Commercial Real Estate News
Commercial Co-Broker Commissions Not Affected by NAR-DOJ Settlement, Yet
NAR still not out of the woods with the DOJ
Following the groundbreaking agreement between the National Association of Realtors (NAR) and the Department of Justice on March 15, 2024, the real estate sector is abuzz with discussions about the potential effects on the future of commercial co-broker fees and payment methods.
This week, in a written statement to The World Property Journal, NAR clarified that the settlement primarily concerns residential real estate transactions, leaving most commercial dealings untouched. Commercial listings often feature in commercial information exchanges (CIEs) rather than multiple listing services (MLSs) and typically don't involve compensation offers. The settlement mandates the prohibition of compensation offers via MLS and requires MLS-affiliated buyer agents to form written agreements with their clients. These changes are expected to be implemented by late July.
D'Etta Casto-DeLeon, 2024 Global President of the CCIM Institute also commented, "The NAR settlement and underlying issues are centered on residential real estate practices, which are completely different from commercial real estate industry standards. As a commercial real estate focused education organization, The CCIM Institute's courses underscore how commercial related fees are always negotiable. Buyers and sellers negotiate any fees with each of their commercial representatives that is appropriate for the transaction. Some of the likely adjustments happening in residential real estate will take a page from these commercial real estate practices."
Commercial real estate professionals across the U.S. are reflecting similar views. Jeff York, President of ITRA Global / York Property Company in Dallas, Texas, noted to The World Property Journal, "While the NAR settlement was significant, it mainly pertained to residential fees and payment structures. So far, no changes in commercial fee arrangements or co-broker payments have been observed, though future state-level regulatory changes, inspired by the NAR-DOJ settlement, could potentially alter the commercial real estate co-broker payments landscape down the road."
Additionally, on April 5, 2024, an appeals court ruled that the Justice Department could reopen its antitrust investigation into NAR, overturning the organization's attempt to seal a 2020 settlement that aimed to conclude the investigation. The 2-1 decision by the US Court of Appeals for the DC Circuit indicated that the DOJ's previous closure of its investigation does not mean it cannot be reopened. This ruling opens the door for further examination of NAR's practices, following a 2023 jury verdict in Missouri that found NAR and others guilty of colluding to maintain high commission rates, leading to a $1.8 billion judgment. The March 2024 settlement with the DOJ, which could potentially lower fees, has left the real estate world pondering the future impacts, though the outcomes remain to be seen.
