NAR Settlement Brings Changes to Real Estate Industry

The National Association of Realtors last year settled a class action lawsuit in which the complainants alleged that industry practices led to excessive fees — namely, commissions for listing agents and buyer’s agents.

To resolve the claims, NAR, which is based in Chicago, agreed to pay $418 million in damages and to remove cooperative compensation offers from Multiple Listing Services.

The settlement was agreed upon in March 2024, with the new rules set to take effect that August. A U.S. District Court judge in Missouri signed off on the settlement in November, making the new way of doing things official.

However, according to the Long Island Board of Realtors, a 30,000-member not-for-profit trade association, the changes are not as dramatic as they may appear.

Compensation for listing agents and buyer brokers has always been negotiable, said LIBOR CEO Doreen Spagnuolo during a recent interview.

Note that while “Realtor” and “real estate agent” are often used interchangeably, not every real estate agent is a Realtor. Realtor is a trademark of the National Association of Realtors, so only members can identify as Realtors.

This interview has been edited for length and clarity.

Does this affect all real estate agents in New York State, regardless of whether they are Realtors?

The NAR settlement changes, they do impact Realtors who belong to NAR; however, it really influences industry practices more broadly, and it affects real estate agents truly across the country.

First of all, it brings transparency to the conversation, and that’s extremely important. A Realtor, or any real estate agent, is able to sit down and speak with their client and explain the process to them.

Homebuying could truly be one of the biggest and most expensive purchases of somebody’s lifetime, and there’s a lot that is involved in it. It’s complicated. And Realtors are real estate agents who really know what they’re doing and understand all of the different nuances with the settlement, and just in general with the transaction alone, can provide extremely helpful guidance and information to a consumer. Because it’s nerve wracking. It’s a big process, and there are a lot of laws and regulations and changes that are going on in the industry today.

The changes are good with respect to more transparency and, hopefully, more consumer confidence in the homebuying process.

What do the listing agents need to do differently now, in light of the settlement?

Offers of cooperative compensation — or offers of commission, or compensation, or fee being paid to a buyer’s agent — can no longer be included in an MLS, a Multiple Listing Service.

The listing agent has to make sure that they explain to the seller that commissions are negotiable. Commissions are not set by law. Commissions are something that has to be negotiated between the home seller and the listing agent.

The listing agent has to make sure that they articulate their value: “This is what I’m bringing to the table. This is what I’m going to do for you, Mr. or Mrs. Seller, and this is why I’m charging whatever the broker’s fee is.” There should be a negotiation back and forth.

Listing brokers also have to make sure that they explain to the sellers that a seller does not have to pay or buyer-broker fee. They can, but they don’t have to. Again, it’s all part of the negotiation. Any commission, any fee, is negotiable. Listing agents have to make sure that they explain that to the sellers. That transparency in having the conversation about commissions with the sellers is more critical now than ever, although that conversation should always be had.

Now that this topic is more in the public domain — it’s in all the real estate industry newspapers — it’s good. It’s making consumers more aware of what’s going on and asking the right questions, and they understand what their rights are, and that’s a great thing.

What are buyer’s agents doing differently than they had to do before?

If a buyer broker is going to be bringing in a client to view a property, whether it’s virtually or live, they have to enter into a buyer representation agreement.

NAR and LIBOR, we’ve been saying for as long as I’ve been there that a buyer agent should be entering into a written agreement with their buyer because it spells out what the commission is, what the buyer-broker fee is, what that buyer agent is going to be doing for the buyer. Again, it’s clarity, it’s transparency, and it’s best practices that the buyer understands: What am I paying for? What am I getting for this?

The buyer broker is able to articulate their value of what they’re doing for this particular buyer.

The lawsuit really came out and demonstrated — jurors obviously said — that buyer brokerage may not have been so clear out there in the public eye. A buyer broker represents the buyer’s interest. The fiduciary duties are to protect the interest and the confidentiality of the buyer.

The listing broker’s fiduciary duties are to the seller, and the listing broker protects the confidentiality and the interests of the seller.

Now, it must be clear to the buyers that the buyers have the right to seek their own representation if they choose to do so. So when they enter into a buyer representation agreement, the buyer’s agent and the buyer sit down in almost the same process as on the listing side: “Let’s go paragraph by paragraph. This is what this means. This is what I’m going to do for you. This is the marketing I’ll do. This is what I bring to the table. This is my experience. This is what I’ll do here. This is how I’ll protect you. This is the best way I’m going to negotiate and find a house for you.”

And so it is, again, transparency, clarity, trust, that is being built up among the parties and within the real estate industry in and of itself. So these conversations and these practices are a wonderful thing.

As of February 2025, if I go to list my house, what is that listing agreement going to look like?

First of all, there are no standard fees, and one of the requirements too in the settlement is that the listing agreement, and also the buyer representation agreement, there has to be a statement on there that commissions are not set by law. They’re fully negotiated.

So, because of that, when the seller sits down with the listing agent, there’s no set fee. The listing agent is going to have to explain: This is what I charge. This is why I charge it. The seller might say, well, you know, I would like this service, and not that service. And there should be a negotiation going back and forth until they both settle on what the fee for the sale of the house will be.

The listing agent also has to make sure that they explain to the seller: A buyer is going to come and make an offer to you. You may offer compensation to pay a buyer’s agent, but you don’t have to this. Nothing is mandatory. If you would like to do so, you may do it. And some may say, “Well, why would I do that?” Well, it might incentivize a buyer to come and purchase this property if they’re going to be getting some assistance with paying their buyer broker.

Also, a conversation needs to be had that a seller, if they would like, could also offer concessions.

A concession is a certain amount of money — whatever the seller decides — saying that they’ll help the buyer with down payment costs. But a seller can never determine what the buyer can use a seller concession for. It’s just a set amount, and then it’s up to the buyer to decide what they’re going to use that amount of money for.

The listing broker should be explaining to the seller that you can offer a seller concession, but you don’t have to. These are just options you have that you may want to put an incentive there for to help a buyer, or could put a buyer over the edge to definitely be able to purchase this property.

A buyer broker should be explaining to the buyer that a seller may offer to pay the buyer broker compensation, but there is no requirement that they do. They don’t have to.

So the buyer representation agreement is where the buyer is agreeing to pay whatever the commission is to that buyer broker. When a buyer is making an offer back to purchase a house, they could put an amount in that offer to say that the sellers will pay my buyer broker, or a part of my buyer broker fee.

The main point is, it’s all in negotiation, and it should just be all negotiated out between the parties to that particular transaction. That increases transparency. And once consumers understand that they have these rights, it’s going to increase the consumer trust in the real estate transactions.

Is this the new norm indefinitely, or is this still being appealed or adjudicated in court?

The settlement made a significant shift, and the industry is going to evolve as interpretations and as best practices develop.

With the NAR settlement — they settled. They did not appeal. But there are other pending lawsuits that are out there. So, you know, what’s going to happen with the appeal, or no appeal, or is the DOJ getting involved? It’s evolving right now. Everyone’s going to have to make sure that they understand the different nuances, what are the changes. Things are being changed continuously.

And I have to put a plug in for my LIBOR, but that’s truly why LIBOR is so important. We are supporting our members through these industry changes, staying right on top of the nuances, what’s going on. If there’s another case out there, if there’s a new development, whatever the development may be, we’re trying to explain it all to our members by providing them webinars, resources, tools.

We do have on our website a consumer part, but I’m looking to develop it so consumers will also have a place where they could come and get trusted information. I want LIBOR to be a trusted resource for our members and also for the consumers.

We look to support and empower our members for their success. We look to explain how important transparency is, and we want the consumers to trust LIBOR and to trust real estate state in general.

LIBOR has a Legal Support Center for its members, including a help line to discuss legal questions with an attorney. For more information, visit lirealtor.com/brokers-agents/legal.