CHICAGO - The National Association of Realtors has agreed to pay $418 million to settle nationwide class actions, including a lawsuit pending for years in Chicago federal court, that accused the NAR and a host of large real estate brokerages of conspiring to force home sellers to overpay commissions to agents.
The NAR announced the deal in a release posted Friday, March 15, and provided a copy of the settlement agreement to The Record.
That agreement, which is still subject to approval by a judge, has yet to be filed in court.
If the settlement follows a traditional path through court, the attorneys who filed the lawsuits may seek to claim one-third of the settlement as fees. This would amount to nearly $140 million to be paid to the plaintiffs' lawyers.
Neither the settlement agreement nor the NAR press release clearly states how much plaintiffs' lawyers will be able to claim from the settlement.
Any fee award would come on top of $69 million in attorney fees requested from other related settlements with real estate brokerage giants Anywhere, Re/Max and Keller Williams. Under those settlements, which have been granted preliminary approval by a federal judge in Kansas City, Missouri, the brokerages will pay more than $208 million to settle related claims against them.
The judge in that case has yet to rule on the attorney fee requests from lawyers with the firms of Williams Dirks Cameron, of Kansas City; Boulware Law, of Kansas City; and Ketchmark and McCreight, of Leawood, Kansas.
Lawyers who would stand to get paid through the NAR settlement and potentially others in a class action lawsuit still pending in Chicago federal court include those from the large class action firms of Susman Godfrey, of Los Angeles, New York and Seattle; Hagens Berman Sobol Shapiro, of Seattle and Chicago; and Cohen Milstein Sellers & Toll, of Chicago and Washington, D.C.
According to the settlement agreement, the deal includes a host of smaller real estate brokerages across the country who could be swept up in such court actions. The deal specifically includes all brokerages which had residential transactions of less than $2 billion in 2022. According to the NAR release, the association estimates the deal will include more than 1 million NAR members.
The release specifically noted the deal will not include agents affiliated with HomeServices of America and its related companies, who are the final corporate defendant still in court in the lawsuit pending in Kansas City.
According to the settlement agreement, a portion of the settlement fund will come from payments from parties released under the deal, as a small percentage of their transaction volume.
The NAR notes the deal does provide a "mechanism" to help larger brokerages to also obtain similar lawsuit releases.
While the payout is large, the deal's most significant effects will likely be felt in changes the settlement is expected to bring to the way Americans buy and sell homes.
Under the settlement agreement, real estate agents for home sellers will be forbidden from making non-negotiable offers of compensation to agents for home buyers. In practice, this means the deal would all but forbid the traditional 6% commission for real estate agents, which historically has been split between the agents for home sellers and home buyers.
Typically, real estate sellers have had no ability to negotiate those fees. However, under the settlement terms, buyers will now enter into agreements with their agents concerning fees.
Real estate agents will also be forbidden from advertising to home buyers that they can purchase homes without paying commissions to their agents, unless the agent is actually providing services at no cost to anyone.
“Ultimately, continuing to litigate would have hurt members and their small businesses,” said Nykia Wright, NAR's interim CEO. “While there could be no perfect outcome, this agreement is the best outcome we could achieve in the circumstances. It provides a path forward for our industry, which makes up nearly one fifth of the American economy, and NAR. "
The settlement appears poised to draw to a close a court battle that has continued for five years, since the first lawsuit was filed in 2019 in Chicago federal court. The similar actions in Kansas City followed about a month later.
The lawsuits all alleged the NAR and its large broker members and partners violated federal antitrust law by allegedly conspiring to improperly use its control of the Multiple Listing Services (MLS) - the central hub for homes listed on local real estate markets - to force home sellers to pay inflated commissions to real estate agents.
The lawsuits claimed such activity allegedly inflated the price of homes in the process.
The lawsuits asserted home sellers and buyers could save money if they were able to negotiate those rates with their respective agents and among themselves as part of the home sale process.
Judges in Chicago and Kansas City have repeatedly rejected attempts by the NAR and the large brokerages to dismiss the cases.
In the first trial in the related cases, a jury in the Western District of Missouri ordered the defendants to pay $1.2 billion.
The settlement would undo that verdict.
The settlement could include potential cash payments to anyone who sold a home using an agent on the MLS in certain areas of the country since 2014. However, individual eligibility dates would be determined based on the MLS market in which a particular home was sold.
Nationally, the eligibility dates will include anyone who sold a home since Oct. 31, 2019, when the lawsuits were first filed.
The settlement agreement indicates potential class members could be notified of their eligibility to participate in the settlement after a judge grants preliminary approval to the settlement.
It is not known at this point when that might occur. Nor is it clear how much individual claimants could expect to receive from this settlement, or the settlements pending with the large brokerages which have already settled separately.