Local Realtor board exec responds to NAR settlement offer

Jeff Kester: Commissions have always been negotiable, and that will not change.

The National Association of Realtors has put forth a $418 million settlement offer in a class-action lawsuit brought by home sellers, who accused NAR of price-fixing and collusion by artificially bumping up agent commissions.

The case dealt with Missouri markets, including Springfield.

The settlement offer is a development that caught Jeff Kester, CEO of the Greater Springfield Board of Realtors, off guard when it was announced March 15.

“I’m actually at an NAR conference now, and the details are still kind of circulating through,” he said in an interview with Springfield Business Journal on March 19.

Many national media reports following the announcement of the settlement agreement have made predictions about the effects the ruling and settlement will have on the industry, with some national media reporting the standard 6% commission on buying or selling a home is no more, and it will soon be cheaper to buy a home.

“There have been statements made in some media outlets, unfortunately, about certain commission percentages and how those percentages don’t exist anymore,” Kester said. “Almost all of those statements I have seen have been incorrect.”

Kester said there has never been a standard commission.

“Just the mention of a standard commission would be a violation of federal antitrust laws,” he said. “That commission has always been and hopefully will always be fully negotiable between consumers and their agent.”

In a typical real estate transaction, a commission of 5%-6% is split between buying and selling agents, according to multiple real estate guides, such as Investopedia.

“For a long time, the listing broker has been paid by the seller on the listing side, and a portion of that is paid through a cooperating broker who is working for a buyer or with a buyer,” he said. “The cooperative compensation technicalities may be changing, but representation and agency on both the listing and the buying side are going to be as important, if not more important than ever before.”

Kester said it was too early to predict the effects the settlement will have on the industry or the local market.

The case
In October 2023, an eight-person jury found NAR and its co-defendants liable in the case Burnett et al. v. National Association of Realtors et al., which covered Missouri markets, including Springfield, but which is having national reverberations.

NAR and co-defendants HomeServices of America and Keller Williams Realty were found liable for $1.8 billion in damages in the case overseen by Presiding Judge Stephen R. Bough in the Western District of Missouri.

The settlement offer has not yet been approved by the court. If approved, it is expected to go into effect in July, according to an announcement by NAR.

At issue in the case, according to a Western District case summary, are the allegations that NAR has anticompetitive rules that require home sellers to pay commission to the home buyer’s broker and that the defendants enforce those rules through anticompetitive practices.

“Plaintiffs challenge rules in both the National Association of Realtors Handbook and Code of Ethics that allegedly require home sellers to make a blanket offer of compensation to any potential buyer’s broker as a condition of listing their home on the following multiple listing services,” the summary states. Four listing services are named, including the Southern Missouri Regional Multiple Listing Service, Heartland Multiple Listing Service, Columbia Board of Realtors and Mid America Regional Information System.

The class members used a defendant in the sale of their home that was listed on one of the services. The plaintiffs alleged violations of the Sherman Act, the Missouri Merchandising Practice Act and the Missouri Antitrust Law.

The NAR website states that if approved, the agreement would resolve claims against NAR and more than 1 million of its members, as well as all state and local Realtor associations, all association-owned multiple listing services and all brokerages with an NAR member as a principal with a residential transaction volume in 2022 of $2 billion or below.

NAR continues to deny wrongdoing with the MLS cooperative compensation model that was introduced in the 1990s in response to calls from consumer protection advocates for buyer representation, the announcement states.

The $418 million settlement amount would be paid over a period of four years, it adds.

“NAR has worked hard for years to resolve this litigation in a manner that benefits our members and American consumers,” said Nykia Wright, interim CEO of NAR, in the announcement. “It has always been our goal to preserve customer choice and protect our members to the greatest extent possible. This settlement achieves both of those goals.”

 Local impact
Asked how the outcome of the case would impact the local real estate market, Kester said that is yet to be determined.

“It’s premature to get into a lot of details,” he said. “It’s still a very fresh announcement. None of this is carved in stone or finally adjudicated. The settlement still has to be approved by the court. Things can change and are still fluid.”

Other managing brokers contacted for this story also said it was too early to comment. Springfield Business Journal will continue to report on the local effects of the court decision.

Kester said the relationship between consumers and agents is still an important one.

“What we think we know at this point is that real estate commissions always have been negotiable between consumers and their broker/agents, and that will not change,” he said. “It does not or should not affect consumers’ desire or need to work with a buyers’ agent or how buyers’ agents work within the real estate system.”

He added that what everyone is striving for is a more transparent system.