What Does the National Association of REALTORS® (NAR) Agreement Mean for You?
If you’re looking to buy or sell a house, you might have heard about the recent National Association of REALTORS® (NAR) agreement and wondered how it will affect you. Below, we explain what the NAR is and what the NAR agreement entails. We also discuss what the NAR agreement means for you as a buyer or seller.
What Is the NAR?
The NAR was founded in 1908 and has since become America’s largest trade association, having approximately 1.5 million real estate professionals as members. Its membership includes residential and commercial brokers, salespeople, property managers, appraisers, counselors, and others involved in the real estate industry.
You may be familiar with your local multiple listing service (MLS), a database that lists almost all of the residential properties for sale in your area. There are currently hundreds of MLSs throughout the United States and the NAR—through its member realtor associations—governs the terms of these services.
What Is the NAR Agreement?
The NAR agreement largely focuses on how real estate agents are compensated for their work. Traditionally, the person selling a house would pay a commission that would be split between the seller’s agent (sometimes referred to as the “listing agent”) and the buyer’s agent. In 1996, the NAR adopted its Adversary Commission Rule (also known as its “Mandatory Offer of Compensation Rule”), which required a seller’s agent to offer a blanket, nonnegotiable commission for the buyer’s agent if they wanted to list a property on the local MLS; the buyer’s agent whose client purchased the home would earn that commission. As such, buyer’s agents were more likely to show their clients properties where the seller’s agent was offering a higher commission.
Multiple class-action lawsuits were filed against the NAR alleging antitrust violations. The plaintiffs claimed that because the Adversary Commission Rule essentially required the seller’s agent to pay the buyer’s agent a set percentage of the home’s sale price, it eliminated competition among buyer’s agents and ultimately led to sellers paying higher commission rates. In March 2024, the NAR agreed to pay a $418 million settlement resolving these claims. As part of the settlement, the NAR also agreed to remove compensation offers from the MLSs and require buyer’s agents to enter into representation contracts with their clients.
How Will the NAR Agreement Affect You?
Because seller’s agents can no longer offer blanket compensation to buyer’s agents through their local MLS, buyer’s agents will now have to find another way to be compensated for their services. They may negotiate their commission with either their client or the seller’s agent on a case-by-case basis. As such, if you’re buying or selling a house, it’s a good idea to hire a lawyer who can help ensure that your rights are being protected and that you’re paying a fair commission rate.
If you’re a buyer, your real estate agent will also require you to sign a contract outlining the scope of their services and how they’ll be compensated. While many buyer’s agents used representation agreements like these in the past, the contracts were never universally required until the implementation of the NAR agreement.
For More Information
If you’d like to know more about the NAR agreement and the impact that it will have on buyers, sellers, and the real estate market in general, turn to The Lyons Law Group, P.A. Based in New Port Richey, FL, and Spring Hill, FL, we’re a trusted real estate law firm that’s been serving clients in Pasco County, Hernando County, and other areas of the Tampa Bay region since 2008. We offer real estate services for both buyers and sellers, and we’d be happy to arrange a free initial consultation to discuss the implications of the NAR agreement and answer any questions you might have. Contact us today to schedule an appointment at a date and time that’s convenient for you.
