More Brokerages Leave Powerful Realtor Group
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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 allegiance to the National Association of Realtors, a powerful trade organization whose grip on the real estate industry appears to be loosening.
The Chicago-based N.A.R. is the largest professional organization in the United States. It has 1.5 million members, more than $1 billion in assets and owns the trademark to the word “Realtor,” making a real estate agent’s ability to call themselves a Realtor and to buy and sell homes contingent upon the payment of membership dues in much of the country.
But in recent months, a combination of sexual harassment allegations against its top leadership 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 brokerage franchiser, with brands including Century 21 Real Estate, Coldwell Banker, the Corcoran Group and Sotheby’s International Real Estate falling under its umbrella — settled those lawsuits last month. Anywhere will pay $83.5 million; Re/Max, $55 million. Both have now revealed that they will also be abandoning a 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, a spokesman for N.A.R., in an emailed statement. “It is incumbent on every Realtor association — local, state and national — to continue to communicate and provide true value to our members. If these brokers continue to find value in belonging to the association, then they will choose to belong.”
“The proposed settlement does not change how our case is 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 buyers’ agent in a home sale transaction — a fee that is nearly always passed on to the home seller.
Agents who are members of N.A.R. must follow the organization’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 seller costs.
Also on Friday, N.A.R.’s chief legal officer, Katie Johnson, sent an internal message to staff that clarified the group’s own interpretation of the rules for agent commissions. In that message, which was obtained by The New York Times, she said that while N.A.R.’s policy does require listing agents to offer compensation to a buyer’s broker, that offer can be $0.
An attorney for plaintiffs in the antitrust case told Inman, the real estate news site, which 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 suits last month. On Friday, Anywhere revealed the terms, and announced that as part of the agreement, they will no longer require their nearly 200,000 real estate agents to hold membership in N.A.R. Re/Max, which has more than 140,000 agents, will also abandon N.A.R., under the same stipulation in its agreement.
N.A.R. has said it has no intention of joining Anywhere and Re/Max in a settlement, and instead will head to federal court on Oct. 16 in Kansas City (the plaintiffs are based in Western Missouri). Keller Williams and HomeServices of America are also named as defendants.
The departures from N.A.R. come just a few days after Redfin, the Seattle-based online real estate broker, announced it would require many of its own agents to sever their ties with the organization. Glenn Kelman, the chief executive of Redfin, said that N.A.R.’s looming antitrust battles played a key role in his decision, but he was also troubled by allegations of pervasive sexual harassment within the organization that The New York Times revealed in August. N.A.R. former president Kenny Parcell, who was the subject of many of those allegations, stepped down from his post two days after The Times’s report came to light.
Jason Haber, a real estate agent with Compass who has been at the forefront of calls for reform at N.A.R. since The Times published its report, said N.A.R. is at an inflection point.
“The trial and the sexual harassment are inextricably linked because they expose flaws within N.A.R. Anyone in real estate knows, a house is only as strong as its foundation. The house of N.A.R., after years of neglect, had too many cracks 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 N.A.R. also said they were seeing those cracks.
“We’re in a perfect storm,” said Leigh Brown, a North Carolina broker who serves on N.A.R.’s national board of directors, of the issues now surrounding the organization. “N.A.R. is bloated, and its staff is arrogant. And at the same time, its membership is 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 said she believes the class-action suits to be shortsighted, however, because if home sellers are not required to compensate their buyers’ agents, many buyers will navigate the home market solo, leaving them vulnerable to exploitation. “It’s structured this way to make sure the consumer has protection,” she said.