approval to the NAR settlement that was first announced in March. The settlement previously received preliminary approval in April, but it needs to go through a two-round process to get across the finish line.
To refresh, the NAR settlement covers lawsuits that were filed by homesellers. As part of the settlement, NAR agreed to pay $418 million and make a variety of rules changes. For example, Realtors who show properties are supposed to have signed agreements in place with consumers before showings take place. NAR-affiliated multiple listing services also had to change their platforms so that sellers’ agents could not use those platforms to preemptively offer compensation to buyers’ agents.
The NAR settlement did not include large brokerages that did more than $2 billion in transaction volume in 2022. Many such companies have since struck their own deals to settle homeseller cases. According to a court filing last week, the settlements up for final approval today total almost $700 million, the bulk of that coming from NAR and HomeServices of America.
It’s worth noting that there are still other cases filed by homebuyers that, while raising similar antitrust allegations, have not been resolved.
Impacted consumers have also already started getting notifications that they might be able to collect money from the settlement. According to a court filing last week, 14 million postcards and 25 million emails have gone out to potentially impacted consumers. Consumers have also been notified via other digital campaigns conducted on platforms such as Google and Facebook. According to the filing, “The notice programs reached 99 percent of the class.”
As of Nov. 14, the company overseeing the notification effort had received 491,490 claims, the vast majority of which came in online, the filing notes.
Right now, if the available settlement money (after the plaintiffs’ attorneys get their cut) was divided equally among the consumers who have filed claims, everyone would get just over $900. However, that number is sure to shrink as more and more consumers sign up to collect their piece of the settlement pie.
That all sounds pretty final. So it’s case closed at this point, right?
Not by a long shot.
There are a few pending questions hanging right now. One is simply whether or not Judge Bough will actually give the settlement its final approval. On that point, Marty Green — a principal at mortgage law firm Polunsky Beitel Green — told Inman last week that he believes the settlement will ultimately be approved.
“I think the momentum of the case has been there for some time for a global resolution,” Green said.
James Dwiggins
Industry insiders who spoke with Inman agreed. For instance, NextHome CEO James Dwiggins — one of the industry’s most vocal commentators on the topic — told Inman last week that the deal “is done.”
“It’s not only just done, but the judge has already decided it’s done,” Dwiggins, who expressed disappointment that some objections in the case have not weighed more heavily on the judge, said in a phone call. “Literally everything that comes across, he rubber stamps.”
However, that doesn’t mean every issue is wrapped up. Notably, last month University of Buffalo contracts law professor Tanya Monestier filed a lengthy objection to the settlement. Monestier’s argument boiled down to the idea that consumers are not getting sufficient value from the settlement, either monetarily or through its required business practice changes. She ultimately described the deal as “the worst of all possible worlds.”
Green expects the settlement to get final approval even in light of such objections, though he said that Monestier “makes some interesting arguments, particularly with respect to attorney’s fees.”
Marty Green
“I could see the court looking at the overall attorney’s fees as part of the discretion they have and perhaps making some adjustment there,” Green said. “That’s one area where I think you could see some tinkering with it without necessarily endangering the overall resolution here.”
Green added that the amount individual consumers are poised to collect is a “really modest potential recovery,” which could add pressure to adjust the distribution of settlement money.
In addition to Monestier, a number of other parties, most of them plaintiffs in other commission-related cases, have filed objections as well. Those objections range from the monetary size of the settlement to its scope, among other things, and aim to prevent final approval of the settlement.
However, attorneys for the plaintiffs argued in a filing last week that the objections are not persuasive and that the settlement is in fact fair.
It is also worth noting that Judge Bough granted final approval to settlements involving Keller Williams, Anywhere and RE/MAX in May — potentially offering a preview of how he might be thinking about similar settlements involving NAR and other companies.
Additionally, over the weekend the U.S. Department of Justice filed a five-page statement of interest in the Sitzer | Burnett case. The document did not weigh in on final approval of the settlement but did take issue with rules requiring buyers and brokers to enter into written agreements before touring homes — one of the practice changes the deal wrought. The DOJ’s filing also noted that if the deal is approved, the court should “clarify that such approval does not address whether the proposed settlement prevents and retrains current antitrust violations, remedies past violations, or contains revised policies and practices that comply with the antitrust laws.”
The filing, along with objections such as those raised by Monestier and others, highlights the fact that even as the finish line looms, debates over the finance and substance of the settlement loom. And that’s all on top of the homebuyer lawsuits, as well as the DOJ’s broader and looming interest in the industry.
Moreover, the legal wrangling over the antitrust commission suits seems to have broken the dam, with numerous other challenges to real estate’s status quo following in recent months. They include among other things a suddenly raging debate over NAR’s Clear Cooperation Policy, as well as challenges to the trade organization’s three-way membership agreement.
All of which is to say that there are basically two broad reasons industry pros need to be aware of what’s happening today. The first is that the settlement itself matters, continues to face challenges, and will impact the consumers Realtors work with. The second is that it represents a kind of inciting incident in a period of disruption that shows no sign of stopping. At the core of questions over, say, the future of NAR lies this settlement.
How much attention are agents paying to this?
The short answer is, not a lot.
Anthony Lamacchia
“I think most Realtors think it’s done, honestly,” Anthony Lamacchia, a real estate podcaster and the CEO of Lamacchia Companies, told Inman last week. “I don’t think the masses realize that it hasn’t been approved yet.”
Different industry insiders had different opinions about what comes next, or on the degree of change that awaits the homeselling business. But generally speaking, those who talked with Inman for this story tended to agree with Lamacchia that the final step of the settlement’s journey through the courts is not on a lot of agent radars.
“Most agents are just focused on what they need to do to be effective and earn a living,” Chris Heller, president at OJO, told Inman last week. He added that the NAR settlement is likely more on the mind of leaders at big brokerages and tech companies who are still working to adapt to the new rules.
Heller also said there remains some confusion among agent ranks about what exactly constitutes best practices in a post-settlement world.
Chris Heller, OJO
“Not everyone’s a hundred percent clear on what they should or shouldn’t be doing,” he noted. “But they’re catching on quickly because in every transaction there’s another agent involved.”
The idea that adapting to the post-settlement world is a work in progress was a recurring theme in conversations for this story. For instance, Dwiggins argued that there are numerous points of confusion for agents, as well as conflicting information depending on which brokerage or state a person works in.
“The industry is trying, but it’s not being given very clear guidance from one spot,” Dwiggins said. “And so everyone’s trying to interpret these things the best that they can. Some in good ways, some not.”
The comments highlight the ongoing nature of the commission lawsuit story and the fact that Tuesday’s hearing is not the end, at least for real estate practitioners.
But what comes next is a matter of debate. In Lamacchia’s case, he suggested the future may look similar to the past.
“These plaintiffs’ attorneys, who are basically working for industry disruptors that have wet dreams about destroying our industry, and you can quote me on that, they’re going to be disappointed,” Lamacchia said. “They’re going to be disappointed because it’s not going to break.”
That said, change — and the final chapters of the commission lawsuit saga — may ultimately take time to fully materialize. That’s in part because the wheels of justice turn slowly. But there’s a practical component as well: Dwiggins pointed out that many deals currently closing were already in the pipeline before NAR’s new rules went into effect in August. And that means the coming months or year may deliver the real moment of truth.
“So some of the effects you’re going to see are starting now,” Dwiggins said. “But the market has been really slow. So you haven’t seen a massive amount of this stuff either. It is a problem.”
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