A look back at NAR's legal battles in 2024

December 24, 2024 5:00 AM

The real estate industry had a watershed moment in August, as terms of a legal settlement over the payment of buyer's broker commissions went into effect.

Yet, this was not the finale to this long-running litigation or to the other suits involving the National Association of Realtors.

But with the return of the Trump Administration, the current efforts to reopen the Department of Justice investigation into NAR over fees — discarding a settlement reached in 2020 — could soon come to an end.

The following is a month-by-month recap of the highlights of National Mortgage News' coverage of these cases in 2024.

January: Appealing the Sitzer/Burnett verdict

After losing a jury trial and being penalized $1.78 billion, NAR, HomeServices of America and Keller Williams asked the court to set aside the verdict or order a new trial.

Attorneys for NAR and the brokerages took aim at numerous aspects of the case, including claiming plaintiffs' "irrelevant and prejudicial evidence" inflamed the passions of jurors.

"We are confident that the court will deny this desperate attempt to avoid justice and ultimately we will win on appeal and bring an end to this price fixing one and for all," Michael Ketchmark, attorney for the plaintiffs, said in response.

February: Keller Williams breaks ranks

Ending its appeal, Keller Williams settled not only the Sitzer/Burnett case, but also the Moehrl and Nosalek actions.

"We think settlements are the most logical route for defendants to avoid significantly higher damages and/or a lengthy and uncertain appeals process," Ryan Tomasello, an analyst with Keefe, Bruyette & Woods, said in a note following the announcement of this agreement.

At that time, Tomasello added that given the various court deadlines, it was likely "this legal contest" would be resolved by the middle of 2024.

March: NAR decides to settle

On March 15, NAR changed direction, and rather than appeal the jury verdict, entered into a $418 million settlement with the Sitzer/Burnett plaintiffs.

The agreement led to NAR prohibiting offers of compensation to be published on Multiple Listing Service sites, and mandating the use of written agreements between Realtors and their clients.

The trade group settled in order to end uncertainty as well as liability risks for its members.

What the deal did not do is set commission rates for the brokers involved on either side of the transaction.

April: The GSEs clarify their positions on commissions

The shift in how buyer's broker commissions were to be paid left the mortgage industry with a lot of questions, especially regarding underwriting and qualifying borrowers.

Both Fannie Mae and Freddie Mac said they wouldn't count buyer's fees toward their limits on seller contributions as long as the amounts were in line with the regional norm, a position similar to that for the Federal Housing Administration mortgage insurance program.

All three entities left the door open for future modifications to this policy.

The Department of Veterans Affairs announced in May that it would temporarily loosen its restrictions, which prohibited borrowers from paying broker commissions on mortgages the program guarantees.

May: Plaintiffs versus plaintiffs in settlement tiff

The day before a final hearing to approve the Sitzer/Burnett settlement with parties other than NAR, a group of plaintiffs in one of the Batton cases sought an injunction looking to halt that proceeding.

But a federal judge in Illinois rejected their claims, noting they were already objectors to that settlement and would have a chance to express that during the May 9 hearing in Kansas City, Missouri.

The next day, that court did approve the portion of the settlement for Remax, Anywhere Real Estate and Keller Williams.

The settlement released the defendants, their subsidiaries, brands, affiliated agents, along with their franchisees and their agents from ongoing and future litigation surrounding the antitrust claims.

Besides Burnett, the deals covered cases known as Moehrl and Nosalek.

June: DOJ answers NAR's attempt to reverse decision

In April, on a 2-to-1 vote, an appellate court ruled in favor of the Department of Justice's attempt to reopen its investigation into NAR, a matter the group thought was settled in 2020.

NAR filed for a rehearing in May, saying it could have far reaching implications if the government was allowed to renege on the agreement.

But the Justice Department said the decision did not violate any legal principles that NAR raised.

Eddie Blanco, a Realtor with Stratwell and chairman of the board-elect for the Miami Association of Realtors, said at the time, rather than on this particular case, he was focused on Aug. 17, the day new commission rules went into effect.

July: DC court sides with Justice Department

In two separate, single-page rulings, the U.S. Circuit Court of Appeals for the District of Columbia, rejected NAR's motions to have the April decision overturned.

The organization was looking to have the original three-judge panel review the ruling. Failing that, it wanted to have the entire court rehear the case.

But both attempts were denied in unanimous votes.

Afterwards, NAR was not deterred.

"This ruling stands in opposition to years of precedent on the interpretation of government contracts and the bedrock principle that the government must honor its word," a NAR spokesperson said. "We are evaluating all remaining legal options and are committed to exploring all avenues to ensure the DOJ is held to the terms of our 2020 agreement."

August: Implementing the change

NAR put the new rules into effect as scheduled on Aug. 17. Even before that day, the housing industry was looking at workarounds or other ways to assist homebuyers who were now burdened with paying for their real estate broker.

The Federal Savings Bank updated an existing unsecured loan program it had originally rolled out for Veterans Affairs borrowers. The homebuyer can borrow up to $50,000 to defray the costs of agent commissions.

This shift in how a commission is paid has the potential to change the dynamic between mortgage loan officers and real estate salespeople, added John Paasonen, co-founder and CEO of mortgage fintech Maxwell.

September: Real estate agents navigate the new environment

The industry response to the Aug. 17 changeover was almost instant. Redfin surveyed its agents and found that while in some locales instances of fee negotiations increased, for others, no change from past practice occurred.

"We've found a tale of two markets," said Redfin Chief Economist Daryl Fairweather. "In slow markets where there's less demand from homebuyers, like Austin, agents report that most sellers are still willing to pay the buyer's agent commission to attract buyers, and agent fees are mostly the same as before."

The opposite was true in more competitive metro areas with high demand and low inventory.

A separate survey found the prevailing sentiment among real estate agents remains that, as a group, they hate the changes and 86% of them believe it will push people out of the business, a Clever Real Estate poll taken between Aug. 28 and Sept. 9 found.

October: NAR goes to the top

Following through on its previous filing, NAR asked the U.S. Supreme Court to grant a petition for certiorari on its suit against the Justice Department.

"A rule that the government receives special treatment permitting it to easily escape its contractual commitments would create profound instability, along with basic unfairness," wrote attorneys for NAR.

After a win at the district court level, NAR lost a 2-to-1 appellate court decision, along with subsequent efforts for a rehearing, either before the original three judges or the full court.

Meanwhile, ahead of the November hearing for NAR's portion of the Sitzer/Burnett settlement, a number of objections were filed with the court asking this agreement be rejected.

Those in opposition felt the agreement left some consumers unsatisfied, particularly regarding a perceived lack of enforcement and wiggle room for workarounds was in place.

November: Objections rejected, settlement approved

Judge Stephen Bough rejected those objections as well as a last minute one filed by the Department of Justice and approved the $418 million NAR settlement.

"The new provision that requires buyers and brokers to make written agreements before home tours may harm buyers and limit how brokers compete for clients. It bears a close resemblance to prior restrictions among competitors that courts have found to violate the antitrust laws in other proceedings and could limit — rather than enhance — competition for buyers among buyer brokers," the DOJ said in its filing.

But the approval doesn't end NAR's legal or reputational issues. DOJ said it reserved the right to take action in the future if warranted.

Also, a series of unwanted headlines — including a New York Times investigation that featured critics questioning the salaries of the trade group's top executives and former officers with dubious current ties to NAR — raised lingering questions about whether the negative coverage would impact the trade group going forward.

December: NAR fights back against New York Times article

NAR refuted the allegations made in a New York Times article that claimed a nonprofit affiliate, the American Property Owners Alliance, was donating money to right-leaning non-housing causes.

"APOA has an issues-based grant making process to organizations on both sides of the aisle," a NAR statement read. "Cherry-picking data can tell one story, but a holistic review of APOA giving reveals that its giving is split and changes from year to year based on current priorities."

NAR also took issue with the Times' misreporting that one of APOA's grantees was a super political action committee. A spokesperson for the trade group said the error was published despite NAR sharing the correct group identification ahead of publication. The Times' correction clarified APOA's grantees were not PACs.

"The correction of this claim undermines the core premise of the article, as well as much of the third-party legal commentary provided for the article," a NAR spokesperson said Wednesday.