The National Association of Realtors® (NAR) has faced significant criticism following the events of the Burnett trial and settlement, leaving many still dissatisfied with how the organization has responded to issues the association, and the real estate industry at large, continue to face.
In response to ongoing concerns involving NAR, a group of 15 industry leading brokers, who have remained anonymous, besides spokesperson and United Real Estate CEO Dan Duffy, have taken it upon themselves to petition the organization for change and growth, as first reported by Real Estate News.
The group—dubbed the Pro-Agent Restore Trust in NAR Working Group (PART)—aims to address the key issues of Clear Cooperation Policy, the three-way local, state and national association agreement, a need for more transparency, the lack of independent governance at NAR, and the organization’s balance sheet and other financial interests.
While PART is reportedly composed of 15 brokerage members, there are several other leaders and brokers who have been privy to the group’s workings via an October 13 meeting held by NAR to provide updates to and receive feedback from leading brokerages. Craig Cheatham, president and CEO of The Realty Alliance, was present at this meeting of “enterprise companies, multi-regional and national in scope,” as he describes it.
Of PART specifically, Cheatham says it represents a “newer segment of our industry, what one might call the ‘corporate brokerage.’”
“Many of their members rely on venture capital and have a scale and structure that is much more national in scope than what we would have called the ‘big brokers’ in the past,” he continues. “In most cases their representatives do not have a long or firsthand history with NAR and wouldn’t be familiar with how NAR’s governance and administration would have gotten to where they are today. PART leaders have been working to educate themselves on products and services NAR provides and how it works with the state and local associations.”
Cheatham shares what The Realty Alliance and some other traditional “big brokers” are looking for from NAR:
- Provide clarity and “safe harbors” for fundamental industry practices through its legal and advocacy teams
- Utilize its advocacy arm on major initiatives to “move the needle in meaningful ways” on housing affordability and inventory”
- Streamline its governance while simultaneously ensuring that the industry’s significant players are given opportunity to shape NAR’s decisions in the future
- Enhance the efficiency of the delivery of the research and economic data and insights NAR produces so it can be better utilized by brokers and agents alike
- Develop significant resources specifically for brokerage leaders, not just agents, associations and MLSs
- Reduce its budget by focusing on core services, cutting niche programs, putting purchases out to bid and moving at least temporarily to a zero-based budgeting system while improving financial transparency
- Rebuild its reserves to be able to reimburse large brokers left out of the NAR settlement
- Decide whether or not the association will remain the place for MLS policy development, interpretation and enforcement
- Clarify the roles of each level of the three-way agreement, along with justifying any overlap, allowing each to make its own case for its value proposition
Many if not all of the companies invited to the October 13 meeting were part of the “$2B club,” those who weren’t included in the protections of the NAR settlement based on their annual sales volume of over $2 billion—a stipulation NAR negotiated with plaintiffs’ attorneys.
Mike Hickman—CEO of Orange County, California-based Seven Gables Real Estate—was one such broker in attendance. He believes that repairing relationships between NAR and brokers in the “$2B club” cannot happen without monetary compensation.
“This should be repaid,” he said in an interview with RISMedia. “People made decisions on my behalf that are affecting my business. I’m just a family-owned business, and it’s businesses like mine that make up (NAR’s) constituents.”
Cheatham says that while the PART corporate brokerages are also “certainly upset” about not being included in NAR’s settlement, “the cooling effect the lawsuits have had on their ability to raise additional capital would be a top concern for PART, which sets them apart from the rest of the industry.”
“Their requests would come from their experience in corporate environments and public companies and thus are a bit different than the specific demands we heard from all the other segments of our industry,” he says. “That said, there is a great deal of overlap between what this group wants and the more traditional big brokers, and even mom-and-pop shops would ‘amen’ much of their wish list.”
In attending the October 13 meeting, Cheatham said that the traditional “big brokers,” such as many that are part of The Realty Alliance, “aren’t as concerned with the timing of the Form 990 or whether there are independent board members, at least in terms of thinking these are top priorities.” He says their members are looking for changes to NAR that are “transformational and accomplish meaningful goals.”
The Form 990 Cheatham references is NAR’s required tax form (the tax form used for non-profit tax-exempt organizations). The deadline to file its 2025 form (for the year 2024) is November 15, technically November 17 since the 15th falls on a Saturday. The highly anticipated form will detail the organization’s use of member dues and other financial information, including salaries and expenditures on everything from advocacy to advertising.
Strained trust
Hickman shares high praise for NAR CEO Nykia Wright, referring to her as “super impressive.”
“I’m glad she’s the CEO of NAR,” says Hickman. “They needed someone of her caliber.”
But according to Hickman, in Wright’s efforts to turn things around, she and NAR have overlooked a very important factor: brokers have power over agents.
Hickman relayed that during the meeting, one broker asked the room how many firms would not join NAR if they didn’t need the association in order to access forms. Many hands went up.
“The brokers in this room all got hit pretty hard,” he said. “And that’s not being acknowledged. We can control where the agents go, what association they affiliate with. You can do all the things you want at NAR, but unless the brokers approve of it, it’s going to be difficult to infiltrate the organization.”
Putting the issue of settlement repayment aside, Hickman does believe progress is being made at the association as a whole.
“I think the mere fact that they stepped out of a couple of controversial issues and turned it back to the MLSs and to the local associations is proof that progress is being made,” he says. “Acting as a trade organization instead of trying to create policy, which they shouldn’t be involved with in the first place.”
Hickman remains optimistic that Wright and NAR will make the changes the broker group—and the industry at large—are demanding, adding that some of those changes are starting to take place, such as bringing on Sherry Chris as a liaison with the brokerage community. Other signs he’d like to see that NAR is headed in the right direction would be eliminating wasteful spending, creating more consistent and localized communication to better understand issues, and implementing accountability, he explains.
“I think there is a glimmer of hope, and I think if anybody can do it, I think it’s Nykia,” he says. “She’s a good listener. She’s a good executor.”
Governing bodies
From an outside perspective, NextHome Inc. Co-Founder and CEO James Dwiggins says that while not knowing who all the members of PART are or their full agenda, he agrees with their purpose of “restoring trust and pushing for more transparency at NAR,” and says it is “important and overdue.” Dwiggins notes, however, that he also wants “to give NAR leadership time to do that” themselves.
“Nykia has been the full time CEO for just over a year, and it takes time to assess all the issues in an organization of this size, and make changes of which she’s made many already—especially to staffing,” he says. “She’s brought on an entirely new leadership team, and reduced overall NAR staffing by one-third and produced a balanced budget. With their new 3-year strategic plan being unveiled and voted on next week, we need to give it some time to see the full effects—while making sure there is accountability.”
Dwiggins continues that the NAR governance structure does need a “massive overhaul” and “should include people from outside the industry—at least on the Board of Directors and key committees that influence the direction of the organization and industry as a whole.” He says that it’s a well known fact there are “too many unqualified volunteers sitting on the board and committees,” and this is the “biggest issue and threat that needs to be addressed.”
“The full-time leadership team that runs NAR—Nykia and her team—cannot do their jobs correctly if they are hamstrung by red tape and policies that provide more control to a volunteer leadership team and committees that rotate out every 12 to 24 months,” Dwiggins continues. “It literally makes zero sense. And, you could apply that same logic to state and local associations as well. It’s time to go back to the drawing board and have an honest conversation about how things need to operate for an uncertain future. Too much is at stake to leave things as they are.”
In terms of Clear Cooperation, another target of PART’s, Dwiggins says that the “(i)ntent is good” and he himself has never disagreed with the structure of the policy. He says that the real controversy around the policy has always been “putting profits first vs. what’s right for the seller no matter how much people try to spin the conversation.”
“Sellers have always had plenty of options to list and sell their home on their terms with or without an agent, on or off the MLS, publicly or privately, with an exclusive listing agreement or not,” Dwiggins says. “Unfortunately, certain agents and companies don’t offer or explain to them all these choices, and distort the truth about the existing policy for their own financial benefit.”
PART’s other target of the three-way agreement Dwiggins says he doesn’t have issue with as it has “many benefits,” and he says he worries that “the industry will become too short-sighted on saving money versus looking at what happens if the industry loses its voice in local, state and national politics.”
“We’re one bad policy decision away from destroying the American dream of homeownership and NAR advocacy is the only thing stopping that from occurring—literally,” he says.
NAR’s governance meetings start today at the annual NAR NXT conference November 13-17, coinciding with the release of its 2024 Form 990.
