Speculation is still swirling around what Judge Stephen Bough’s final ruling on the Sitzer/Burnett commission lawsuit will be and how it will impact the industry.
Thanks to provisions in both Anywhere’s and RE/MAX’s settlement agreements, as well as Redfin’s announcement that it would be requiring agents to cancel their National Association of Realtors membership, much of the speculation has focused on what will become of NAR’s 1.5 million members.
Although some have estimated the trade group’s membership numbers could drop by nearly 1 million members, many don’t believe that will happen because some MLSs require NAR membership in order to access their platforms.
“I think it is more about inertia,” Murray said. “Certainly there are a lot of places in the U.S. that you have to be a Realtor to get access to the Realtor-owned and operated MLS. But it is interesting, among other places, like California, Colorado, Florida, Georgia and South Carolina and, functionally, the state of Washington, you don’t have to be a Realtor to get access to the MLS. Well, last I checked, Colorado still has a record number of Realtor members and last I checked, California still has 162,000 Realtor members.”
Chip Stella, a LandVest broker, is in the camp that believes brokerage provisions no longer requiring NAR membership will have an impact on membership numbers, but he isn’t sure how large it will be.
“Maintaining MLS access is important if you want to still serve your clients,” Stella said. “I actually do still believe in our organization. I don’t think I am going to change my affiliation.”
Despite asking their agents to cancel their NAR memberships, Redfin also acknowledged that agents in some areas may need to maintain their membership to continue conducting their business.
“In about half the U.S., including in cities like Charlotte, Dallas, Houston, Las Vegas, Long Island, Minneapolis, Nashville, Phoenix and Salt Lake City, we can’t quit NAR individually or en masse, because NAR membership is required for agents to access listing databases, lockboxes, and industry-standard contracts,” Redfin’s CEO Glenn Kelman wrote in a letter shared on the firm’s website. “It’s impossible to be an agent if you can’t see which homes are for sale, or unlock the door to those homes, or even write an offer.”
Due to the need for MLS access in some cases, industry analyst Rob Hahn believes brokerages announcing breaks from NAR isn’t a truly substantial move.
“Redfin’s bold and courageous letter is mostly symbolic. But by itself… it’s not going to have much of an impact,” Hahn wrote in the Oct. 2 edition of his NotoriousROB email newsletter. “In fact, I’m not even sure that Redfin does not renew its Realtor membership for 2024, because they kind of have to.”
RE/MAX executives, whose firm’s settlement agreement in the Sitzer/Burnett, Moehrl and Nosalek commission lawsuits, no longer requires agents and brokers to belong to NAR. The franchisor’s leaders believe current housing market conditions will have a greater impact on NAR membership numbers than the provisions in their settlement.
“We see some retirements. We see some that needed one more good market that maybe would have retired 10 years ago but stayed in the business a little longer than they would have who are now leaving,” Nick Bailey, RE/MAX’s president, told investors and analysts during the firm’s third quarter 2023 earnings call Friday.
He continued: “There were also a lot of new licensees that came int the business in the last few years and some of them were team members and when there is a contraction, you know, just not enough volume out there to support as many agents, what we see is the overall number of agents in the industry reduces.”
In addition to the possible impact of the settlement agreements on NAR membership numbers, the unknown contents of Bough’s injunction could slash NAR membership numbers and prompt more agents nationally to leave the business.
If Bough’s injunction puts an end to any and all offers of cooperative compensation, many believe the number of buyer’s agents will dwindle, as fewer homebuyers are likely willing to pay for those services upfront.
“It is a sales business,” Stella said. “If there is x number of units you need to sell to support your family, pay your mortgage, and all of a sudden your business as a buyer’s agent drops 25%, you are going to be impacted.”