Behind the collapse of NAR’s big vision for brokers
After existential crisis, is a mass exodus ahead?
The National Association of Realtors was a “gift of vision.”
Or so William North wrote in 1978, just a few years after the organization took on its modern form and ahead of the decades he would spend steering NAR in its ascension to the largest trade group in the country by membership.
“[It is] the vision of those who dreamed that the business of real estate could become a profession,” wrote North, who served as executive vice president, general counsel and chief executive officer. “The vision of those who believed that the search for the highest and best use of the land required the highest and best measures of professional responsibility.”
Though the code still governs NAR and the trade group has repeatedly reasserted its inherent mission, critics say its most recent generation of leaders hasn’t held up its end of the bargain.
Exclusive listing databases and mandated membership solidified the group’s hold on the industry for more than a century. But a perfect storm of internal rot, an onslaught of antitrust litigation and public criticism are putting its reputation as an industry authority on shaky ground.
As NAR’s problems stack up, members are casting doubt on the group’s reign atop the industry — adding internal pressure that for the first time matches scrutiny from regulators.
“[NAR] got hit with a fourth-quarter tsunami this year,” said Compass agent Jason Haber, who is starting an alternative organization. “But that tsunami didn’t start in August or September. It actually started well before, under the surface.”
Members only
NAR is a mammoth organization. Since emerging as a major player in the 1970s, it has more than tripled its membership to count 54 state and territory associations (including Washington, D.C., Guam, Puerto Rico and the Virgin Islands) and more than 1,000 local chapters.
The 1.5 million-member group generated over $300 million in revenue, with assets totaling more than $1 billion, according to its most recent tax filing for 2022. Last year, its lobbying arm raised $44 million.
With millions of dollars incoming, the organization’s political action committee secured its position as the second-biggest lobbying spender last year, after the U.S. Chamber of Commerce.
Much of NAR’s hold on the industry boils down to its control of Multiple Listing Services, though the group has responded to calls to decouple access from NAR membership by placing responsibility with local associations to decide whether to open their databases to nonmembers.
While some operate independently, most MLS are still controlled by local associations. Agents who want access have to belong to a local chapter, which can run up to $1,000, adding to the overall group’s pot of funds and constituents.
“The NAR has played an outsized role in shaping our country’s residential real estate industry for over a century,” wrote James Bradbury in a 2019 article in the University of Colorado Law Review.
Now the iron grip on the industry that gave way to its rise has landed the group in a seemingly endless battle in the courts.
Chaos abounds
NAR suffered its first major blow on the national stage in August, when the New York Times published an investigation into the trade group’s “culture of fear” created by alleged sexual misconduct from its then-president, Kenny Parcell, and a history of ignored complaints about bad behavior.
“I feel like I was constantly screaming, ‘This is so inappropriate,’” former employee Stephanie Quinn told the Times. Another employee, Amy Swida, said she was “scared every day coming to work.”
Parcell, who has denied the accusations, resigned from his role later that month.
His departure kicked off a period of chaos for the organization’s top post, a high-visibility role focused on building internal and external relationships and expanding political advocacy.
The accusations triggered a backlash from some of the group’s largest members. In October, Redfin CEO Glenn Kelman called on his firm’s agents to drop memberships in markets where their exit wouldn’t impede access to listing services.
NAR chalked it up to an individual brokerage decision but showed no signs that it would decouple the MLS, like Redfin called for amid its departure.
“One brokerage deciding to join or not join does not impact the other or the services provided,” NAR wrote in a statement.
Upon Parcell’s departure, President-elect Tracy Kasper took the reins, but employees at the organization quickly condemned her, saying she played a part in creating the hostile work environment and calling for her resignation. Despite the pushback, Kasper vowed to bring change.
“It is important to all of us at NAR that we take this moment to learn and focus on building a culture of comradery,” the Idaho-based broker said in a statement announcing her elevation to the top job.
It was all downhill from there. Just two months later, a jury in Kansas City, Missouri, ruled against the trade group in a landmark antitrust case over broker commissions. The verdict is still awaiting the judge’s approval, but it could put the organization on the hook for $1.8 billion in damages.
“[NAR] got hit with a fourth-quarter tsunami. But that tsunami didn’t start in August or September. It actually started well before, under the surface.”
The group was defiant after the decision, saying, “This matter is not close to being final, as we will appeal the jury’s verdict.”
The jury’s verdict in the case, known as Sitzer/Burnett, sparked a wave of copycat lawsuits. With the first lawsuit on its way to appeal and the cascade of new filings, NAR will be tied up in court for years to come.
If the group doesn’t significantly change its practices, “these lawsuits are going to mount, and that’s what’s ultimately going to bring them down,” said Michael Ketchmark, an attorney for the plaintiffs in Sitzer/Burnett.
The group’s broker commission policies have stolen the spotlight, but NAR is also under antitrust scrutiny for its ban on pocket listings. At the heart of the lawsuit is its rule requiring listing agents to submit a property to their MLS within one day of marketing it.
After the verdict came the next leadership shakeup. CEO Bob Goldberg stepped down a year ahead of his planned retirement and was replaced by interim CEO Nykia Wright.
But even that calm was temporary.
At the beginning of January, five months into the job, Kasper suddenly resigned, with the organization saying she had alerted leadership and law enforcement over a blackmail threat. The details of what the group called a threat to disclose “a past personal, non-financial matter unless she compromised her position” remain unclear.
The organization also reported that month that after four years of record numbers, membership dropped 26,000 in 2023 with 17,000 leaving between November and December. Though expected as the result of a chilled housing market, the drop marked its first year-over-year decline in the past decade.
“In some ways, [the lawsuits and sexual harassment issues] are inextricably linked,” Haber said. “They’re a failure of the organization to act in the best interest of its members.”
But its problems trickle all the way down. Some say NAR was largely absent from the fights against Los Angeles’ new mansion tax, rent law updates in New York and Chicago’s transfer tax.
While many fear losing NAR’s political voice, others want a change in industry leadership if the organization can’t prove its value amid the upcoming obstacles.
“The worst thing that could happen is for our industry to become rudderless,” Haber said. “How many times can you just say it’s gonna be OK? But then what’s the track record on that?”
Building an industry giant
Like many other trade groups across the country, NAR has roots dating back to industrialization in the U.S. As public employees, post office supervisors and hotel, restaurant and bar workers banded together, so did real estate agents.
In 1908, 20 local and state boards gathered in Chicago to form the National Association of Real Estate Exchanges. In 1913, the group adopted its code of ethics, laying the groundwork for the commission policies that would land it in court 110 years later.
The rules stated that listing agents must “always be ready and willing to divide the regular commission equally with any member of the Association who can produce a buyer for any client.”
The group drew up its code during a time NAR leaders have characterized as the Wild West, ripe with scammers ready to take advantage of unsuspecting consumers. The organization taps this same refrain today to serve as a warning for a world without NAR.
Real estate was plagued by “Robber Barons whose motto was not ‘Let the Public Be Served’ but rather ‘Let the Public Be Damned,’” North wrote.
Members of the budding organization pledged to expand education about the industry, establish and uphold ethical standards and advocate for public policy.
“We won’t let one or two leaders derail us from that path,” Elizabeth Mendenhall, who served as NAR president in 2018, said of the group’s original intentions.
Mendenhall, a sixth-generation Realtor who takes speaking engagements on behalf of NAR leadership, said she questions the motivations of those calling for the association to lose or lessen its standard-setting power.
“Why wouldn’t you want to hold yourself to higher standards? That’s an oath we take when we join the organization,” she said. “I would challenge someone who doesn’t feel that’s important.”
Troubled rise to the top
The challenges to NAR’s century-long reign have been brewing for decades, and critics say they’ve resisted meaningful change.
“I’ve always described NAR as the whack-a-mole machine,” said Ketchmark, who’s also representing the plaintiffs in a second antitrust case in Kansas City. “Every time they get caught doing something, they just change the way that they do it slightly.”
Policies first sparked official scrutiny around the 1950s, when the organization — then known as the National Association of Real Estate Boards — and the Washington Real Estate Board were at the center of a lawsuit alleging that members of the D.C. chapter conspired to fix their commission rates.
The lawsuit followed a criminal investigation into similar accusations, but that case was dismissed. The civil case made it all the way to the Supreme Court, but the justices ultimately didn’t find the local or national board liable for price fixing.
“Once real estate started becoming a big part of the economy after World War II, there was plenty of antitrust focus,” said antitrust attorney Dylan Carson.
More than 50 years later, the Department of Justice took notice. The department sued NAR in 2005 for barring internet-based brokers’ access to listings. The group entered into a 10-year settlement with the department three years later, agreeing to grant online agents full access to the MLS without having to admit wrongdoing.
Even before the DOJ inquiry, the organization’s local and state chapters had been fighting several lawsuits over their policies prohibiting nonmembers from accessing the MLS, according to Carson.
The DOJ once again set its sights on NAR when it filed another complaint against the organization in 2020, during the Trump Administration. The department claimed that buyers’ broker commission policies — the rules being contested in civil courts across the country — illegally restrained competition.
Upon filing the complaint, the department agreed to settle with NAR, provided the organization changed some of its rules and increased transparency around its commission policies.
“These lawsuits are going to mount, and that’s what’s ultimately going to bring them down.”
At the time, NAR’s legal team thought the DOJ’s interest in its cooperation rules had ended, according to a federal appeals court hearing.
But when President Joe Biden assumed office, his administration vowed to prioritize antitrust actions, including those aimed at anti-competitive practices in the real estate industry, according to an executive order issued in July 2021.
“Robust competition is critical to preserving America’s role as the world’s leading economy,” the order states. “Yet over the last several decades, as industries have consolidated, competition has weakened in too many markets.”
With a renewed antitrust crackdown, the DOJ withdrew from its settlement with NAR. Though a lower court initially rejected the department’s request to reopen its probe, the DOJ is appealing the decision — a move the appellate court judges seem inclined to support.
“I don’t see how you can read into this [letter] any kind of commitment about not prosecuting in the future,” Judge Florence Pan of the D.C. Circuit said at a hearing in December.
Though the Realtors’ group has largely escaped significant penalties, the recent verdict appears to signal that the tide is changing.
“Instead of a group of regulators or the traditional system going after them, regular jurors who have to deal with stuff like this in their day-to-day lives can hold them accountable,” said Sitzer/Burnett attorney Ketchmark. “That’s what’s changing here.”
Uncertain future
NAR started to feel the pressure even before the jury handed down the Sitzer/Burnett verdict. The group, which had skated by before by agreeing to update policies, appeared willing to change again.
Days ahead of the trial, the group changed its interpretation of the commission-sharing rule at the heart of the lawsuit. The policy was originally interpreted as requiring listing brokers to offer a portion of the commission to buyer’s agents. In October, a NAR spokesperson said the provision only mandates that brokers communicate the offer regardless of the amount, which can be $0.
The group is also facing a high-profile rival, a new trade association founded by Haber and Mauricio Umansky, a star broker and co-founder of The Agency brokerage.
“We’ve never known a real estate industry without [NAR],” Haber said. Despite the group’s prominence, “it just feels like something isn’t working.”
Though the two are still sorting out the details, they’re designing the fledgling American Real Estate Association with their top complaints in mind.
Umansky filed a lawsuit against the Realtors’ association in 2020 over its listing database policies, while Haber founded the grassroots NAR Accountability Project, aimed at bringing change to the organization.
Under the duo’s association, members can determine their own commission rates, and listing brokers won’t be required to cooperate with buyers’ agents. As part of the initiative, Umansky and The Agency’s Chris Dyson have launched the National Listing Service, a platform that’s live with some listings available.
“NAR was too big to fail, until it failed,” Haber told the Times. “People want something different.”