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MortgagePoint » Your Trusted Source for Mortgage Banking and Servicing News 50 T he National Association of Realtors (NAR) announced an agreement to resolve litigation over broker commission claims asserted on behalf of home sellers. The agreement would settle claims against NAR, over one million NAR members, all state/territorial and municipal Realtor as- sociations, all association-owned MLSs, and all brokerages having a NAR mem- ber as principal in 2022 with a residential transaction volume of $2 billion or less. The settlement, which is subject to court approval, clarifies that NAR contin- ues to deny any wrongdoing in connec- tion with the Multiple Listing Service (MLS) cooperative compensation model rule (MLS Model Rule), which was implemented in the 1990s in response to consumer protection advocates' calls for buyer representation. Under the terms of the agreement, NAR is expected to pay $418 million over a four-year period in damages and will change numerous rules that housing experts believe will lower house costs. This settlement is the culmination of a series of lawsuits against NAR which will ultimately do away with standard commissions. "NAR has worked hard for years to resolve this litigation in a manner that benefits our members and American consumers. It has always been our goal to preserve consumer choice and protect our members to the greatest extent pos- sible. This settlement achieves both of those goals," said Nykia Wright, Interim CEO of NAR. This resolution accomplished two essential goals: it released most NAR members and many industry stakehold- ers from liability in these instances, and it ensured that cooperative compensation remains an option for customers when purchasing or selling a house. NAR also obtained in the deal a mechanism enabling practically all brokerage orga- nizations with a residential transaction volume of more than $2 billion in 2022, as well as MLSs that are not completely controlled by Realtor's associations, to ac- quire releases efficiently if they so desire. In addition to the financial settlement, NAR has agreed to implement a new MLS rule that prohibits offers of broker remuneration on the MLS. This means that offers of broker remuneration cannot be made over the MLS, but they can still be pursued off-MLS through negotiation and consultation with real estate experts. "On a scale of 1-10, the National Association of Realtors' decision to shift the buyer side commission burden from sellers to buyers is a 10 and represents nothing short of a sea change," said Toby Schifsky, VP of Real Estate Education at Kaplan. "This is by far the biggest change to hit the real estate industry in more than 30 years and has introduced new complexities to the process of buying and selling a home. While this may result in lower prices for homebuyers—especially important at a time of elevated mortgage rates—it's going to be imperative for buy- er representatives and agents to demon- strate their value to would-be buyers." According to the New York Times, American homeowners may see a signif- icant decrease in the cost of selling their houses in wake of the agreement that is set to eliminate the industry's normal 6% sales commission. Compensation offers help make pro- fessional representation more accessible, lower the expenses for home purchasers to get these services, promote fair hous- ing prospects, and broaden the possible buyer pool for sellers. They also comply with the real estate laws of the many states that specifically permit them. "While it's too soon to tell what the new business model will look like, it's safe to say it will be nearly unrecogniz- able from the current one," Schifsky said. "Stakeholders will have to make significant adjustments and rethink their strategies." NAR has agreed to establish a new rule requiring MLS participants dealing with buyers to enter into written agreements with their clients. NAR continues, as it has for many years, to urge its members to adopt buyer brokerage agreements, which assist consumers understand exactly what services and value will be given and for how much. These adjustments will take effect in mid-July 2024. Realtor.com Chief Economist Dan- ielle Hale released a statement reading, "These changes could put more pressure NAR ESTABLISHES AGREEMENT TO RESOLVE NATIONWIDE COMMISSION CLAIMS F I V E S T A R I N S T I T U T E M E M B E R S ' I N S I G H T S