NAR Settlement 'The Worst of All Possible Worlds'? What Homebuyers MUST Know! | Ep. 8
Introduction
Hey everyone, I'm Nick, host of the DIY Homebuyer Podcast. Today we're examining an important critique of the NAR settlement by law professor Tanya Monastier, who called it "the worst of all possible worlds" in a recent Inman article. We'll explore what has—and hasn't—changed since the settlement, and what issues still need to be resolved.
Background on the NAR Settlement
The settlement, which went into effect on August 17th, 2024, was intended to:
Make home buying more fair and equitable
Create financial efficiency in transactions
Open pathways for unrepresented buyers to save money
Reform how buyer's agents are compensated
Key Issues Identified by Monastier
1. Ineffective Changes
According to Monastier, the settlement has:
Not eliminated steering
Not resulted in lower commissions
Not shifted payment obligations to buyers
Led to widespread confusion
Enabled exploitation of consumers
Failed to account for buyer/seller psychology
Underestimated industry resistance to change
2. Industry Workarounds
Monastier identified seven ways agents and brokers are circumventing the settlement:
a) Modifying Buyer Agreements
Setting artificially high initial commissions
Amending agreements once seller compensation is known
Using variable commission ranges
b) Bonus Compensation
Accepting additional compensation from sellers
Taking bonuses above negotiated rates
Creating indirect incentives for steering
c) Using Touring Agreements
Delaying formal representation agreements
Renewing short-term agreements repeatedly
Backdating documents to appear compliant
3. Enforcement Problems
The settlement suffers from fundamental enforcement issues:
NAR is responsible for enforcing its own settlement
Brokerages lack incentive to police their agents
No independent oversight mechanism exists
Violations are difficult to detect and prove
4. Consumer Impact
The settlement has failed to benefit consumers because:
Sellers still feel compelled to offer buyer agent compensation
Commissions remain steady at 5-6%
Unrepresented buyers face increased difficulties
System remains fundamentally unchanged despite added paperwork
5. Financial Settlement Issues
Monastier objects to the distribution of settlement funds:
Class members would receive only $20-25 each
Attorneys seeking $333 million in fees (33% of settlement)
Legal fees include rates of $1,000-2,200 per hour
Disproportionate benefit to attorneys versus consumers
Recommended Solutions
For meaningful change, Monastier suggests:
Eliminate upfront buyer agent compensation offers
Create true decoupling of buyer and seller agent compensation
Strengthen enforcement mechanisms
Reform compensation structures
Implement independent oversight
Implications for Homebuyers
The settlement's shortcomings reinforce the value of self-representation:
Avoid conflicts of interest inherent in current system
Potential savings of $15,000-27,500 per transaction
Greater control over negotiations
Direct communication with listing agents
Transparency in transaction costs
Resources for DIY Homebuyers
If you're interested in self-representation:
Join our FREE Skool community at skool.com/DIYhomebuyer
Access our free course on home buying essentials
Email questions to hello@DIYhomebuyeracademy.com
Subscribe to the podcast for ongoing insights
Share these resources with other potential homebuyers
Call to Action
To help reform the real estate industry:
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The only way to create real change is through informed consumers making better choices. Together, we can work toward a more transparent, efficient, and fair real estate market.
