“Decoupling” Buyer Broker Compensation: The National Association of Realtors Settlement

The National Association of Realtors (NAR) recently entered a settlement resolving multiple Federal lawsuits challenging long-standing business practices and agent compensation. The crux of the dispute was the present requirement that listing agents or sellers make offers of buyer broker compensation a requirement of using the Multiple Listing Service (MLS). The plaintiffs alleged this resulted in a variety of anticompetitive practices, including inflated realtor commissions and price fixing. In October, 2023, a jury agreed, and a judge awarded damages of at least $1.8 billion. Burnett et al v. National Association of Realtors et al., Case Nos. 1:19-cv01610 and 4: 19-cv-00332-SRB (W.D. Mo., 2019).

The subsequent pending settlement in lieu of appeal mandated two major changes to NAR business practices. The most publicized component of the settlement is that NAR agreed to create a new MLS rule prohibiting offers of buyer broker compensation on the MLS—“decoupling” buyer broker compensation from the Mashburn broker compensation, however, may still be communicated outside of the MLS. The second change in practices is that NAR also agreed to create a new rule requiring MLS participants working with buyers to enter into written agreements with buyers before buyers tour a home. Proponents of the settlement believe the rule changes will result in a more competitive environment benefitting consumers, while critics oppose what they perceive as new obstacles to buyer representation that will ultimately hurt homebuyers.

Approval of the settlement is still pending, but the new rules are expected to apply beginning July, 2024. While contracting for buyer broker compensation is no longer possible within the MLS, the types of compensation (e.g., fixed-fee, seller concession, or a portion of the listing broker’s compensation) remain unchanged. Practitioners may anticipate drafting or reviewing agreements for buyer broker compensation that would previously have been a component of the MLS.

For more information about this topic, please reach out to the author: Bradley J. Fisher

This article was originally published in the May 2024 edition of the SBM Real Property Section e-Newsletter