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With the historic antitrust settlement policies implemented on Aug. 17 and settlements nearing final approval, the real estate industry is grappling with what’s next. Many agents are frustrated with the National Association of Realtors (NAR) settlement terms, and the lackluster rollout of communication has only added to the tension.
Online forums are filled with discussions about leaving NAR, and some large brokerages no longer require membership due to parent company decisions. While the frustrations are understandable, leaving NAR would be a huge mistake for any agent making a rash decision.
The MLS connection: Why leaving NAR won’t solve the problem
Being a member of the MLS is still a necessity for most agents. Leaving NAR won’t remove agents from the new rules that are required of MLS members regarding buyer agent commissions. Leaving NAR in protest is ultimately ineffective, and leaving to save money could end up being far more costly. Let’s explore why staying with NAR, despite any frustrations, remains the best decision for most agents.
The potential downfall of NAR: A worse scenario
NAR is paying an enormous $418 million settlement over the next four years, and it needs its membership to survive. In a hypothetical scenario where NAR declines, government intervention could be far worse than continuing with this trade association. While some Realtors are not fans of NAR and advocate for consolidation, the organization still provides irreplaceable functions for the industry.
Copyrighted forms: A costly barrier for non-members
One of the first hurdles an agent would encounter leaving NAR is losing access to the essential copyrighted forms used by Realtors. Without these forms, brokerages would need to create custom contracts, leading to potentially significant attorney fees—costs that could easily exceed the price of NAR membership.
Imagine being a buyer’s agent without access to standardized forms. Getting custom contracts accepted by sellers would be difficult, and buyers could face additional attorney fees. Even if the listing agent (who is a Realtor) prepares the offer using Realtor forms, it could result in a reduced buyer’s agent’s commission given the new and negotiable nature of buyer agent compensation.
Moreover, violating copyright laws could result in NAR claiming significant financial penalties under U.S. Copyright Code § 504, not just for the money but to make an example out of any agent daring to cross this line.
Loss of the Realtor brand title: A marketing challenge
It might seem easy to switch from using “Realtor” to “real estate agent,” but in practice, it’s far more complex. Updating marketing materials is simple, but the real challenge lies in explaining the decision to potential customers.
When asked, “Are you a Realtor?” the convoluted explanation of why you left could confuse or even deter new prospects from working with you. Consumers may distrust agents who aren’t Realtors, potentially suspecting that they were forced out for unethical reasons or that there is more to the story than they are hearing.
Loss of ethics standards: The ripple effect
The NAR Code of Ethics goes beyond legal requirements, offering protections that law alone does not provide. For instance, it protects the LGBTQ+ community in 27 states where discrimination based on sexual orientation and gender identity is still legal. That’s just one example out of many that could be covered by the code of ethics. Violating this code can result in quick hearings and punishments, unlike the slower, more complex legal system.
Without NAR’s ethical oversight, some non-Realtor agents could exploit the lack of standards, engaging in questionable practices that harm consumers and professionals alike. Even worse, consumers and Realtor members would have no recourse against actions by non-Realtor agents that are unethical yet legal. The resulting distrust could damage working relationships and affect the acceptance of offers from non-Realtor members.
What more would be lost?
NAR offers a wealth of education and member benefits, both nationally and at the state level. Losing these resources would impact agents, particularly those whose brokerages rely on Realtor associations for training and development.
NAR also plays a critical role in lobbying, having ranked as the top lobbying organization in the U.S. in recent years. If too many agents leave, NAR’s political influence could diminish, resulting in generational harm to homeownership rights. The weakening of NAR’s advocacy could affect not just the industry but buyers, sellers, and the overall housing market.
The rise of competing associations: More chaos than help
While some may look to alternative associations, like the American Real Estate Association (AREA), these organizations are more likely to fracture the industry further. Competing associations would struggle to replicate all the functions of NAR, leading to redundancy, contradiction, confusion, and weakened lobbying efforts. Agents seeking the resources of multiple associations would face even higher costs than sticking with NAR.
AREA, launched by Mauricio Umansky and Jason Haber, aims to rival NAR with its National Listing Service (NLS). However, the “network effect” makes this an uphill battle. Until there is a significant base of agents and listings in a competing association, there is no necessity to join, which is a Catch-22 for growth in the first place.
In industries like real estate, where the stakes are high, switching from a well-established platform like NAR to a new entity is a significant risk that could disrupt business practices and professional networks.
Deciding to stay: The logical choice
Even if you’re still considering leaving NAR, remember that it’s required that all agents within a real estate office are either members or non-members. If your brokerage remains with NAR, you would need to leave the brokerage as well, adding even one more hurdle making the idea impractical.
Business decisions should never be emotional. The facts show that staying with NAR is almost always the best option. No matter how you feel about being a member of NAR, you would most certainly feel ill-equipped without them. A better investment of your energy is to focus on how to grow your business and adapt in the ever-changing market we are currently experiencing.
Sean Frank is the founder and CEO of Mainframe Real Estate in Florida. Connect with him on Instagram and LinkedIn.
