The winners and losers in NAR’s historic settlement 

When news of the National Association of Realtors’ $418 million settlement of the antitrust case Sitzer/Burnett came out in March, the update set off more questions than answers. 

The trade group’s agreement, which includes key rule changes to commission sharing guidelines, could result in the biggest such changes from the industry’s top trade group. If approved, it is set to shift the status quo for real estate agents, brokerages and other major players. 

Now that the dust has started to settle, The Real Deal mapped out the state of play.

Winners

NAR (for now)

The trade group’s deal marked a relative bargain compared to the overall damages. The rule changes involved in the settlement are the closest NAR has come to fulfilling what the Department of Justice has previously described as a satisfying rule change. 

The department previously pushed back on a proposed settlement in a Boston-based lawsuit over broker commissions, pushing for the listing service to “prohibit sellers from making commission offers to buyer brokers at all,” in a change that “would promote competition by empowering buyers to negotiate directly with their own brokers.”

Home sellers and buyers

Some forecasts claimed the move would cool home prices. Many have dismissed those projections as overblown, but it is clear that the settlement terms mean the burden of commission costs won’t be automatically assigned to sellers. 

Buyers can try to go bare-bones, paring down the assistance they need in the process, but that could depend on individual circumstances like experience, knowledge and comfort level.   

Now, the products and services that typically come with a buyer’s broker are laid bare for negotiation. Buyers will likely be in charge of tallying the costs related to their representation earlier in the process through exclusive agreements or flat fees. 

Compass 

One week after NAR’s deals, the brokerage giant announced its own settlement for $58 million — a relative bargain compared to more than $500 million it would cost to opt into the trade group’s settlement. 

Announcing an agreement to pay $57.5 million to settle class-action lawsuits accusing them of conspiring with other brokerages and trade groups to hike agents’ fees, Compass denied any wrongdoing and claimed the sum would not materially impact its operations. 

The move made the brokerage the fourth to propose a settlement. Anywhere Real Estate, Keller Williams and RE/MAX have already agreed to pay a combined total of $209 million in deals pending court approval.  

Redfin

The established MLS players look to benefit from the shakeup. NAR’s settlement doesn’t apply to aggregators but it  does open the door for more negotiations by buyers navigating a DIY process.

The settlement doesn’t address the lawsuits against Redfin, which announced in the fall it was pulling out of NAR where it could. But the online brokerage claimed the win, saying in a post reacting to the deal it was primed for business on the back of low fees and delivering listings directly to buyers.  

“Evolution is a slow process, but every once in a while, a giant asteroid helps it along,” Glenn Kelman said in a released statement. 

Zillow 

Zillow has been gearing up for the fallout from this case in recent months. The company said in its fourth-quarter earnings that its lack of long-term contracts with members could mean buyer agents bow out of the platform. Zillow told investors in February it was working to diversify its revenue — around two-thirds of which last year came from brokers paying for services. 

The company could be viewed as a loser. It’s heavily invested in buy-side income streams tied to transactions that the rule changes could upend, but Zillow’s independence from the MLS could also allow it to eat up even more market share. 

It will, however, likely face a solid competitor in CoStar. The real estate data behemoth was the only company to see its stock price perform well after the settlement was announced. It is in the midst of a $1 billion push of its Homes.com and Apartments.com platforms to become a contender among residential players. 

The real estate influencers ready to explain this big new world  

Some brokers with large social followings geared toward training and motivating other brokers seized on the news.

Tom Ferry and Ricky Carruth were among those who offered  town hall-style discussions of what the settlement means for brokers. Unsurprisingly, their message was that agents need to seize the opportunity to show off their value and explain what clients will miss if they take the bare-bones approach.

Losers 

NAR (later)

For the top guard of residential real estate, the deal accelerates this crisis of authority, opening up a vacuum of MLS control for alternatives.

In addition to the ripple effects from the actual rules later this year, the deal could instigate strife because it left out some of its biggest members. 

“If they think it’s going to be business as usual after they dropped their 70, 80 largest members on the coals, so to speak, they better think more carefully,” RealTrends president Steve Murray said. 

The brokerages that didn’t make the cut

Brokerages with more than $2 billion in transaction volume in 2022 can opt in via a formula whereby they pay 0.25 percent of their average annual transaction volume.

Residential giants such as eXp would owe an estimated $367 million, just under three times the company’s cash on hand.

Those that decide not to enter the settlement are left open to future litigation risks, but more are likely to follow in Compass’ footsteps. 

Michael Ketchmark, the plaintiffs’ attorney in Sitzer/Burnett, told Inman that lawyers were still working with some of the almost 90 firms excluded from the settlement for mediation or to reach deals of their own. 

HomeServices of America

Since it is not included in the settlement, HomeServices of America is now the only defendant left holding the multi-billion-dollar bag. It could petition the court to offset the damages based on the other defendants’ settlement amounts for a combined total of more than $626 million.

The judge’s final decision on the verdict could treble the damages for the three defendants to more than $5 billion. Even if that’s not the case, HomeServices could still be on the hook  for more than $1 billion in the Sitzer/Burnett case alone if the company doesn’t settle. 

Mortgage firms 

An interruption or shift in commission flow for the buyer’s broker could trip up the flow of referrals to the brokerage arms of firms such firms as Rocket Mortgage and loanDepot, which still rely on broker connections and MLS data.

But some on the loan origination side have endorsed putting officers in the broker’s seat. The head of the Mortgage Bankers Association responded to the news by telling lenders to consider offering the same services typically provided by a buyer’s agent. 

“License your loan officers as real estate agents and offer the buying agent service for less than a 3 percent fixed fee point,” CEO and president Bob Broeksmit said at the MBA’s National Advocacy Conference, days after the settlement was announced. “Some of you will say I want nothing to do with that. Others of you will say that is a great retention opportunity for my loan officers and the market will figure all this out.”