Commissions lawsuits FAQ: Answers to top questions 

The National Association of Realtors reached a deal in March to settle a growing number of lawsuits that challenge the way real estate agents get paid. This settlement — which still needs to be approved by a judge — has created a wave of uncertainty and concern about the future. But the picture is becoming clearer.

Real Estate News has put together answers to your top questions.

What are the commissions lawsuits about?

Some consumers claimed that the industry has conspired to keep commissions artificially inflated — and started taking their complaints to court. Last fall, a Missouri jury agreed, awarding nearly $1.8 billion to home sellers in the Sitzer/Burnett case.

How many lawsuits are still out there?

There are more than 20 lawsuits, most brought by home sellers, but some also brought by buyers. Cases have been filed across the country and cover different geographic areas that add up to pretty much everywhere. 

Some are class-action cases, which means they can include people who didn't file suit but meet certain criteria. Most are fresh filings awaiting their first court date. Others are moving toward trial or an appeal. There have also been efforts to consolidate some of the commissions cases, though the courts have so far ruled that consolidation is not necessary.

Who is being sued?

NAR has been a defendant in most of the lawsuits, but it has lots of company from across the country: Dozens of brokerages, as well as some MLSs, associations and even top teams. And not all of those defendants are covered by the NAR settlement.

Who is covered by the NAR settlement? And who isn't?

The NAR deal covers brokerages with a principal who is a Realtor and whose residential transaction volume in 2022 was $2 billion or less. It also covers MLSs that are wholly owned by a Realtor association. 

That leaves 30 MLSs and about 90 brokerages uncovered, though they can settle by paying into the settlement fund or going through mediation. But they don't have much time to decide: The deadline to act is June 18. 

Compass was the first "unsettled" brokerage to reach a settlement agreement after the NAR deal was announced. Since then, Real Brokerage announced a settlement on April 8, and Realty ONE Group and At World — parent of @properties and Christie's International Real Estate — announced settlements on April 24.

The most recent settlement announcement came on April 29 from Douglas Elliman.

NAR's settlement also covers agents, even those affiliated with HomeServices of America and its related companies. HomeServices had been the last company still fighting the outcome of the $1.8 billion Sitzer/Burnett case, where the stakes had risen significantly, to $4.7 billion — a hardball move by the plaintiffs — but agreed to a $250 settlement deal on April 26.

What rule changes are coming, and when?

The NAR settlement is expected to take effect in July. This is what will happen when it does:

• MLSs will no longer include offers of compensation for buyer agents. This isn't just a "$0 is OK" situation. The field is actually going away.

• Buyer agents will need to get written agreements with clients before they show a home, something that is already required in 18 states.

• Compensation must be in the form of a percentage or dollar amount.

• Agents will not be able to accept compensation beyond what is spelled out in their agreement with buyers.

How will buyers' agents get paid?

There are multiple ways buyers agents can get paid. For example:

• Homebuyers can pay their agents directly.

• Sellers can offer concessions that the buyer may use for things like closing costs and, yes, paying their agent. (And buyers can ask for concessions in their offer if the seller is not providing them.)

• The listing broker can offer a portion of their compensation to the buyer agent.

Wait, isn't 'cooperative compensation' going away?

It's not going away — it's just moving out of the MLS. Brokers could still offer commissions on their own listings, via their own websites or other non-MLS channels. The key is that all forms of compensation need to be negotiated between buyer agents and their clients directly — and it needs to be spelled out in an agreement before an agent shows a would-be buyer a house.

There might be some temptation for agents and brokerages to develop workarounds, but experts advise against this approach to avoid attracting the attention of the Department of Justice, not to mention attorneys who want to add to the parade of copycat lawsuits.

What about financing?

Cooperative compensation may not be going away entirely, but it will be less of a guarantee in real estate transactions. And with that change comes complications in financing. Statements from federal financial entities have clarified things a bit: The Federal Housing Administration and GSEs, aka "government sponsored enterprises" like Fannie Mae and Freddie Mac, will continue to exclude seller or listing agent payment of buyer agent commissions from their limits on "interested party contributions," or IPCs. 

That's a lot of alphabet soup, but it is good news for buyers, sellers and agents, because counting buyer compensation as an IPC would limit the amount of money sellers could offer for things like closing costs or repairs.

Things are less clear for veterans. VA mortgage rules currently prohibit buyers from compensating their agent in any way (only sellers can do that). But NAR and others are asking for a change to that rule, and for buyers to be allowed to finance their agent commissions.

Will this make houses cheaper?

Some observers seem to think so. But others point out that home prices are driven by factors that have nothing to do with commissions: inventory, interest rates, and the likelihood that sellers will still ask for as much as they can from potential buyers, regardless of what happens with commissions.

When will home sellers get a payout?

It's not yet clear when home sellers will get paid. Tens of millions of people may be eligible for a piece of the pie, which includes money from NAR, brokerages that have settled, and whatever HomeServices of America and other brokerages that are not a part of the settlement end up paying. That could add up to more than $5 billion. But when all is said and done, individual members of the class may get as little as $10, some industry leaders estimate. 

How will NAR pay its part of the settlement?

NAR President Kevin Sears said in an interview that senior leaders and financial experts would be getting together in May to determine how it will pay its $420 million settlement, starting with $202 million within 90 days of a judge's approval and continuing with $72 million annual payments for the next four years. 

"Will there be some changes in the association? We don't know yet," he admitted. "Whether it be some streamlining, I mean, probably but we don't know yet." The organization also said in Realtor magazine that it will "not change membership dues in 2024 or 2025 because of this settlement." 

Where can I learn more?

There is a growing number of resources available to help you unpack the NAR settlement and the changes it will bring to the industry. Some of the best: 

• NAR's "facts" page includes the actual settlement documents as well as frequently updated FAQs that go deeper into what the agreement requires, financing and more.

• Bright MLS has a guide that provides details about the big picture as well as specific details about how the MLS experience will change.

• Keller Williams shared a candid FAQ (sample question: "Why be a member of NAR?") as well as a "NAR Settlement Simplified" one-pager that gets into the nitty gritty of agency.

• HAR's "The Reality of Real Estate" page includes FAQs, videos and infographics intended to address "misinformation" around the NAR settlement.