Understanding the National Association of Realtors Lawsuit
The civil case of Sitzer Burnett et al v. The National Association of Realtors et al, U.S. District Court for the Western District of Missouri has caused a tremendous amount of handwringing in the media and among many of our Realtor colleagues.
To be honest, until I had several of our Realtors asking me about it, I wasn’t paying attention. This subject turned out to be way more interesting than I anticipated. Maybe you’ll agree. As always, I’d love to hear your thoughts and perspective.
Here’s the basic run-down: A jury in Missouri found NAR and co-defendants, including Home Services of America and Keller Williams, liable.
The plaintiffs claimed:
- Real estate commission rates are too high.
- Buyer brokers are being paid too much.
- NAR rules and corporate defendants’ practices lead to set pricing.
The ruling found that NAR’s Clear Cooperation Policy (CCP) violated antitrust laws, potentially opening up the industry to increased competition, changes in traditional business practices, and a fundamental shift in the power dynamic.
What is the NAR’s Clear Cooperation Policy?
The National Association of Realtors (NAR) Clear Cooperation Policy is a mandatory rule that requires listing brokers to submit property listings to the MLS for cooperation within one business day of publicly marketing a property. The policy was adopted by NAR in 2019 to address concerns about the use of pocket listings, which are properties that are not marketed on the MLS and are only available to a select group of buyers.
The Clear Cooperation Policy is intended to:
- Increase transparency in the real estate market: By requiring all listings to be submitted to the MLS, the policy helps to ensure that all buyers and agents have equal access to information about available properties.
- Promote competition: By making all listings available to all agents, the policy helps to level the playing field and promote competition among agents.
- Protect consumers: By ensuring that consumers have access to all available properties, the policy helps to protect them from unfair competition and potential fraud.
The Clear Cooperation Policy has been met with mixed reactions from real estate professionals. Some agents support the policy, arguing that it will help to increase transparency and competition in the market. Others oppose the policy, arguing that it will be too burdensome and will not achieve its intended goals.
In Defense of the NAR’s Clear Cooperation Policy
The NAR has always reminded Realtors to avoid misleading claims about buyer agent services in keeping with the spirit of the clear cooperation policy. NAR’s Code of Ethics prohibits Realtors from advertising or representing their services as “free” or “at no cost” unless they will not receive any financial compensation from any source for those services.
This reminder comes in response to a recent uptick in complaints about Realtors who are using misleading language to describe their services.
For example, some Realtors use phrases such as “no buyer agent fees” or “buyer agent services are included with the listing price” when they will receive compensation from the seller or another source.
NAR is concerned that this type of misleading advertising is harming consumers and could lead to disciplinary action against Realtors. Therefore, NAR is urging its members to be clear and transparent about the cost of their services.
Here are some specific guidelines for Realtors:
- Do not use the word “free” or “at no cost” to describe your buyer agent services unless you will not receive any financial compensation from any source for those services.
- Disclose the amount of compensation you will receive from the seller or another source for your buyer agent services and do so clearly.
- Do not use phrases that could mislead consumers about the cost of your services, such as “no buyer agent fees” or “buyer agent services are included with the listing price.”
NAR encourages its members to follow these guidelines to ensure they are providing consumers with accurate information about the cost of their services.
In addition to the above, NAR also reminds its members of the following:
- Realtors are required to disclose all material facts to their clients.
- Realtors must avoid making false or misleading statements about their services or qualifications.
- Realtors must not engage in any deceptive or fraudulent practices.
The NAR is committed to protecting consumers and upholding the highest standards of professionalism in the real estate industry. By following NAR’s Code of Ethics, Realtors can help to ensure consumers receive accurate and reliable information about the costs of their services.
Cooperative Cooperation Laws Explained
In the context of Missouri law, cooperative cooperation is a concept that refers to the willingness of different entities, such as businesses, government agencies, or nonprofit organizations, to work together to achieve common goals. This can involve sharing resources, information, and expertise to improve efficiency, effectiveness, and overall outcomes.
| The Missouri Cooperative Companies Act, codified in Chapter 357 of the Revised Statutes of Missouri, provides a legal framework for the formation and operation of cooperatives, which are businesses owned and controlled by their members. The Act recognizes the cooperative business model as a unique form of enterprise that promotes cooperation among its members to achieve shared economic, social, or cultural objectives. |
Cooperative cooperation is also a significant aspect of Missouri’s procurement laws. The state’s cooperative purchasing program allows eligible local governments, political subdivisions, and quasi-public governmental bodies to participate in cooperative purchasing agreements with the state, enabling them to leverage their collective buying power to obtain better prices and terms on goods and services.
Missouri’s emphasis on cooperative cooperation extends to various other areas, such as education, healthcare, and environmental protection. For instance, the Missouri Department of Elementary and Secondary Education (DESE) encourages school districts to collaborate on initiatives that improve student learning and achievement. Similarly, the Missouri Department of Natural Resources (DNR) promotes partnerships among businesses, environmental organizations, and government agencies to address environmental challenges.
In essence, cooperative cooperation is a fundamental principle embedded in Missouri’s legal and regulatory landscape, fostering collaboration and shared responsibility among diverse entities to advance common interests and achieve positive outcomes for the state’s communities.
What is Decoupling?
In the real estate industry, decoupling refers to the separation of buyer and seller agent commissions.
Traditionally, real estate agents are compensated through a commission-based system, where they earn a percentage of the property’s sale price. In a decoupled system, buyers and sellers would pay their respective agents directly rather than the listing agent typically covering the buyer’s agent’s commission.
Decoupling has been proposed as a way to increase transparency and fairness in the real estate transaction process. Proponents of decoupling argue that it would give buyers and sellers more control over the fees they pay and would incentivize agents to represent their clients’ interests more effectively.
However, critics of decoupling argue that it could lead to higher costs for buyers and sellers, as agents may charge higher commission rates to compensate for not receiving a portion of the seller’s commission.
| Arguments FOR Decoupling | Arguments AGAINST Decoupling |
| Increased Transparency: Buyers and sellers would have a clearer understanding of how much they are paying in commissions and would be able to compare rates more easily. Fairer Representation: Agents would be incentivized to represent their clients’ interests more effectively, as they would not be reliant on the listing agent for their compensation. Greater Choice: Buyers would have a wider pool of agents to choose from, as they would not be limited to those who are affiliated with the listing agent’s brokerage firm. | Higher Costs: Buyers and sellers may end up paying higher commission rates, as agents may charge more to compensate for not receiving a portion of the seller’s commission. Reduced Efficiency: The transaction process may become less efficient, as agents would need to negotiate two separate commission agreements instead of one. Potential for Conflicts of Interest: There is a potential for conflicts of interest if buyers and sellers are paying agents directly. For example, an agent may be incentivized to recommend a property that is more expensive to earn a higher commission. |
Overall, the potential impact of decoupling on the real estate industry is still uncertain. It is important to weigh the potential benefits and drawbacks carefully before deciding whether or not to support decoupling.
Final Thoughts
There’s a lot to unpack when we discuss this civil case and its potential impact on the real estate industry. Everyone should be paying attention, because staying informed is the key to our continued success. As we learn more about the direction the industry will take in the wake of this case, we’ll have to make some changes to how we operate our businesses.
Change is inevitable – but how we approach and embrace it is up to us. I still believe that real estate is going to be a fantastic industry to be in for the next 25 years and beyond. Stay optimistic. This, too, shall pass.
