Is NAR’s Change to Its “Participation Rule” an Admission of Guilt

By Franco Faraudo

For over a hundred years, real estate in America has been sold under the agreement that a commission would be split by both the buyers’ and sellers’ agents. This basic understanding is what was eventually codified by the National Association of Realtors (NAR) when they built their MLS system. NAR included a “participation rule” that forced brokers listing a property to include some monetary compensation for the buyer’s representative. It was that feature that was at the heart of a class action lawsuit brought by Joshua Sitzer and Amy Winger in 2019. This case, known now as the Sitzer/Burnett case, accuses NAR of conspiring to inflate commissions and thereby harm consumers.

The Sitzer/Burnett case is now only weeks before trial, and NAR has just updated its participation rule. Now, according to an NAR spokesperson, the policy “requires participants to communicate an offer of compensation to other MLS participants, and that offer can be any amount, including $0.” The change didn’t go unnoticed by the plaintiff’s attorney, who said, “If there is now a sudden change in this long-standing policy, it’s a stunning admission of guilt.”

There are a lot of specifics that will determine the verdict of this case. The plaintiffs argue a number of NAR’s practices are anticompetitive, and the participation rule is just one example. NAR did not invent the idea of broker reciprocity but now must be the champion of it. I see NAR’s move as more of an olive branch than an admission of guilt. Shared broker compensation had been going on long before the organization had been formed and will likely go on long after. No matter the outcome of this case, it will bring up the legality of a trade organization controlling the main digital portal of an entire industry. If NAR is allowed to be the gatekeeper of the one true source of real estate listings, should it also be liable for the harm caused? The stage is now set for the latest edition of NAR’s ongoing courtroom drama.

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