The National Association of Realtors (NAR) has been the cornerstone of the American real estate industry for decades. With millions of members and a seemingly unshakeable influence on the market, NAR has often been seen as the protector of real estate professionals' interests. But recent events have thrown that perception into disarray, at least from this Realtor's perspective. The $418 million settlement reached by NAR in response to a federal antitrust lawsuit raises serious questions about whether the association has truly fought for its members—or simply sold them out.
As agents who have traditionally relied on Buyer transactions, they may be wondering "how am I going to get my next paycheck"? No question, we will be able to work through this mess but in the meantime there will be many agents who are going to be looking for a side gig if not a completely new source of income. But isn't that why we grow our Asset Garden, just for situations like this fiasco?
From my perspective, the settlement represents more than just a legal resolution; it signifies a capitulation to government overreach and a betrayal of the very professionals who fund the association through their dues.
At least here in Florida, full disclosure has been the law of the land for decades negating the need for this 'one size fits all' settlement. It's incorrectly stated in the press that 'sellers are required to pay buyer side commissions'. This is at best a misrepresentation of how the process works, at least here in the Free State of Florida. At its worst, it perpetuates the often negative attitudes towards the true beneficial market service Realtors provide.
Without going into a lengthy economics discussion, suffice it to say that "middle men" (and Yes. Ladies too!) have throughout history been maligned as collecting a fee for "doing nothing". We are looked at as needlessly meddling between buyers and sellers. The reality is that without "middle men" or "brokers" as we Realtors call ourselves, the market would break down quickly as buyers and sellers found that the information needed for an efficient and beneficial market place was just not there having seriously disappeared without our services. "Middle men" provide the platform for the very efficient flow of information that any market place needs to be effective, efficient, beneficial to all parties....Without us, there is no "real estate market".
The Backdrop: A Troubling Legal Battle
The lawsuit that led to this settlement accused NAR and several major brokerages of conspiring to inflate real estate commissions, effectively forcing sellers to pay more than they should have to. The plaintiffs argued that NAR's rules, particularly those related to the Multiple Listing Services (MLS), created an environment where sellers were required to offer compensation to buyer agents as a condition for listing their properties. This, they claimed, unfairly propped up commission rates.
It’s important to remember that this case didn't come out of nowhere. The real estate industry has long been under scrutiny for its commission structures, and NAR has had ample time to prepare for this kind of legal challenge. Yet, instead of mounting a robust defense, the association chose to settle—quickly, and at a staggering cost (Pearson Realty Group) (The Mortgage Reports).
The $418 Million Question: Who Does NAR Really Serve?
The settlement amount—$418 million—will be paid out over several years, with the first installment of $197 million due within 90 days of court approval. This might seem like a win for the plaintiffs, but for the dues-paying members of NAR, it feels like a colossal loss.
Why? Because this settlement doesn’t just impact NAR's finances; it fundamentally alters the real estate market. The settlement eliminates the "requirement" (so says Real Estate News) for sellers to offer compensation to buyer agents through the MLS, a move that could drive down commissions across the board. While that might sound good for consumers, it’s a direct hit to real estate agents, who now have to renegotiate their value proposition in a market that’s already competitive and increasingly driven by discount brokers (RealEstateNews.com).
A Libertarian Perspective: NAR’s Failure to Fight
From a libertarian standpoint, this settlement is nothing short of a disaster. NAR’s decision to settle so quickly reeks of an organization that’s more interested in self-preservation than in defending the principles of a free market. By settling, NAR essentially admitted that the government had the right to dictate how private businesses negotiate their compensation—a dangerous precedent that could have far-reaching implications.
One has to wonder: With the vast resources at its disposal—funded by the dues of hardworking real estate professionals—
Couldn’t NAR have fought harder?
Couldn’t they have taken a principled stand against what many see as government overreach into the private sector?
Instead, NAR chose the path of least resistance, opting to settle rather than risk a prolonged legal battle. This decision not only undermines the association's credibility but also raises serious questions about its commitment to defending the interests of its members.
The Impact on Realtors: A New Reality
For Realtors, the fallout from this settlement will be significant. The elimination of the MLS compensation requirement means that buyer agents will now have to negotiate their fees directly with their clients. This could lead to a race to the bottom, with agents slashing their commissions to stay competitive.
While some might argue that this is simply the free market at work, the reality is that it puts Realtors in a precarious position—forced to justify their value in an environment where consumers are increasingly looking for the lowest possible price. Now, there's nothing wrong with the need to continually prove one's worth, that's the Market at work. And we'll figure out how to make it work (until our beneficient Government overlords get involved again) but in the meantime I fear we'll lose many seasoned and great agents along the way.
Moreover, the requirement for written buyer agency agreements, while ostensibly a move towards transparency, could further complicate transactions and deter potential clients who are wary of signing contracts before they even begin their home search (The Mortgage Reports) (RealEstateNews.com). Huh, ya think?
What Could Have Been: A Missed Opportunity for Real Reform
Instead of settling, NAR could have used this lawsuit as an opportunity to push for real reforms that would benefit both agents and consumers. For example, they could have advocated for more flexibility in commission structures, allowing agents to offer a wider range of services at different price points. They could have worked to dismantle the barriers to entry in the real estate market, making it easier for new agents to compete and innovate. How about pressuring states with vague or ineffective disclosure rules/regs into getting with the program. Instead, by settling, NAR has likely entrenched the status quo, leaving many agents to fend for themselves in a market that’s about to become even more challenging and more confusing for our buyers and sellers.
Conclusion: A Betrayal of Trust
In the end, the $418 million settlement is not just a financial hit for NAR; it’s a betrayal of the trust that Realtors have placed in our association. From this Realtor's perspective, it’s a clear example of an organization that has lost its way—more concerned with protecting its own interests than with standing up for the principles of a free and fair market. And don't we see this at nearly every level as organizations and institutions grow overly obese and self-serving.
Realtors deserve better. They deserve an association that’s willing to fight for their rights, even when it’s difficult. They deserve leadership that’s committed to defending the principles of a free market, not caving to government pressure at the first sign of trouble. Unfortunately, with this settlement, it seems that NAR has fallen short—and it’s the Realtors who will pay the price.
Don't give up. Fight, Fight, Fight. Refuse to lie down and take it. Either figure out how you're going work around this awful settlement or look to expand your Asset Garden so that you're not dependent upon some moron sitting in his/her ivory tower making decisions for YOUR life.
Let's get to work!
The "ASSET GARDENER"
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