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The deadline for brokerage firms large and small to choose to reach settlement agreements with attorneys representing home sellers is quickly approaching, in a case that will almost certainly change how brokers are compensated in the United States
Brokerage firms and multiple listing services have until 11:59 p.m. CST to offer to pay fees or mediate and reach an agreement to resolve antitrust claims by home sellers over brokerage commissions. The deadline was set by a settlement brokered in March by the National Association of Realtors.
While some of the largest brokerages and franchises in the U.S. have made headlines nine figure settlement agreement In recent months, dozens of brokerage firms and hundreds of MLSs have been trying to decide whether to reach settlements and relieve themselves of liability from current and potential future lawsuits totaling about $1 billion.
While NAR’s settlement covers much of the industry, it does not include brokerage firms with more than $2 billion in residential sales in 2022. But the settlement provides a path for brokerages not covered to reach their own agreements.
In the days leading up to the deadline, Inman contacted every brokerage firm not covered by the National Association of Realtors’ proposed settlement or their own settlement.
Choosing to settle means potential protections for brokerages and their agents, but it also means potential settlement fees that some independent brokerages on the list fear they won’t be able to pay.
Representatives for some brokerages said they had taken steps to opt into the settlement. Others said they were planning to mediate. Others are stuck, they told Inman, facing an uncertain path forward.
With less than 24 hours until the deadline, some brokerages, such as California’s JohnHart Real Estate and Alabama’s ARC Realty, are still unsure whether they will be forced to merge under NAR’s settlement, while others say: On Tuesday afternoon, dozens of brokerages still on the sidelines were scrambling to decide what to do next — before time ran out.
“We have been actively preparing for months to comply with the terms of the settlement involving contracts, disclosures and policy changes,” Nebraska Realty CEO Andy Alloway told Inman, noting that he asked the plaintiffs Lawyers allowed him to opt in without any review. “We simply don’t have the money to pay the settlement.”
Opt-in process
The deadline of June 18 was chosen because the plaintiffs filed a motion for preliminary approval of the NAR settlement agreement on April 19, triggering the 60-day opt-in deadline.
Brokers who want to join must fill out a form called Appendix C, which includes boilerplate language agreed to by the brokerage and plaintiffs as well as a number of boxes to fill out and sign.
Those who opt in must send an email with a signed Appendix C form to co-lead plaintiffs’ attorneys at the law firm Cohen Milstein Sellers & Toll, NAR, and legal administration firm JND.
By around mid-August, settlement brokers must pay the agreed-upon amount based on one of two payment methods of their choice, as detailed in the appendix.
NAR will develop new rules for the industry by August 17, and settlement brokerage firms must agree to comply with them by September 16.
The brokerage will certify that they will exceed $2 billion in residential sales in 2022.
Brokers near $2B cutoff
Multiple brokerages said they should not be included on the T3 list of 60 companies with sales exceeding $2 billion in 2022, each with its own unique explanation.
It’s unclear whether plaintiffs’ attorneys will accept the companies’ claims. The 2023 T3 Sixty Real Estate Yearbook, which includes a summary of a brokerage’s total transaction volume in 2022, will be the “irrefutable” source for determining whether a brokerage’s transactions exceed $2 billion, the settlement said.
JohnHart Real Estate is a California-based brokerage firm with real estate yearbook sales of $2.67 billion in 2022. Be included in this list. Surprisingly we never heard back.
Robert Glaser | CEO, Smith Associates
Florida-based Smith Associates CEO Robert Glaser said the real estate yearbook initially included commercial sales transactions for his brokerage. Adding all that, the yearbook shows Smith & Associates will have sales of $2.06 billion in 2022.
Beau Bevis leads Alabama-based ARC Realty, which has $2.11 billion in transaction volume in 2022, according to the Real Estate Almanac.
Conversely, Bevis also said the yearbook included data on the acquisition of a rival brokerage firm in Alabama, capstone real estateearly 2022.
“We don’t complete asset purchases until March 2022,” Bevis said. “If you exclude January and February 2022, we are below the 2 billion threshold. That is our position in this situation.
Bob Bevis | CEO of ARC Real Estate
Nebraska Real Estate, for example, said its sales exceeded $2 billion just after including “for sale by owner” transactions it helped broker.
“These are not MLS transactions, so we are asking that brokers with less than $2 billion in sales be included in the terms of the settlement,” Alloway said.
uncertain future
Michael Ketchmark of Ketchmark & McCreight is the lead plaintiffs’ attorney in a major commission lawsuit that is being partially resolved by NAR Settlement, Sitzer | Burnett did not respond to a series of questions about the brokerage firms, which said they are working with the plaintiffs’ attorneys on their unique circumstances. Instead, he said nearly all MLS and agents have opted to settle.
Michael Cagemark | Lead Plaintiffs’ Counsel
“We are in settlement negotiations with a number of agents and remain confident that most agents [the] Small and medium-sized brokers that have not yet settled will eventually agree to settle and abide by the terms of the NAR settlement,” Ketchmark said.
He declined to name the settlement brokerage until his company files the settlement agreement with the court, which he said would likely be sometime in July.
“I suspect you’re going to see almost every broker over $2 billion come to a deal, and if not, they’re probably going to be named as defendants,” Ketchmark said.
Most brokerages who responded to Inman declined to comment directly or through lawyers. Many did not respond at all.
Some of the largest brokerages — eXp, HomeSmart, Fathom Realty, Brown Harris Stevens and Samson Properties — declined to comment. EXp cited ongoing litigation as a reason for not commenting.
Other companies did not respond to multiple requests for comment, including Howard Hanna, Weichert Realtors, United Real Estate, Raveis and others.
California-based Seven Gables Real Estate quickly reached its own settlement after the NAR. CEO Michael Hickman said his company was the first in California to reach a settlement after the NAR. He said the plaintiffs’ attorneys have not yet signed the agreement.
Sources familiar with the strategy of Signature Premier Properties, a New York brokerage with $3.56 billion in transaction volume in 2022, told Inman the settlement has been reached.
Hilton and Hyland also confirmed plans to reach a settlement through mediation.
Opting in does not guarantee final approval of the NAR settlement by Judge Stephen R. Bough following a Nov. 26 hearing. And there’s no guarantee that other plaintiffs — especially past homebuyers — won’t try in court.
Andy Alloway | CEO, Nebraska Real Estate Company
Alloway’s independent brokerage firm could expose potential pitfalls for brokerage firms that trade more than $2 billion but are independently owned and significantly smaller than the nation’s top brokerages.
Alloway said he was prepared to abide by the terms of the settlement, but his company did not have the money to pay monetary damages and asked not to pay.
“We’re an independently owned company (I’ve been the sole owner for the past 15 years) and we’re not very well funded,” Alloway said. “We operate on a tight margin and choose to put as much money as possible back into the pockets of our customers and agents.”
Who is inside?
While it’s difficult to get a full picture of the companies that opted into the settlement, several prominent brokerages have publicly or privately acknowledged their fate.
Among them:
- compass: Compass is the brokerage with the largest settlement volume. The company agreed in March to pay $57.5 million.
- American Home Services: Agree to pay the largest known settlement amount other than NAR. It will pay $250 million.
- Keller Williams: Franchisor agrees to pay $70 million to settle Sitzer|Burnett case. One buyer is appealing the settlement.
- Real estate anywhere: Anywhere agrees to pay $83.5 million before Sitzer | Burnett case goes to trial. One buyer is appealing the settlement.
- re/max: Agree to pay $55 million to settle before Sitzer | Burnett case goes to trial. One buyer is appealing the settlement.
- Nar: Agreeing to pay $418 million to settle rather than move forward with Sitzer’s appeal | Burnett verdict.
- Douglas Elliman: Agreed to pay $17.75 million to settle a lawsuit against it.
- Red Fin: Agreed to pay $9.25 million.
- @characteristic: Agreed to settle for an undisclosed amount.
- Real Brokerage Business: Agreed to pay $9.25 million.
- First Real Estate Group: Agreed to settle for an undisclosed amount.
By noon on Tuesday, Inman learned that the following brokerages had also chosen to settle:
- Equity Real Estate
- Downing Fry Realty Company
- key real estate
- atlanta community
- american home
- Said Company
- Ross and Wimble
- Real estate group
- Alison James
- silver creek
- peak
- Pioneer Real Estate
- Michael Sanders
- Watson Properties
- MVP Real Estate Associates
- Real Estate Management Associates
- McEnany Partners
- Serpe/Brown Harris Stevens
Email Tyler Anderson
Editor’s note: This article has been updated to reflect the number of brokerages contacted by Inman and includes an update on brokerage firms that have opted in as of late Tuesday afternoon.
