NAR Lawsuit – Background to Now

NAR’s role

The National Association of REALTORS® (NAR) is the largest trade association in the U.S.  Membership is composed of residential and commercial brokers, salespeople, property managers, appraisers, counselors, and others engaged in the real estate industry. Members belong to one or more of approximately 1,200 local associations/boards and 54 state and territory associations of REALTORS®. NAR creates policy, rules, and procedures related to membership, multiple listing services, and professional standards.

According to www.nar.com, The National Association of REALTORS® is a leading force in organized real estate, dedicated to its members’ success. NAR offers you the chance to build your expertise and position yourself as an ethical professional your clients and community can rely on.

To the public, NAR’s goal is “Empowering REALTORS® to preserve, protect and advance the right to real property for all.”  

The Consumer Federation of America has been working for many years to impose new standards on REALTORS®. 

Fall out from Antitrust – Price Fixing Lawsuits

Beginning in 2019, numerous lawsuits were filed against NAR and major real estate brands accusing antitrust laws violations and price fixing.

Previous system: In the traditional cooperative compensation model, listing agents and buyer agents shared commissions, with sellers typically paying both agents’ fees. The MLS served as a tool for LA’s and BA’s to share listings and offers of compensation in one place. Access to the MLS is only available to REALTORS. Some MLS data is fed into various other sites like Zillow, Realtor.com, and Homes.com, as well as IDX feeds on agent websites..

How did the previous system practically work? When a LA who is a member of the MLS listed with a Seller, the LA would negotiate with a Seller a total fee to be charged to the Seller as a commission on that transaction. The LA would then itemize how much of that total was to be shared with a BA. That amount to be shared with a BA was then listed in the MLS as “a unilateral offer of compensation” to MLS BA’s. LA’s provided counsel and expertise to the Seller and BA’s brought counsel and expertise to the Buyer throughout the process. Both were compensated for their services under this method but the fee (once set) did not vary from BA to BA (e.g, it was unilateral). Technically, the offer of compensation could have been zero or nominal compensation but that would not create an incentive to bring a Buyer. 

Additionally, to participate in the MLS, all agents were required to list every property in the MLS within so many hours of entering into a listing agreement. Essentially, this created a system where the entire market had to follow these MLS rules.

In Texas, many real estate firms would require a buyer and BA to enter into a Buyer Representation Agreement. The Texas Association of Realtors® form essentially committed the Buyer to pay a commission to the BA; however, the Agreement stated that the BA would attempt to get the commission paid by the Seller. And, since most LA’s were offering compensation to the BA through the MLS System, Buyers never paid for their BA. 

Buyer Representation Agreements were not required, though, so many Buyers were oblivious to the payment structure as it was assumed that the Seller was just paying the commission. Technically, though, it has always been the LA who shared the commission with the BA. 

In their attempt to break up the current system, The Consumer Federation of America (CFA) coined the terms, “coupled

” and “decoupled” commissions. They claimed claimed coupled commissions were essentially “price fixing” as agents and brokers were able to charge high, fixed rates with the buyer having no control over negotiating their own commission based on experience of the agent, services needed, etc. The theory was that Buyer’s and competitive forces could influence the commission structure which would then impact the overall cost of the home a buyer was purchasing. 

According to the DOJ, “Preventing sellers and listing agents from setting buyer-broker commissions would promote greater price competition and innovation in the market for brokers’ services.”

“It is critically important that buyers negotiate buyer agent commissions before their agents search for properties.” Stephen Brobeck of the Consumer Federation of America 

On October 2023, a jury decision in the Sitzer lawsuit found the industry guilty of price-fixing and awarded damages that could exceed $5 billion.

During that time, several large real estate firms pulled out of NAR (Redfin, Remax, Anywhere). There is some question about how well NAR actually represented REALTORS in their handling of the lawsuits as well as competition coming from entities such as Zillow. A new trade association, the American Real Estate Association formed and is advocating for a national MLS. 

On February 15, 2024, the DOJ Intervened in a different lawsuit, Nosalek v. MLS PIN – calling the proposal neither fair, reasonable, or adequate.  “It makes insignificant and largely cosmetic changes to the [MLS] Rule, while perpetuating the existing structure that drives supra-competitive commissions.  There is no reason to believe that the settlement will reduce broker commissions for the class.”

An appeals court decision in April 2024 expanded the DOJ’s ability to investigate the National Association of Realtors®, potentially leading to further scrutiny of commission practices.

While NAR leaders and lawyers felt there was sufficient grounds for an appeal, following that path would have put members at substantial risk for additional lawsuits, costs, potential liability, and uncertainty. After weighing the options, NAR began working on a settlement.

NAR announced a Settlement Agreement on March 15, 2024, which the court granted preliminary approval in April. Most copycat suits have been paused while the settlement agreement is finalized. The court will hold a hearing regarding the final approval of the settlement this year (2024). 

The NAR Settlement Agreement releases liability and ends the lawsuit – and copycat lawsuits with these types of claims – for NAR, 1 million plus members, state/local REALTOR® associations, brokerages with volume of $2billion or less, and REALTOR® association owned MLSs. The settlement is for $418 million over 4 years.

Settlement Terms:

No offers for compensation in the MLS or any MLS supported entity. (New)

Require disclosures to sellers and buyers that compensation is not set by law and is fully negotiable. (Partially New) 

Disclose to the Seller the LA’s offer of compensation. (Not new)

Requires Buyer Representation Agreement before showing any property (New)

Must disclose the amount of compensation as objectively ascertainable and not be open ended. (Not new – but now clearer on WHO pays and HOW).

BA can NOT receive more than what Buyer and BA agree upon (New)

Essentially what this does is “decouple” commissions per CFA/DOJ’s proposal: The DOJ suggests “decoupling” commissions, where buyers would negotiate and pay their own agent’s fees directly, rather than relying on sellers to cover both agents’ commissions.

The DOJ believes this change would promote greater price competition and innovation in the market for brokers’ services, potentially leading to better deals and more creative services for buyers (e.g., greater variation of agent compensation depending on factors such as agent experience and time spent on the sale).

“It is critically important that buyers negotiate buyer agent commissions before their agents search for properties,” said CFA’s Brobeck.  “Otherwise, buyer agents could steer buyers to properties with the highest dollar concessions and potential agent compensation,” he added.  

REALTORS® are held to a higher standard of loyalty, care, and fiduciary (acting with the client’s interests above their own) and therefore deny that they were steering buyers to properties based on compensation.

NAR and REALTORS® are now “under the gun” to make changes that will satisfy both the DOJ and CFA in order to insure the acceptance of the Settlement which would limit damages to be paid under all of the cases. New Rules go into effect August 17, 2024. 

Meanwhile, the CFA is issuing a lot of rulings and guidance on what is going to be acceptable which reflects the power they have over these cases.

DOJ and CFA statements: 

The DOJ proposes that sellers could provide dollar concessions to be used for buyer agent commissions (and other buyer costs), rather than requiring buyers to pay additional cash out of pocket.

“CFA does not oppose monetary assistance from sellers to buyers, only broker manipulation of this assistance to ensure current levels of broker compensation that are strongly influenced by broker collusion,” said CFA’s Brobeck.

CFA criteria also addressed broker compensation when buyers are unrepresented customers.  The criteria include a requirement that listing agents show properties to all prospective customers, including those without an agent.  They also accept that agents can request a reasonable fee from these buyers to cover any additional administrative expenses and, if buyers balk at paying this fee, can request the fee be paid by their seller clients.  They encourage fees, as well as commissions be expressed in dollars vs. a percentage of the sale price.

The post National Association of Realtor Lawsuits – What Happened? appeared first on Hill Country Home & Ranch Team.

1. Plan ahead by organizing and budgeting. Develop a master “to do” list so you won’t forget something critical. To estimate moving costs, use a moving calculator.

2. Sort and get rid of things you no longer want or need. Have a garage sale, donate to a charity, or recycle.

3. But don’t throw out everything. If your inclination is to just toss it, you’re probably right. However, it’s possible to go overboard in the heat of the moment. Ask yourself how frequently you use an item and how you’d feel if you no longer had it. That will eliminate regrets after the move.

4. Pack like items together. Put toys with toys, kitchen utensils with kitchen utensils. It will make your life easier when it’s time to unpack.

5. Decide what, if anything, you plan to move yourself. Precious items such as family photos, valuable breakables, or must-haves during the move should probably stay with you. Don’t forget to keep a “necessities” bag with tissues, snacks, and other items you’ll need that day.

6. Use the right box for the item. Loose items are prone to breakage.

7. Put heavy items in small boxes so they’re easier to lift. Keep weight of each box under 50 pounds, if possible.

8. Don’t over-pack boxes. That will increase the chances that items inside the box will break.

9. Wrap every fragile item separately and pad bottom and sides of boxes.

10. Label every box on all sides. You never know how they’ll be stacked and you don’t want to have to move other boxes aside to find out what’s there.

11. Use color-coded labels to indicate which room each item should go in. Color-code a floor plan for your new house to help movers.

12. Keep your moving documents together in a file. Including important phone numbers, driver’s name, and moving van number. Also keep your address book handy.

13. Back up your computer files before moving your computer.

14. Inspect each box and all furniture for damage as soon as it arrives.

15. Remember, most movers won’t take plants. If you don’t want to leave them behind, you should plan on moving them yourself.

The post 15 Tips for Packing Like a Pro appeared first on Hill Country Home & Ranch Team.

Today, I had someone call and want to make an offer on one of our listings.  Exactly what we’re in business for! Here’s a non-exhaustive* list of what you’ll need to give me in order to get the process going:

1.  How will you take title? In other words, I need your legal name.

2. What’s your mailing address, email, phone number, and fax number?  This is primarily so that the title company can send you their title commitment and all the restrictions, easements, etc. that affect the property.

3.  How much is the offer and how are you going to pay for it?

This is where people who have not been working with a buyer representative sometimes are surprised and can get a little offended.  What you need to keep in mind is that, from the Seller’s point of view, he/she wants to know, “Can this buyer perform?” So …

If the intent is to buy with cash, you’ll need to give me either a copy of a recent bank statement that shows that you have an account balance that is equal to your offer price or you can ask your bank to provide a letter stating the same information.  Most banks are more than willing to write a letter for you.

If the intent is to finance the transaction, you’ll need to contact your bank, mortgage company, or credit union, make application, have them run a credit check, and, if you meet the lender’s criteria, they will send me a “pre-qualification letter” that I can submit with the offer.   Basically, what a pre-qualification letter says is that the lender is agreeing that they will lend you the money IF you substantiate all that you have told them about your finances (and  continue in the same condition through closing – e.g., don’t go out and buy a car or furniture without making sure it won’t affect your ability to purchase the property) and IF the property conforms to their standards.

4.  You’ll need to be ready to issue a check for the earnest money and option fee (if applicable – see below). Earnest money typically is $500, $1000, $1500 and up … depending upon the purchase price.  It’s  what shows that you are an “earnest” buyer.  Generally speaking, it will NOT be refunded if the deal falls through unless there are title issues.  The only exception to that is if you “opt out” during the option period (again – see below) of if your financing falls through during the financing period.  The Financing period is the time period within which you must supply the lender with all of your financial information and get the final “OK” from the Lender.

5.  Do you want to do inspections? If so, you’ll need to purchase the right to do so. Typically the right to do so costs $10 p/day and usually lasts from 7-14 days.  This 7-14 day time period is what is generally referred to as the option period.  It’s called the option period because, if you find something surprising during that time, you can “opt” out and all you lose is your option money.  If there are no surprises and you want to move forward, the option fee typically is applied to the purchase price.  Another alternative (if there are surprises found during inspections) is to go back to the Seller and ask for concessions or repairs.

Keep in mind that there are different kinds of inspections:  A general home inspection, a well inspection, a septic inspection, etc.  Also, if you are buying a raw piece of land, an inspection period usually does not apply.  And … if you are asking for a REALLY great deal or buying AS IS, you may gain leverage in your negotiations by not asking for an option period.  For example, my husband and I have gotten some REALLY REALLY good deals because we offered cash with no option period, and close in 2 weeks.  You just have to weigh what you are trying to accomplish.

6. Are there any other conditions that apply? (e.g., Sale of current home, owner financing, etc.)

7. Last but not least, when do you want the closing to be?  For a property that is financed, you are looking at between 4-6 weeks.  It will vary depending upon the lender’s backlog.  For an all cash deal, it just depends upon whether a survey is needed or if there are inspections.  Typically, 2-4 weeks.

The best part of my job is drawing up contracts.  It means we are doing are job … helping people buy and sell property.

There are a lot of things that can go wrong during the “closing process.”  My job is to walk you through the entire process, anticipate the problems that can occur and then resolve them.

So … Are you ready to put an offer in?  Call me and we’ll get the ball rolling.

*Obviously, I am just covering contract basics here.  There are a lot of other legal issues covered in the standard TAR contract.  If you want more information, just ask me and we can go over it in more detail.

Here are some issues that will disqualify standard financing:

Electrical – Electrical service will need to be upgraded/fixed if wiring is exposed, outdated (below 100 amp service) or a fire hazard (cloth wiring).

Plumbing – Leaks, corrosion, outdated or inadequate plumbing systems.

HVAC – Must be able to heat and cool the house to certain temperature standards.

Lead paint and Asbestos- these materials must be disposed of properly and brought current.

Exterior issues- Roofs, windows, and siding must be in working condition and leak free. Peeling paint must be scraped and repainted.

Well and septic- Must be in working condition and conforming with safety standards.

Foundation- Slabs can not be cracked and un-level. Pier & Beam must support the structure and be level.

Unfinished areas- Missing railings, unfinished entries, exposed wiring, unfinished floors , missing insulation, drywall, etc. will not meet lending requirements.

The post I Want To Make An Offer – What Do I Need? appeared first on Hill Country Home & Ranch Team.