Several of the country’s largest real estate brokerages, including Coldwell Banker, Century 21 Real Estate, Sotheby’s International Realty and Re/Max, are severing their ties to the National Association of Realtors, a powerful trade organisation whose grip on the real estate industry appears to be loosening.
The Chicago-based N.A.R. is the largest professional organisation in the United States. It has 1.5 million members, more than $1 billion in assets and owns the trademark for the word “Realtor”, making the ability of an agent to call himself a Realtor and to buy and sell homes in much of the country contingent on the payment of membership dues.
But in recent months, a combination of sexual harassment allegations against its top executives and a duo of class-action antitrust lawsuits have battered its image and influence. Re/Max and Anywhere Real Estate – the world’s largest real estate franchiser, whose brands include Century 21 Real Estate, Coldwell Banker, the Corcoran Group and Sotheby’s International Real Estate – settled those lawsuits last month. Anywhere will pay $83.5 million and Re/Max will pay $55 million. Both have now announced that they will also drop the requirement for N.A.R. membership as part of their settlement agreements.
“Brokerages are independent, legal entities that make their own business decisions,” said Mantill Williams, an N.A.R. spokesman, in an e-mailed statement. “It is incumbent upon every brokerage association – local, state and national – to continue to communicate and provide real value to our members. If these agents continue to see value in belonging to the association, they will choose to belong.”
“The proposed settlement does not change how our case will be presented in court,” he added.
A coalition of home sellers sued N.A.R. and several brokerages in 2019, challenging N.A.R.’s policy that requires a listing agent to pay a fee to a buyer’s agent in a home sale transaction – a fee that is almost always passed on to the home seller.
Agents who are members of the N.A.R. must follow the organisation’s policies when buying, selling and listing homes, including the one that led to what home sellers in the lawsuits described as a violation of the Sherman Antitrust Act by inflating sellers’ costs.
Also on Friday, N.A.R.’s chief legal officer, Katie Johnson, sent an internal message to staff clarifying the group’s own interpretation of its rules on broker commissions. In the message, obtained by The New York Times, she said that while N.A.R. policy required listing agents to offer compensation to a buyer’s broker, that offer could be $0.
A lawyer for the plaintiffs in the antitrust case told Inman, the real estate news site that first reported the shift, that the change amounted to a “stunning admission of guilt.”Anywhere and Re/Max are named as defendants alongside N.A.R. and signed a joint settlement for both lawsuits last month. On Friday, Anywhere revealed the terms, announcing that as part of the agreement it will no longer require its nearly 200,000 agents to hold membership in N.A.R. Re/Max, which has more than 140,000 agents, will also leave N.A.R. under the same provision in its agreement.
N.A.R. has said it has no intention of joining Anywhere and Re/Max in a settlement and will instead go to federal court in Kansas City (the plaintiffs are based in western Missouri) on 16 October. Keller Williams and HomeServices of America are also named as defendants.
The N.A.R. defections come just days after Redfin, the Seattle-based online real estate brokerage, announced that it would require many of its own agents to sever ties with the organisation. Glenn Kelman, Redfin’s chief executive, said the N.A.R.’s looming antitrust battles played a key role in his decision, but he was also troubled by allegations of widespread sexual harassment within the organisation, which The New York Times revealed in August. Former N.A.R. president Kenny Parcell, who was the subject of many of those allegations, stepped down from his post two days after the Times report came to light.
Jason Haber, an estate agent with Compass who has been at the forefront of calls for reform at the N.A.R. since The Times published its report, said the N.A.R. was at a turning point.
“The trial and the sexual harassment are inextricably linked because they expose flaws within N.A.R. As anyone in property knows, a house is only as strong as its foundation. N.A.R.’s house had too many cracks after years of neglect, and now those cracks have been exposed,” he said in an interview. “The only way to save it is to rebuild it from the ground up.”
On Friday, leaders within the N.A.R. also said they could see those cracks.
“We’re in a perfect storm,” said Leigh Brown, a North Carolina broker who sits on the N.A.R.’s national board of directors, of the problems now surrounding the organisation. “The N.A.R. is bloated, and its staff is arrogant. And at the same time, its members are trying to figure out if they can function without N.A.R., and we’re defending whether or not our business model works for the average consumer.”
Ms Brown, however, said she believed the class-action lawsuits were short-sighted because if home sellers are not required to compensate their buyers’ agents, many buyers will navigate the housing market alone, leaving them vulnerable to exploitation. “It’s structured that way to make sure the consumer is protected,” she said.
