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Judge Stephen R. Bough, who presided over the landmark Sitzer | Burnett class action lawsuit, granted preliminary approval to the proposed settlement reached last month by the National Association of Realtors in an order released on Tuesday.
The order makes it increasingly likely that Realtors will operate under new rules within just a few months at which time NAR has agreed to implement a set of changes governing the industry.
Judge Stephen R. Bough | Photo courtesy of the University of Kansas School of Law
Bough ruled that the sweeping changes proposed within the settlement agreement were “fair, reasonable and adequate” and set a November hearing for final approval.
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Under the terms of the settlement, NAR agreed to establish rules preventing the display of cooperative compensation within the multiple listing services by mid-July. NAR will also pay $418 million over the next four years, and plaintiffs’ attorneys said in a Friday filing the settlement amounted to “greater than 50 [percent] of NAR’s net assets.”
The rule changes are widely expected to provide added transparency into how real estate agents are compensated, and some experts believe the changes will lead to more negotiation around real estate commissions paid by buyers and sellers in the near future.
NAR’s proposed settlement offered blanket protection from a growing list of lawsuits filed by homesellers and homebuyers across the country in the months following the Sitzer verdict.
In a statement, NAR spokesman Mantill Williams said the organization was happy with Bough’s order.
“It has always been NAR’s goal to resolve this litigation in a way that preserves consumer choice and protects our members to the greatest extent possible,” Williams said. “This proposed settlement achieves both of those goals and provides a path for us to move forward and continue our work to preserve, protect and advance the right to real property for all.”
The lawsuits largely centered around what was known as the Participation Rule, which required listing brokers to make blanket, unilateral offers of compensation to buyer brokers in order to submit a listing in a Realtor-affiliated multiple listing service.
The rule changes envisioned by the settlement will also require buyer’s agents to obtain a signed representation agreement with clients before touring homes.
The settlement didn’t include HomeServices of America or other brokerages that conducted over $2 billion in transaction volume in 2022. That left out more than 90 brokerages. Ultimately, however, NAR said its proposed settlement would protect over 1 million of its nearly 1.5 million members. HomeServices has vowed to fight the Sitzer verdict.
Brokerages and MLSs not covered by the proposed settlement have until June 18 to take action and be covered.
Bough also agreed to certify the proposed settlement class, which would include the following:
- Homes listed on Moehrl MLSs: March 6, 2015, to date of Class Notice;
- Homes listed on Burnett MLSs: April 29, 2014, to date of Class Notice;
- Homes listed on MLS PIN: December 17, 2016, to date of Class Notice;
- Homes in Arkansas, Kentucky, and Missouri, but not on the Moehrl MLSs, the Burnett MLSs, or MLS PIN MLS: October 31, 2018, to date of Class Notice;
- Homes in Alabama, Georgia, Indiana, Maine, Michigan, Minnesota, New Jersey, Pennsylvania, Tennessee, Vermont, Wisconsin, and Wyoming, but not on the Moehrl MLSs, the Burnett MLSs, or PIN MLS: October 31, 2017, to date of Class Notice;
- For all other homes: October 31, 2019, to date of Class Notice.
Following the Oct. 31 verdict, some of the largest companies in real estate have reached proposed settlements with plaintiffs in various lawsuits. More settlements are expected to come.
Michael Ketchmark
“Every day we continue to engage in settlement conversations and settlements with companies,” Michael Ketchmark, the lead plaintiffs’ attorney in the Sitzer case, told Inman earlier this month.
On Tuesday, Ketchmark told Inman he was happy to see the preliminary approval.
“It’s a huge step towards bringing about the necessary relief to homeowners nationwide,” Ketchmark said. “NAR negotiated a way for large brokers, and we reach settlements almost daily. The long-engrained mandatory compensation is finally dead.”
The approval isn’t the end of the scrutiny NAR faces. Earlier this month, an appeals court ruled that the U.S. Department of Justice could reopen its investigation into NAR’s cooperative compensation rule, also known as the Participation Rule, which it began investigating five years ago.
Inman Deputy Editor Andrea V. Brambila contributed reporting.
