DOJ Rejects Real Estate Commission Offers, NAR Awaits $418M Settlement Approval

Key Takeaway

• The DOJ opposes offers of compensation in real estate listings, signaling potential regulatory intervention despite NAR's proposed $418 million settlement.
• NAR's changes to remove compensation offers from MLS are set for August, with a key settlement approval hearing in November.
• The DOJ continues its investigation into NAR’s Participation Rule, following a green light to resume the probe after withdrawing from a 2020 settlement.

DOJ's Stance on Real Estate Commissions

The Department of Justice (DOJ) has recently made a significant move in the residential real estate sector, breaking its silence on commission practices as the National Association of Realtors (NAR) awaits approval on a proposed $418 million settlement. This settlement, which hinges on compensation guidelines, has been a focal point of contention. During a status hearing for the Nosalek case in Massachusetts, DOJ attorney Jessica Leal stated, “We believe offers of compensation should not be made anywhere, but certainly not on the MLS.” This comment, reported by RISMedia, signals potential regulatory intervention if brokerages continue to use listing agreements that allow sellers to make offers of compensation.

The Details and Broader Implications

The DOJ's involvement comes at a critical time as NAR's changes are set to take effect in August, with a judge considering the settlement approval in November. The DOJ's stance could reshape the landscape of real estate commissions, impacting how brokers and agents operate. This development is part of a broader trend of increased scrutiny and regulation in various sectors, as seen in other DOJ actions, such as the recent decision not to prosecute MilliporeSigma for internal misconduct due to their cooperation and compliance efforts. This approach by the DOJ underscores a shift towards encouraging corporate transparency and accountability.

A Broader Regulatory Landscape

The DOJ's recent actions are not isolated to the real estate sector. The department has been active in other areas, such as its decision to seek the breakup of Live Nation Entertainment Inc. for antitrust violations related to Ticketmaster's control of concert ticket sales. This move, part of the Biden administration's focus on competition, highlights the DOJ's broader strategy to address monopolistic practices and ensure fair market conditions across various industries. The DOJ's proactive stance in these cases reflects a commitment to maintaining competitive markets and protecting consumer interests.

My Perspective on the DOJ's Actions

From my viewpoint, the DOJ's recent actions in the real estate sector and beyond indicate a robust regulatory environment aimed at fostering transparency and competition. The DOJ's intervention in the NAR settlement and its broader regulatory efforts suggest a significant shift towards holding corporations accountable and ensuring fair practices. While some may argue that increased regulation could stifle business operations, the long-term benefits of a transparent and competitive market outweigh these concerns. The DOJ's approach, as seen in the MilliporeSigma case, also highlights the importance of corporate cooperation and compliance in mitigating legal risks.

Street Views

• Jessica Leal, Department of Justice (Bearish on current commission practices in residential real estate):

  "We believe offers of compensation should not be made anywhere, but certainly not on the MLS."

• James Dwiggins, NextHome CEO (Neutral on DOJ's stance):

  "The update was a 'shot across the bow.'"
  "At the very least, all eyes are on the DOJ right now."