A recent landmark U.S. settlement could impact the Canadian housing market.
Recently, the National Association of REALTORS® (NAR), a major U.S. group representing over one million realtors, announced a substantial settlement totalling $418 million US. This settlement will end legal claims from home sellers who argued that the NAR artificially inflated real estate commissions. As part of this agreement, the NAR has agreed to revise broker commission rules, including eliminating the standard 6% sales commission and other commission-related regulations. The NAR denies any wrongdoing, however.
Coinciding with this development, there is an ongoing proposed national class action lawsuit in Canada. This U.S. settlement could potentially impact the Canadian real estate market, as it supports suggestions of similar changes here in Canada, as well.
Statement by the National Association of REALTORS®
On March 15th, the National Association of REALTORS® announced that it had reached a significant agreement aimed at resolving litigation concerning broker commissions on behalf of home sellers. This comprehensive settlement is pending court approval and encompasses over one million NAR members, all state and local REALTOR® associations, association-owned MLSs, and brokerages with NAR member principals involved in residential transactions totalling $2 billion or less in 2022.
Under the terms, NAR, while maintaining its stance of no wrongdoing regarding the MLS cooperative compensation model rule established in the 1990s, will disburse $418 million over approximately four years.
Key outcomes of the agreement include the release of most NAR members and numerous industry stakeholders from liabilities, alongside the preservation of cooperative compensation as an option for consumers in real estate transactions. NAR also secured a mechanism for nearly all brokerage entities that had a residential transaction volume in 2022 of over $2 billion and MLSs not wholly owned by REALTOR® associations to obtain releases efficiently if desired.
Agents affiliated with HomeServices of America and related companies are not covered by the settlement, as well as employees of the remaining corporate defendants named in the cases.
NAR has agreed to implement a new MLS rule prohibiting offers of broker compensation on the MLS, so offers of broker compensation could not be communicated via the MLS, although they could continue to be an option consumers can pursue through negotiation and consultation with real estate professionals. NAR also agreed to implement another new rule that would require MLS participants working with buyers to enter into written agreements with their buyers. These changes will go into effect in July 2024.
