NAR has been unfairly ‘vilified’ over broker commissions, CEO says

The ‘notion’ that real-estate agents set commissions is ‘wholly untrue,’ says National Association of Realtors CEO

The real-estate industry is in a period of upheaval, amid over a dozen lawsuits over its current practices and reports of alleged misconduct at the National Association of Realtors.

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The CEO of the country’s most powerful real-estate association says the group is being unfairly attacked, and is pushing back against claims that it controls the fees that home buyers and sellers pay when a house changes hands.

The interim chief executive of the National Association of Realtors, Nykia Wright, on Wednesday posted a video to “set the record straight” and stated that the real-estate profession has been “vilified by certain plaintiffs’ lawyers, sensationalized by a few reporters, and misrepresented by people who know little about this business.” 

Wright also said that the “notion that the National Association of Realtors controls what real-estate professionals get paid is wholly untrue.”

The NAR “does not set commissions,” Wright continued. “It never has, and it never will. Period. End of story.” 

The video seemed to be a response to a high-profile lawsuit against the NAR that has the potential to upend longstanding practices around  brokers’ commissions and how they are structured in America. The outcome of the case could affect the wallets of millions of home buyers and home sellers.

The CEO’s message comes amid a period of upheaval for the century-old NAR, which has endured accusations of sexual assault against its president, as well as an onslaught of lawsuits alleging anti-competitive behavior and price-fixing. The NAR has had several executives quit, or retire early

The key lawsuit that has implications for the millions of people who buy and sell homes was the Sitzer/Burnett case. In November 2023, the NAR and several real-estate companies were ordered to pay $1.8 billion in damages, as ruled by a Missouri jury. It has spawned multiple copycat lawsuits across the country.

The case centers on commissions that homeowners who sell their home give to the buyer’s real-estate agent. Those payments, while not specified by the NAR, are somewhat informed by the organization’s rules, which mandate listing agents to include a commission for the buyer’s agent when listing the property for sale. 

Most real-estate agents are members of the NAR. Being a member grants them access to the multiple listing service, a group of databases with information about homes for sale, and the primary way that buyers and sellers find properties.

The plaintiffs had argued that the NAR and brokerages had colluded to drive up the commission that home sellers pay to the buyer’s agent. The commissions are often baked into a home’s selling price, and many homeowners selling their house may not be aware that they are paying 5% to 6% of the home’s sale price in commissions to the agents involved.

A real-estate celebrity wants to start an alternative NAR

As the NAR goes through a turbulent period, two real-estate brokers have launched a new industry group to rival the National Association of Realtors.

The group, called the American Real Estate Association, is being positioned as an alternative real-estate agent group to the NAR. AREA is headed by real-estate agent Mauricio Umansky, founder of luxury real-estate firm The Agency and star of the Netflix show “Buying Beverly Hills,” and Jason Haber, a Compass agent who had started the NAR Accountability Project, which was a grassroots nationwide movement to reform the organization.

The founders say more than 1,500 people signed up to join AREA in less than a week after it was first announced.

“The enthusiasm is unbelievable,” Haber told MarketWatch. “The energy that people are bringing, the excitement they’re bringing — it’s great. And it goes in tandem with the kind of culture and community we want.” 

Umansky told MarketWatch that the group is  planning to refocus lobbying and advocacy, and increase the focus on helping local agents deal with city councils and state legislatures; create a national, unified listing service that would be an alternative to the multiple listing service; and focus on continuing education for real-estate professionals. 

“We need a Marshall Plan for housing in this country,” Haber said. “Everyone talks about this housing shortage, but no one’s talking about solutions. We’ve got to develop practical solutions to this country.” 

But the new group, AREA, declined to say how they would structure brokers’ commissions. 

“There should be no fixing it, period, end of story. It’s whatever the market decides or whatever buyers and sellers negotiate,” Umansky said. “It should just be whatever is negotiated and whatever an open, free market is willing to pay.”

Competition is ‘welcome,’ NAR says

Addressing Umansky and Haber’s new group, the NAR CEO said in the video that they will will “welcome competition from anyone who can match our impact and deliver the kind of value we bring.”

But one consumer advocate cast skepticism on the Haber-Umansky effort.

“Despite its deficiencies, NAR’s Code of Conduct discourages Realtors from blatantly anti-consumer practices,” Stephen Brobeck, senior fellow at the Consumer Federation of America, told MarketWatch. 

“I would worry that any alternative to NAR without formal ethical standards would lead to even more unethical conduct than was reported in the NAR-sponsored DANGER Report,” he added.

The DANGER Report was a 164-page document commissioned by the NAR. Published in 2015, it detailed threats, risks, and challenges the real-estate industry was facing then and would continue to face. The report had highlighted that the industry was saddled with a large number of unethical and untrained agents, the Washington Post reported at the time.