NAR settlement doesn’t pass the ‘real world’ test 

As settlements in the commissions cases continue to work their way through the courts, several have faced objections and appeals. Now, the mother of all deals — NAR's $418 million settlement — has come under fire, with a law professor filing a comprehensive objection on October 28.

Tanya Monestier, who teaches at the University at Buffalo School of Law, submitted a 136-page document objecting to the proposed settlement between home sellers and the National Association of Realtors, which is scheduled to be finalized on Nov. 26 in U.S. District Court in Kansas City.

The filing details her concerns about the settlement, which she calls "the worst of all possible worlds."

Monestier has previously authored several reports on buyer agreements, criticizing some as overly cumbersome or harmful, and creating her own simpler, three-page draft buyer agent agreement.

Implementation a 'disaster'

While the goal of the settlement was laudable, Monestier said it only makes sense on paper.

"It is an example of something concocted by lawyers without a full appreciation of how this would play out in the real world," Monestier said in the filing. "In the real world, the implementation of the settlement has been a disaster."

She points to "workarounds" some in the industry are using to keep the old system in place, providing examples in the filing of agents compelling home sellers to offer buyer agent commissions that go against the spirit of the settlement.

In a phone interview, Monestier said she felt it was necessary to file an objection because not enough people were speaking out about this. As it happens, she is also a member of the seller class: She sold a home in 2022 and paid around $27,500 to a buyer's agent, making her eligible to file an objection.

"Not a lot of home sellers know enough about the settlement and industry contracts [to file an objection]," Monestier said, adding that as a law professor who teaches students about contracts, a judge may find her objection more compelling.

Attorney fees don't need to be so high

Monestier also objected to the attorney fees requested, citing examples of settlements in the $1 billion range where fees were much lower than the 33% attorneys are asking for in these commission settlements.

"I'm not saying there wasn't a lot of hard work involved, but what I'm saying is the result does not warrant the fees," Monestier said, noting that so far, these cases have only resulted in two changes in the industry: the removal of offers of compensation from the MLS and the requirement that buyers sign an agreement before working with an agent.

Same system, more headaches?

Monestier also raised concerns about the confusion this settlement will bring, ultimately creating a more painful experience for homebuyers.

"The settlement agreement takes a tiny baby step toward decoupling, but in a way that is just an illusion," Monestier said in the filing. "We basically just have the pre-NAR settlement system in place with a whole lot more paperwork, headaches, lies, chaos and frustration."

Asked what should be done, Monestier said compensation should be fully decoupled, and buyers should pay for representation independently. 

"If you can't afford that service… then ask in the offer," Monestier said. "But there's none of this dangling a carrot ahead of time, because once you have that, you know you're going to keep replicating the current system where people (sellers) feel forced to offer commissions in advance."