Settlement Summary
In October 2023, the National Association of Realtors (NAR) and its co-defendants lost the Sitzer-Burnett class-action lawsuit. The plaintiffs took aim at the industry’s cooperative compensation model, claiming that real estate commission rates are too high, buyers’ representatives are paid too much, and NAR’s Code of Ethics and MLS Handbook, along with the corporate defendants’ practices, have inflated commission rates.
In March 2024, NAR proposed a settlement in response to the landmark lawsuits, agreeing to pay $418 million and amend several rules around broker commissions. The settlement received preliminary approval in May 2024 and final approval on November 26, 2024. Appeals have already been filed.
Many of the process changes outlined in the settlement have already taken effect. These changes will somewhat alter the U.S. real estate sector, but the full extent has not yet been realized. Of course, any changes in the real estate markets have a direct impact on the talent mobility industry.
The Changing Real Estate Landscape and Its Effect on the Relocation Industry
We know navigating real estate process changes can be challenging, especially as this shift will broadly impact buyers and sellers. XONEX leadership joined WERC's buyer broker ad hoc group for relocation management companies early on and has participated actively since March. In collaboration with other groups, this subcommittee has worked to develop and support the relocation industry's response to the settlement terms and its impact on the real estate industry. XONEX also built the WERC Residential Home Transaction Cost Estimator.
As licensed, active Realtors, XONEX counselors are highly skilled in providing the support and guidance needed to help clients and transferees navigate these changing times. To this end, XONEX is uniquely qualified to adapt to real estate changes and has been hard at work easing clients into this new world.
Where does the NAR Settlement stand today?
The NAR Settlement received final approval on November 26th, 2024. This was not a surprise; however, uncertainty remains around buyer agency guidelines and the competitive challenges that could result. Today, more questions than answers remain. Appeals have already been filed. We expect litigious activity to continue in the coming year.
Process, Counseling and Policy Changes
XONEX and our Realtor and Brokerage partners have already adopted new processes in response to the settlement.
One of the most significant shifts is the introduction of mandatory written buyer agency agreements, requiring buyers and their agents to work together to outline compensation structures before they even start viewing homes. In short, buyers must now set specific compensation for agents by executing a buyer agency agreement before any real estate-related activities. This compensation may be collected from the seller, the buyer, or a combination thereof and will be determined during the negotiation process. Buyer agency/representation agreements will have to comply with standards outlined in the terms of the settlement and state requirements.
Buyer agency agreements have long been a best practice; the goal behind these buyer agency agreements is to foster a better understanding of compensation expectations from the start. That said, there were no consistent rules around compensation language or amendments of contractual timing. The NAR settlement does put formal guidelines into place, which XONEX counselors were trained on well before the August 17th change date.
Buyer Agency Support: XONEX’s immediate focus is to protect transferees and ensure they understand what they will be asked to sign and that the terms of the agreement are fair and not predatory in any way. Our teams began an educational campaign for clients and transferees as early as May 2024. Today, buyer agency counseling and agreement review are well incorporated into our counseling sessions and all follow-up materials that we share with employees.
It’s important to note that, today, sellers still have the option to offer compensation to a buyer’s agent. These offers will not be made public on the MLS; compensation discussions will now occur as part of the negotiation process. As such, there should be more negotiation flexibility as the industry evolves.
Policy Changes: These changes might raise questions about how they may affect your relocation policies. While some companies have formally revised their policies to accommodate different levels of buyer-broker compensation, most companies are still considering their options. In our experience, which was echoed at WERC’s Global Workforce Symposium, many companies are relying on standing exceptions and/or short amendments that can be changed more easily as the landscape evolves. So far, the settlement's impact on our clients has been subdued. This is largely due to great counseling preparation and the willingness of our client stakeholders to have ongoing, real-time discussions with our leadership team around impact.
Process Changes: In addition to new counseling protocols and document review, XONEX has implemented sweeping changes internally to account for the new guidelines and provide reporting—in real-time—on any material and financial impacts encountered. We have also implemented new procedures with home closing and purchasing, direct billing, file reviews, and IT. They may be proprietary, so please reach out for more details! We’d love to hear from you.
Ultimately, XONEX’s goal is to adapt with the environment as it changes. Our in-house real estate expertise combined with high-touch counseling enables us to be responsive, while still ensuring compliance with tax-protected home sale program guidelines and maintaining cost control to continue encouraging successful sales.
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