The National Association of REALTORS® (NAR), in choosing to settle commission lawsuits filed by sellers that have dogged the industry for five years (along with the cascade of copycats added over the past six months), framed the decision as being an effort to “protect our members to the greatest extent possible.”
Paying $418 million and changing commission rules, the agreement does indemnify most—but not all—REALTOR® members from the suits.
The exceptions, as it turns out, are significant. A handful of suits filed by homebuyers rather than homesellers continue to move forward. Affiliates, franchises and subsidiaries of HomeServices are also explicitly exempted, as that company continues to pursue a legal defense.
Chris Kelly, executive vice president of HomeServices, tells RISMedia the company prepared a “fairly comprehensive” FAQ for members, noting that while the company was “presumably” excluded due to its choice to continue fighting the lawsuits, it was also recently dropped from the aforementioned buyer lawsuits.
Plaintiffs in that case could still attempt to take “additional action” against HomeServices, however, based on the judge’s order.
“It is simply too early to determine any impact the amended business practices will have on the industry,” Kelly said. “What is known is that agents who consistently demonstrate and articulate their value to both buyers and sellers will be able to successfully navigate the changes that will come as a result of the settlement.”
“HomeServices continues to aggressively pursue all available options to resolve its involvement in the underlying class action cases,” he added.
But there is another, larger class of brokerages and entities that are not immediately protected by the settlement. If a company falls outside a certain size (measured in transaction volume), they have the option to join the settlement, but will have to pay extra.
According to the agreement, any brokerage that reported more than $2 billion in transactions during the calendar year of 2022 will have to pay 0.25% of the average of their last four calendar years of transaction volume in order to be included. These companies can also enter into mediation if they think they can’t afford to pay.
Additionally, these companies can opt in only if they had a principal who was a member of NAR, or who participated on any MLS during the last four years—seemingly qualifiers that would include nearly all brokerages of that size.
Although some details are not specified in the agreement—for instance, whether international transactions are included—the payment to join the settlement will be significant, especially for larger companies.
eXp, for instance, would have to pay about $330 million to join the settlement. In a recent livestream for the company’s agents, eXp Chief Strategy Officer Leo Pareja said the company is “still litigating our own stuff” without directly mentioning the possibility of opting into the NAR settlement.
And the formula does not appear to be the same used by Keller Williams, Anywhere or RE/MAX in determining their settlement amounts. Keller Williams, for instance, paid $70 million last month to settle the seller suits. If the company had instead joined the NAR settlement, it would have paid somewhere around $250 million.
On the low end, a brokerage just above that $2 billion transaction volume cut-off would have to pay somewhere in the range of $4 million to $6 million in order to be protected.
But exactly which brokerages are on the outside looking in? According to RISMedia’s 2023 Power Broker Report, a total of 87 companies are not protected from seller lawsuits yet, based on their transaction volume (though not all have been named as defendants in any individual suit).
Affiliates and franchises of Keller Williams, RE/MAX and Anywhere are protected by their company’s separate settlement agreements, pending approval by the courts—something that NAR will also have to receive for its settlement to stand.
Here are the companies that are still potentially liable in the seller lawsuits:
-Compass
-HomeServices of America Inc. (includes all affiliated companies)
-eXp Realty
-Douglas Elliman
-Howard Hanna Real Estate Services
-@properties
-HomeSmart
-United Real Estate
-William Raveis Real Estate
-Fathom Realty
-Majestic Realty Collective
-The Real Brokerage
-John L. Scott Real Estate
-Brown Harris Stevens
-Realty ONE Group
-Samson Properties
-The Keyes Company/Illustrated Properties
-Berkshire Hathaway HomeServices PenFed Realty
-PARKS
-Cairn
-Crye-Leike REALTORS®
-First Team Real Estate
-Equity Real Estate
-Baird & Warner
-Real Estate One Inc.
-West USA Realty
-Latter & Blum Companies
-Realty Austin
-Golden Gate Sotheby’s International Realty
-Christie’s International Real Estate Sereno
-LoKation Real Estate
-Berkshire Hathaway HomeServices Utah Properties
-Professional Realty Services International
-Rodeo Realty Inc,
-John R. Wood Properties
-Select Group Real Estate, Inc.
-Atlanta Communities Real Estate Brokerage, LLC
-Tomlinson Family of Companies
-HUNT Real Estate ERA & ERA Key Realty Services
-Berkshire Hathaway HomeServices The Preferred Realty
-Carolina One Real Estate
-Berkshire Hathaway HomeServices Homesale Realty
-Pinnacle Estate Properties Inc.
-Mark Spain Real Estate
-Engel & Völkers Gestalt Group
-Michael Saunders & Co.
-Hilton & Hyland Real Estate
-Signature Premier Properties
-Realty Executives Associates
-Harry Norman REALTORS®
-Watson Realty Corp.
-Premiere Plus Realty
-Realty Executives Phoenix and Yuma
-Lakes, Jackson Hole & Steamboat Sotheby’s International Realty
-HomesUSA.com
-Charles Rutenberg Realty Clearwater
-Washington Fine Properties
-Berkshire Hathaway HomeServices Drysdale Properties
-Berkshire Hathaway HomeServices Michigan, Northern Indiana, Tomie Raines and Executive REALTORS®
-Berkshire Hathaway HomeServices Commonwealth Real Estate/Robert Paul Properties
-Realty ONE Group West
-Shorewest REALTORS®
-Hawaii Life Real Estate Services, LLC
-Florida Homes Realty & Mortgage
-Lyon Real Estate
-Seven Gables Real Estate
-Iron Valley Real Estate
-Allison James Estates & Homes
-Slifer Smith & Frampton
-Key Realty, LTD
-Five Star Real Estate
-The Group, Inc. Real Estate
-HomeSmart Evergreen Realty
-ARC Realty
-McGraw REALTORS®
-Intero Real Estate Services – East Bay
-Sibcy Cline, Inc.
-Tierra Antigua Realty
-Nebraska Realty
-Realty ONE Group Mountain Desert
-Realty Connect USA
-Downing-Frye Realty, Inc.
-Smith & Associates Real Estate
-Realty Executives Arizona Territory
-McEnearney Associates Inc.
-Rose & Womble Realty
-Northrop Realty
