NWMLS Will Not Opt In: Major Update on the $1.8 Billion Judgement Against the National Association of Realtors

An Explainer

A few months ago, a Missouri court issued a $1.8 billion judgment against the National Association of Realtors (NAR). The media frenzy that followed suggested this ruling would shake the entire U.S. real estate industry, heralding significant changes in compensation and transparency.

However, it’s crucial to understand that this Missouri judgment doesn’t automatically apply to every real estate market in the United States. The extent of its impact hinges on whether the NAR controls the listing service in a given market. In many areas, the NAR does own the listing service, requiring brokers to be NAR members to access listings. This is not the case in Western Washington, where the NWMLS members own the service, not the NAR.

The NWMLS Decision

The Northwest Multiple Listing Service (NWMLS) faced a pivotal decision. As the judgment reverberated through the industry, numerous copycat lawsuits emerged, prompting the Department of Justice to broker a settlement for markets outside Missouri. Markets under NAR ownership were included in a $418 million settlement. Non-NAR markets were offered protection from litigation if they opted into the settlement, which came with a host of conditions.

Today, the NWMLS announced it will NOT opt into the Department of Justice settlement agreement.

NWMLS’s Official Statement

From their press release:

“NWMLS will not ‘opt-in’ to NAR’s proposed settlement agreement. NWMLS’s rules and forms, together with the revised Agency Law, provide for consumer-friendly brokerage relationships. Sellers negotiate how much to compensate the listing firm and decide whether to offer to contribute toward the buyer’s broker compensation and the amount of any such offer. Buyers agree how much to pay their own brokers at the outset of their relationship and can then negotiate for the seller to help cover that cost as part of the purchase.

NAR’s proposed settlement agreement largely duplicates the rules and practices in place in NWMLS’s service area for several years – with one notable exception. The settlement agreement eliminates compensation transparency for buyers and restrains sellers’ choice by prohibiting sellers from making offers of compensation through the MLS. Instead, the settlement agreement allows for offers of compensation ‘off MLS,’ where that information is hard to find and not available to all buyers and brokers. That change is a step in the wrong direction and is detrimental to consumers and brokers alike.”

Winners and Losers

In my view, this decision is a significant win for home buyers and sellers in the Pacific Northwest. I fully support the NWMLS’s stance. Opting in would have been the easy route, avoiding potential future lawsuits. However, the NWMLS is correct about the importance of buyer and seller transparency and choice. Concealing information or incentivizing off-MLS compensation deals leads to murky situations ethically.

Buying or selling a home in our area is one of the most substantial financial transactions people undertake. It’s crucial for buyers and sellers to understand all fees and compensation clearly. Publicizing this information and requiring brokers to have written agreements with their clients is undoubtedly the superior approach.

While the NWMLS could face lawsuits without the protection of the national settlement, I applaud their commitment to transparency over security.

If you have any questions about how compensation works in our area or are beginning your real estate journey, let’s schedule a Ron & Don Sit Down to create a custom game plan for you.