90-plus brokerages left out of NAR commissions deal. What’s next?
Top companies and MLSs outside the settlement can take part in a streamlined process to pay into a fund — but it could cost millions.
Key points:
- Brokerages with more than $2 billion in residential transaction volume can settle by paying a percentage into the settlement fund.
- MLSs that want to settle will pay based on subscriber count.
- For those who can show they can’t afford to pay, mediation is an option.
The $418 million NAR settlement covers a broad swath of the real estate industry, but some of the biggest players in real estate were left out. For the large brokerages and MLSs still facing legal liability, there is a streamlined path to settlement — but it won't come cheap.
Settlement documents to be filed in court indicate that brokerages that averaged more than $2 billion in residential transaction volume over the past four years would not be included in the agreement.
There are more than 90 brokerages that meet this criteria, according to research done by T3 Sixty, whose Real Estate Almanac was used by the court. The list includes Compass (which had $227.98 billion in sales volume in 2022), eXp ($159.1 billion), Redfin ($39.8 billion) and Howard Hanna Real Estate ($37.7 billion), along with dozens of other national and regional firms.
Anywhere Real Estate, Keller Williams and RE/MAX already reached settlements prior to the one made by the National Association of Realtors. The total amount for those three settlements was around $208.5 million.
For the other big brokerage that choose to settle, two options are available:
Option 1: Following preliminary settlement approval, brokerages will have 120 days to deposit funds into a settlement escrow account opened by the plaintiffs. The amount owed is equal to .0025 multiplied by the average annual total transaction volume over the most recent four calendar years.
For a brokerage that averaged $2 billion, for example, $5 million would go into the settlement account. A brokerage the size of Compass could be on the hook for more than $500 million.
Option 2: If a brokerage can show it lacks the ability to pay the amount in Option 1, it could go into non-binding mediation within 110 days following preliminary approval of the settlement agreement.
MLSs have similar settlement options
MLSs not completely owned by Realtor associations are excluded from the $418 million settlement, but if they want to settle on their own, they also have two options:
Option 1: Following preliminary settlement approval, MLSs will have 120 days to deposit funds into an escrow account. They would owe a dollar amount equal to 100 multiplied by the number of subscribers the MLS had in 2023, based on the subscriber count listed in T3 Sixty's 2023 Real Estate Almanac.
A 1,000-member MLS, then, would have to pay $100,000.
Option 2: Similar to the brokerage requirements, if an MLS has a "good faith belief" that it lacks the ability to pay the amount required in Option 1, it can elect non-binding mediation. That mediation would have to occur within 110 days of the preliminary settlement.
Along with paying into the settlement fund, MLSs would also have to change their practices as outlined in the original settlement agreement.
Correction: The tally of affected brokerages now includes one fewer than in the original version of this story.