Major Real Estate Brokerages Cutting Ties with National Association of Realtors

A number of major real estate brokerages in the country, such as Coldwell Banker and Century 21 Real Estate, are cutting ties with the National Association of Realtors (N.A.R.), signaling a potential weakening of the organization's hold on the industry.

The N.A.R., headquartered in Chicago, is the largest professional organization in the United States, boasting 1.5 million members, over $1 billion in assets, and ownership of the trademark for the term "Realtor." Membership dues are required for real estate agents to identify themselves as Realtors and engage in buying and selling homes in many parts of the country.

However, recent allegations of sexual harassment against top leadership and a pair of class-action antitrust lawsuits have significantly tarnished the N.A.R.'s reputation and influence. Last month, Re/Max and Anywhere Real Estate, the world's largest real estate brokerage franchiser, settled these lawsuits with payments of $55 million and $83.5 million, respectively. As part of these settlements, both companies have announced that they will no longer require N.A.R. membership.

Mantill Williams, a spokesman for N.A.R., stated that brokerages are independent entities that make their own business decisions. He emphasized the need for Realtor associations at the local, state, and national levels to continue providing value to their members and that brokers will choose membership based on the value they perceive.

The lawsuits filed in 2019 by a coalition of home sellers challenged N.A.R.'s policy of requiring a fee from listing agents to be paid to buyers' agents in home sale transactions, with this fee typically passed on to the home seller. N.A.R. members must adhere to the organization's policies when buying, selling, and listing homes, including the policy that led to allegations of inflating seller costs, potentially violating the Sherman Antitrust Act.

On Friday, N.A.R.'s chief legal officer, Katie Johnson, clarified the organization's interpretation of agent commissions in an internal message to staff. She stated that while the policy does require listing agents to offer compensation to a buyer's broker, that offer can be as low as $0.

An attorney for the plaintiffs in the antitrust case described this change as a significant admission of guilt. Re/Max and Anywhere Real Estate, along with N.A.R., are defendants in both lawsuits and settled together last month. Re/Max, with over 140,000 agents, and Anywhere, with nearly 200,000 agents, will now also abandon N.A.R. membership under the terms of their agreements.

N.A.R. has stated its intention to proceed with the lawsuits and not join Re/Max and Anywhere in a settlement. The organization is scheduled to appear in federal court on October 16 in Kansas City. Defendants Keller Williams and HomeServices of America are also named in the lawsuits.

These departures from N.A.R. follow Redfin's recent announcement that it will require many of its agents to sever ties with the organization. Redfin CEO Glenn Kelman cited N.A.R.'s impending antitrust battles and allegations of sexual harassment within the organization as factors influencing the decision. Former N.A.R. president Kenny Parcell, who faced numerous allegations of harassment, resigned two days after a report by The New York Times.

Real estate agent Jason Haber, an advocate for N.A.R. reform since The Times report, believes the organization is at a turning point and must be rebuilt from the ground up.

Leaders within N.A.R. acknowledged the challenges the organization currently faces, describing it as being in a "perfect storm." They cited issues such as bloated bureaucracy, arrogant staff, and members questioning the viability of the organization's business model.

Despite the criticism, some N.A.R. board members, like Leigh Brown from North Carolina, argue that the class-action lawsuits overlook the purpose of compensating buyers' agents. They assert that requiring sellers to compensate buyers' agents ensures consumer protection and prevents buyers from being taken advantage of in the housing market.

The recent developments involving major real estate brokerages severing ties with N.A.R. and the ongoing legal battles suggest that the organization's influence and credibility may be at risk.