Agents have been turning to their associations with questions ever since the National Association of REALTORS® (NAR) settled in March to end ongoing litigation over broker commissions.

NAR agreed to pay $418 million, ban broker commissions from the MLS and require buyer agreements. Although the settlement is still subject to final court approval, those updates are set to go into effect in Aug. 17. In the meantime, the industry is at a unique crossroads. The only certainty, it seems, is that there will be changes to how agents do their jobs. How exactly that looks, though, is still uncertain.

For answers, Chicago Agent hosted a conversation with three association CEOs: Michelle Mills Clement of the Chicago Association of REALTORS® (CAR), John Gormley of the Mainstreet Organization of REALTORS® and Jeff Lasky of the North Shore-Barrington Association of REALTORS® (NSBAR).

All three CEOs felt the settlement was the right move overall, although their enthusiasm varied.

Gormley was at NAR’s Association Executives Institute when news of the settlement broke. “I was glad to see it,” he recalled of the moment. “I was glad there was movement.”

The settlement covers roughly 1 million of NAR’s 1.6 million members. Brokerages whose 2022 volume exceeded $2 billion are not automatically covered, though they have the option to mediate separately or through NAR.

Clement echoed that sentiment, saying, “I think they made the right decision based on the goal they had at the beginning, which was really just to release liability for as many members as possible.”

What’s next?

Lasky expressed concern for low-income, first-time and dispossessed homebuyers, many of whom may not be able to afford a good buyer’s agent if commissions are uncoupled.

“These buyers aren’t going to be able to afford representation,” he said, adding that they may buy houses for too much money, without inspection and without an attorney’s review. “Prices aren’t going to be coming down, and listing agents are going to be having a (calamity) dealing with unrepresented buyers.”

So far, the message from NAR is that the court approval process for the settlement is a forgone conclusion — preliminary approval was granted April 23 — but not all real estate professionals are so confident.

Lasky emphasized how many details are still up in the air. He spoke with both of MRED’s attorneys at a recent meeting and said there was one consistent takeaway: “We don’t even know who’s going to end up being a part of this settlement. There is going to be a ton of people who may opt out of this settlement, [and] we don’t have any idea what the people who aren’t involved on the settlement are doing to do.”

Even so, Lasky explained that MRED essentially has no choice but to remove that compensation field, and Illinois is likely on track to enforce the written buyer’s agency agreement across the state. The result is a tricky period for agents who are used to checking their MLS to determine commissions — but it can be even trickier for consumers who know less about the process.

“We should think about the consumer and help prepare our members to answer consumers’ questions,” Gormley said. “We should [steer conversations] away from compensation and more toward representation … It’s about where the value lies.” According to Gormley, “We probably should be mentioning representation three times to compensation one time.”

Clement agreed and said the talk about what’s going to change in Illinois regarding buyer-representation agreements will lead to increased conversations with the clients. And that, she thinks, is a good thing. “Our members are going to be talking about the value they bring to their clients, the value of the expertise that they have,” Clement said. “That’s always been there, but now there’s an opportunity to make sure it’s at the center of conversations.”

The same is true at the association level, too. Lasky noted that all three organizations represented in the chat — CAR, Mainstreet and NSBAR — train members to understand that there’s a value proposition. “This isn’t anything completely new for any of us,” he said.

Although Clement and Gormley did not report hearing much pushback from members regarding buyer-representation agreements, Lasky said that there are “basically two groups.” One is full of brokers that have been using similar agreements for years and are “happy to see it.” The other group, though, “thinks they have been betrayed by NAR and that the world is coming to an end.”

But even agents who already have been using buyer agreements regularly will need to make some changes. “Representation and compensation conversations will happen earlier in a courtship,” Gormley said. Realtors on both sides of a transaction also will need to communicate earlier, he said.

The MLS originally came to be as an agreement for how both sides would get paid. So now, to ensure that co-op commission payments will happen, the process likely will shift to brokerage-to-brokerage agreements.

“Whatever avenue a listing broker chooses to communicate an offer of compensation can establish you in contractual agreement,” Clement said.

Lasky said that brings up larger concerns. “It’s one thing if you have a seller who is going to pay that buyer brokerage. It’s a whole other thing if they refuse to do so … we’re in a very low-inventory period where [the seller brokerage] doesn’t have to accept that. They can say, ‘We’ll wait this out and see if somebody comes in, and we don’t want to pay.’”

If that were to happen, the buyer’s agent would be relying on their buyer-representation agreement — relying on the buyer themselves to pay them.

“That’s going to be a new part of this business,” Lasky said. Although he acknowledged that brokerages have done this in the past, he said it will become more common that a brokerage may have to go after their own buyers to get that compensation if their associate wasn’t able to make an arrangement.

When that does occur, Clement suggested a solution through her association: dispute resolution. “That’s going to be able to be used, no matter where the offer of compensation comes from,” she said. She wants to make sure members know they can use this benefit whenever a disagreement arises, noting, “There are protections at place, honestly, at little cost.”

Association help

Dispute resolution is not the only association benefit. Clement said that CAR aims to equip all members with tools for efficiency, regardless of their years in the business. These include forms and contracts, local advocacy and education, and networking opportunities.

“Our goal is to bring information to our members as quickly and efficiently as we can,” she said. “There’s lots of mixed opinions out there, a lot of change and a lot of uncertainty, so we are trying to meet our members and make sure they’re best prepared.”

To do that, CAR brought in NAR’s legal counsel before the settlement was made, in November, and again in April to discuss changes, and their forms and contracts committee has already met to work on revisions. In the meantime, CAR is trying to communicate often with updates and make sure members know it has resources as they navigate the post-settlement landscape.

Lasky said association advocacy work is more important now than ever. He offered Chicago’s recent real estate transfer tax referendum as an example. The “mansion tax,” as it was dubbed colloquially, would have affected commercial real estate most directly. But still, residential real estate groups marshalled to prevent the measure from going into effect. In the end, they were successful.

“It takes sizable organizations to jump into the fight,” Lasky said. “I think people don’t realize how valuable that is.”

While attending a summit on affordable housing last month, Gormley said he spoke with a colleague who asked if he was afraid of a “splinter group” siphoning members away from the “holy trinity” of NAR and state and local associations. But Gormley isn’t worried.

“It goes back to what Jeff said about advocacy. Being the glue that binds us is so important.” He compared the setup to “It’s a Wonderful Life,” asking, “What would the landscape be without NAR’s advocacy?”

“I hope our members will keep the faith and take a longer view,” Gormley said. “If there’s one thing about brokers across states, they tend to have myopic vision.” His advice? “Read the facts and stay focused on what you can control.”

Clement concurred. “We’re all looking at the same thing and trying to figure out the best move,” she said. “I believe in the power of associations. Our forms and contracts are created by Realtors for Realtors. Those type of things will continue to push us, bring value and make us relevant.”

In his own final comment, Lasky addressed ongoing chatter about the separation of the MLS from the associations. “I think a lot of that has to do with not understanding how this was all put together and the history,” he said. “The region had private MLSes for many years, but they eventually came together in the interests of the brokerages.”

Local brokerages funneled about $43 billion worth of business through MRED last year, Lasky said. “I’m struggling to find what the heck that’s been broken here that needs to be fixed.”