Commissions lawsuits FAQ: Answers to top questions 

The National Association of Realtors reached a deal in March to settle a growing number of lawsuits that challenge the way real estate agents get paid. This settlement — which still needs to be approved by a judge — has created a wave of uncertainty and concern about the future. But the picture is becoming clearer. Real Estate News has put together answers to your top questions.

What are the commissions lawsuits about?

Some consumers claimed that the industry has conspired to keep commissions artificially inflated — and started taking their complaints to court. Last fall, a Missouri jury agreed, awarding nearly $1.8 billion to home sellers in the Sitzer/Burnett case.

How many lawsuits are still out there?

There are more than 20 lawsuits, most brought by home sellers, but some brought by buyers. Cases have been filed across the country and cover different geographic areas that add up to pretty much everywhere. 

Many are class-action cases, which means they can include people who didn't file suit but meet certain criteria. Most were filed in the months following the Sitzer/Burnett verdict and are awaiting their first court date. Others are moving toward trial or an appeal, a few have been dismissed, and some are paused until after NAR's final settlement hearing in November. 

There have also been efforts to consolidate some of the commissions cases, though the courts have so far ruled that a broad approach to consolidation is not necessary. A judge overseeing two Missouri lawsuits, however, did agree to consolidate those particular cases.

Who is being sued?

NAR has been a defendant in most of the lawsuits, but it has lots of company from across the country: Dozens of brokerages, as well as some MLSs, associations and even top teams. And not all of those defendants are covered by the NAR settlement.

Many of those defendants have reached settlement agreements, with a number of those deals set to be finalized on Oct. 31. NAR's final settlement hearing is scheduled for Nov. 26 and will also include final approval of HomeServices of America's $250 million agreement, the largest of the brokerage company settlements.

Who is covered by the NAR settlement? And who isn't?

NAR's settlement covers Realtors, aka agents who are members of NAR. It also covers brokerages with a principal who is a Realtor and whose residential transaction volume in 2022 was $2 billion or less. MLSs that are wholly owned by a Realtor association are covered as well. 

That left 30 MLSs and about 90 brokerages uncovered, though they had the option to settle by paying into the settlement fund or going through mediation. Compass was the first "unsettled" brokerage to reach a settlement agreement after the NAR deal was announced, while eXp was one of the most recent, reaching a deal in October.

Those choosing to opt into the settlement had until June 18 to do so, though many MLSs and brokerages did not reveal their agreements until months later. 

NAR's settlement also covers agents, even those affiliated with HomeServices of America and its related companies. HomeServices had been the last company still fighting the outcome of the $1.8 billion Sitzer/Burnett case, where the stakes had risen significantly, to $4.7 billion — a hardball move by the plaintiffs — but agreed to a $250 settlement deal on April 26.

What industry rules have changed?

Rule changes required by the NAR settlement took effect August 17, even though the settlement won't be final until it is approved by a judge in November.

Here's what to know about the new rules:

• MLSs can no longer include offers of compensation for buyer agents. This isn't just a "$0 is OK" situation. The field must be removed entirely.

• Buyer agents must now get written agreements with clients before they show a home, something that was already required in 18 states.

• Compensation must be in the form of a percentage or dollar amount and cannot be open-ended.

• Agents cannot accept compensation beyond what is spelled out in their agreement with buyers.

How will buyers' agents get paid?

There are multiple ways buyers' agents can get paid. For example:

• Homebuyers can pay their agents directly.

• Sellers can offer concessions that the buyer may use for things like closing costs and, yes, paying their agent. (And buyers can ask for concessions in their offer if the seller is not providing them.)

• The listing broker can offer a portion of their compensation to the buyer agent.

Wait, isn't 'cooperative compensation' going away?

It's not going away — it's just moving out of the MLS. Brokers can still offer commissions on their own listings, via their own websites or other non-MLS channels. Some major brokerage companies, like Anywhere, have encouraged their agents to publicize offers of compensation on their websites; others, like eXp, have said they will no longer facilitate broker-to-broker compensation.

Regardless of the approach, the key is that all forms of compensation need to be negotiated between buyer agents and their clients directly — and it needs to be spelled out in an agreement before an agent shows a would-be buyer a house.

There might be some temptation for agents and brokerages to develop workarounds, but many industry leaders have advised against this approach to avoid attracting the attention of the Department of Justice, not to mention attorneys who want to add to the parade of copycat lawsuits.

What about financing?

Cooperative compensation may not be going away entirely, but it will be less of a guarantee in real estate transactions. And with that change comes complications in financing. Statements from federal financial entities have clarified things a bit: The Federal Housing Administration and GSEs, aka "government sponsored enterprises" like Fannie Mae and Freddie Mac, will continue to exclude seller or listing agent payment of buyer agent commissions from their limits on "interested party contributions," or IPCs. 

That's a lot of alphabet soup, but it is good news for buyers, sellers and agents, because counting buyer compensation as an IPC would limit the amount of money sellers could offer for things like closing costs or repairs.

VA mortgage rules, meanwhile, have been changed to allow buyers to compensate their agent.

Will this make houses cheaper?

Some observers seem to think so. But others point out that home prices are driven by factors that have nothing to do with commissions: inventory, interest rates, and the likelihood that sellers will still ask for as much as they can from potential buyers, regardless of what happens with commissions.

When will home sellers get a payout?

It's not yet clear when home sellers will get paid. Tens of millions of people may be eligible for a piece of the pie, which includes money from NAR and the brokerages and MLSs that have either opted into the settlement or reached separate agreements with the plaintiffs. 

That could add up to more than $5 billion, though as of early October, the settlement fund sits at just over $1 billion. But when all is said and done, individual members of the class may get as little as $10, some industry leaders estimate.

How will NAR pay its part of the settlement?

NAR President Kevin Sears said in an interview that senior leaders and financial experts would determine how it will pay its $420 million settlement, starting with an initial $5 million deposit, followed by $197 million within 90 days of final approval — which is expected on Nov. 26 — and continuing with $72 million annual payments for the next four years. 

"Will there be some changes in the association? We don't know yet," Sears admitted. "Whether it be some streamlining, I mean, probably but we don't know yet." The organization also said in Realtor magazine that it will "not change membership dues in 2024 or 2025 because of this settlement." 

Where can I learn more?

There is a growing number of resources available to help you unpack the NAR settlement and the changes it will bring to the industry. Some of the best: 

• NAR's "facts" page includes the actual settlement documents as well as frequently updated FAQs that go deeper into what the agreement requires, financing and more.

• Bright MLS has a guide that provides details about the big picture as well as specific details about how the MLS experience will change.

• Keller Williams shared a candid FAQ (sample question: "Why be a member of NAR?") as well as a "NAR Settlement Simplified" one-pager that gets into the nitty gritty of agency.

• HAR's "The Reality of Real Estate" page includes FAQs, videos and infographics intended to address "misinformation" around the NAR settlement.