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The U.S. Department of Justice is focused on closing loopholes around the National Association of Realtors’ proposed commission settlement ahead of an expected court ruling later this year, the trade organization’s president told members following a close-door meeting with federal regulators last week.
In a meeting led by Assistant Attorney General Jonathan Kanter, DOJ regulators informed NAR executives, including President Kevin Sears, that the agency was keeping an eye on forms as they update to comply with terms of the settlement agreements NAR and dozens of brokerages and MLSs struck earlier this year.
“The DOJ continues to keep a close eye on perceived efforts to create ‘loopholes’ or ‘work arounds’ to the intent of the settlement agreement,” Sears wrote in a message posted Saturday on Realtor Hub, a forum for NAR members. “The DOJ seems particularly focused on whether the form agreements are tools for that.”
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The DOJ has long indicated it doesn’t want to see offers of compensation from a listing broker made to a buyer broker anywhere. Those offers will be removed from multiple listing services as part of the NAR settlement agreement, but some in the industry are still at odds with where they can advertise offers of compensation. As a result, a wave of new companies have sprung up to offer agents and consumers options to advertise offers of commissions.
The DOJ has yet to weigh in on those new companies.
NAR didn’t immediately respond to a list of questions about what else was discussed during the meeting, how often the organization has met with the DOJ and whether the groups discussed other ongoing litigation.
The meeting and subsequent memo to NAR’s 1.5 million members is the latest indication of how closely the DOJ is watching the real estate industry after the October Sitzer | Burnett verdict opened the flood gates to similar lawsuits.
Beyond the forms, regulators indicated to NAR executives that the agency was concerned about bad actors exploiting other avenues “to circumvent” the coming practice changes, Sears told members. But he offered no additional details on what avenues federal regulaters were most concerned about.
“To be clear, NAR — and I personally — oppose any attempts to circumvent the settlement,” Sears wrote. “The practice changes should be implemented fully and in good faith, in the service of promoting consumer empowerment, consumer choice, and healthy competition.”
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Sears noted the meeting between NAR and the DOJ didn’t mean the agency would drop other inquiries it has recently made into the industry.
Brokerages and associations are now scrambling to create forms, including updated buyer representation agreements, to use in home transactions. Sears offered guidance he said was informed from the meeting with DOJ regulators.
Sears told the associations and brokerages that are updating their forms to make sure they’re clear and emphasize consumer choice.
Last week, a consumer watchdog group released a report alleging that the real estate industry was preparing to adopt forms that were confusing and skewed in favor of Realtors rather than consumers. The California Association of Realtors, among the associations targeted by the Consumer Federation of America, made the decision to delay nearly two-dozen documents after being contacted by the DOJ.
“CAR has received an inquiry from the [DOJ] regarding these forms as well as extensive feedback from our members,” CAR General Counsel Brian Manson confirmed with Inman.
