Confusion About NAR and Washington State

I was recently at a party, and I had at least six different people ask me questions about the National Association of Realtors settlement that’s been in the news. Let me answer some of the questions that kept coming up.

What is a Realtor?

The National Association of Realtors (NAR) is a membership trade group. They have had up to 1.5 million dues-paying members. The term “Realtor” is a brand name like Xerox. So just like you can have a copy machine that is not a Xerox, you can also have a real estate broker that is NOT a Realtor.

What Does the NAR Do?

This varies by state. At the highest level, the NAR is a lobby group trying to affect legislation about real estate. They lobby at the state and national level. In many states, they also control the real estate listings database, which is called a Multiple Listing Service (MLS). In markets where the NAR controls the database, they make it mandatory for agents to join the NAR to have access to the listings.

Important Side Note

The MLS in Washington State is not controlled by the NAR. So in Washington, you do NOT need to be a Realtor to be a member of the Northwest MLS. I dropped my membership a few years ago as these lawsuits were working their way through the system. I am not a Realtor – I’m a Washington State Managing Broker.

The Lawsuit Explained

The big class-action lawsuits were brought by consumers in markets where the NAR controls the listing database. They claimed, among other things, that the member brokerages were colluding with each other to keep commissions artificially high. The other important claim was that NAR-controlled listing services required sellers to pay the commissions for both the buyer agent and seller agent. The lawsuit claimed this was unfair to consumers.

They won the case and the NAR and other parties named are trying to settle the case. The settlement offer is being reviewed by the Department of Justice.

Local Impact: Washington State

Technically, the NWMLS is not a party to this lawsuit or with the settlement. However, many local legal experts believe that the NWMLS will join the settlement in a limited way to be protected from future lawsuits. That is still pending. As these lawsuits were moving along, the NWMLS and the State of Washington were proactive in addressing the claims in the suit and moving to protect consumers.

Compensation and Changes

In January 2024, the NWMLS, via new legislation, is requiring that real estate buyers enter into an agreement with their agent that explicitly describes how the compensation will work. For decades, the seller of a property in Washington State would offer a percentage of the list price as compensation for the Listing Brokerage and the Buyer’s Brokerage – historically it was 6% that was split between the two brokerages.

Future Outlook

We wait to see if the Department of Justice accepts the settlement and if the NWMLS chooses to join to avoid future litigation. The biggest thing that happens now, in my opinion, is that brokers and their clients need to have frank conversations about compensation and what each party thinks is reasonable. Can the broker demonstrate what they do and prove its value? That’s the task at hand.

Feel free to ask follow-up questions in the comments, and I’ll do my best to answer. If you’re jumping into the real estate market in the PNW and have more questions about this – reach out and we can do a Ron & Don Sit Down and talk about it.