April 15, 2024
Amid reported concerns about its solvency following a massive jury verdict, the National Association of Realtors (NAR) has reached a $418 million settlement of legal claims that it established rules that artificially inflated broker commissions. The settlement, under which NAR denies all wrongdoing, is subject to court approval.
“NAR has worked hard for years to resolve this litigation in a manner that benefits our members and American consumers,” NAR’s interim CEO, Nykia Wright, said in a statement.
“It has always been our goal to preserve consumer choice and protect our members to the greatest extent possible. This settlement achieves both of those goals,” she said.
Under the agreement, NAR will change the way brokerage commissions are set, a potential boon for those buying or selling homes. Typically, sellers had to absorb commissions of 5% to 6%, but now such commissions would be subject to more negotiation and competition. The changes would take effect in July.
“Ultimately, continuing to litigate would have hurt members and their small businesses,” Wright said in the statement. “While there could be no perfect outcome, this agreement is the best outcome we could achieve in the circumstances.”
NAR, a lobbying powerhouse that says it is the nation’s largest trade association with more than 1.5 million members, appears financially able to cover the settlement, which it can pay out over four years. It reported more than $328 million in revenue in 2022 in its latest available public disclosure and more than $747 million in net assets.
A jury award in the billions would have been more problematic. The New York Times reported in December that NAR staff were concerned about potential bankruptcy, though a spokesman disputed that account.
Recent upheaval
The jury award was the latest in a series of problems for NAR. Its former board president, Kenny Parcell, resigned in August following a sexual harassment scandal. Former CEO Bob Goldberg left in November, well ahead of his planned departure date. Former Senior Vice President of Talent Development and Resources Donna Gland resigned weeks later.
Then Tracy Kasper, who had replaced Parcell, resigned in January following what NAR said was a blackmail attempt. The departures of Goldberg, Gland and Kasper had been sought by a group of employees in an anonymous letter last fall. The letter also called for the resignation of Chief Legal Officer and Chief Experience Officer Katie Johnson, who remains with NAR.
The new board president is Kevin Sears.
“This will be a time of adjustment, but the fundamentals will remain buyers and sellers will continue to have many choices when deciding to buy or sell a home, and NAR members will continue to use their skill, care and diligence to protect the interests of their clients,” Sears said.
Tracy Kasper
Michelle McMurry-Heath is on leave, The Wall Street Journal reported.