National Association of Realtors Loses Its Grip on Real Estate Industry

The staff members of the National Association of Realtors, the largest professional organization in the United States, were in a panic. Two days before the group’s national convention, they had set up 400 exhibition booths and were expecting nearly 12,000 people to arrive for three days of speakers, training sessions and networking.

But now they were scrambling to find extra security and private bodyguards for members of their team because the former president, who had resigned under the weight of sexual harassment allegations, wrote an open letter that they interpreted as a plan to crash the convention.

The theme of the yearly gathering for 2023 was “Own the Moment.”

That day in November, it was obvious to the staff that N.A.R. — an organization that for more than a century has stood as a monolith of influence within the real estate industry — was losing its grip. This year delivered a one-two punch of dual scandals, and many within the organization admit N.A.R. is now in real danger of going under. Several high-profile real estate agents are talking about starting their own groups.

In addition to sexual harassment allegations, N.A.R. is taking on legal challenges to its 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. Just weeks before the convention, a federal jury agreed with a trio of Missouri home sellers that N.A.R. had operated a price-fixing conspiracy around agent commissions, and ordered damages of at least $1.8 billion.

Additional lawsuits, more than can be counted on both hands, are piling up. The specter of bankruptcy looms large. The Department of Justice is continuing an investigation into the group for antitrust violations, and some of the nation’s largest brokerages, including Re/Max and Coldwell Banker, have said they will no longer require their agents to carry N.A.R. membership. Redfin will require agents in certain markets to cease paying dues.

“This is an extinction-level event,” said Jason Haber, a real estate agent with Compass who has been one of the most outspoken critics of N.A.R. since the harassment allegations broke. “You cannot dispassionately look at the facts and say that everything is OK.”

Three top executives left this year, starting with Kenny Parcell, the president, who stepped down in August two days after a New York Times investigation revealed multiple allegations of sexual harassment and payments to women who reported misconduct. Two weeks before the convention, Bob Goldberg, the organization’s longtime chief executive, opted to retire more than a year early. Donna Gland, who had served as head of human resources for nearly four decades and was facing widespread calls for her removal, announced she was retiring one week later.

Mr. Goldberg still made an appearance at the convention. Nykia Wright, the 44-year-old newspaper executive who has been tapped as interim chief executive,attended the conference’s inaugural gala and flew out after less than 24 hours.

Mr. Parcell sent an open letter to several high-ranking N.A.R. members, saying the sexual harassment allegations against him were “false and defamatory.” He signed off his note, which he saved as a file titled “nar nxt pdf,” with, “I hope to see so many of you in the future.” The N.A.R. staff believed the note meant he planned to attend.

Tracy Kasper, N.A.R.’s new president, sent her former ally a stony warning. N.A.R., she said, was aware of “immediate and serious concerns” about his “possible presence at N.A.R. events.” Effective immediately, the note read, he was banned from all gatherings, and from making contact with staff members.

As Realtors streamed into the convention center on the first day, few noticed the extra security guards who had been hired.

Mr. Parcell did not attend.

In a email sent via his attorney, Mr. Parcell told the Times that he had sent the note to clear his name. “I have never sexually harassed anyone,” he wrote.

“At no place in the letter did I say or imply that I was attending the NAR NXT convention,” he wrote. “It is ridiculous and disingenuous to infer or conclude anything by the electronic PDF file name as opposed to the actual title of the letter and its contents.”

N.A.R.’s new leaders spent the conference trying to assure members that the group would overcome its recent troubles.

“This is far from over,” said Ms. Kasper from the stage at NAR NXT, just before she asked for a “very warm, Realtor welcome” for the event’s keynote speaker, the actress Mindy Kaling.

The crowd, relieved by the vibe shift, whooped.

N.A.R. vs. Everybody

N.A.R.’s power has been in its governance of the industry. With more than $1 billion in assets, the group controls access to the private databases used to list homes, called Multiple Listing Services, most of which are restricted to N.A.R. members only.

The group, based in Chicago, even owns the name so many people use to refer to real estate agents: “Realtor” is restricted to dues-paying members. N.A.R. also wields its influence in politics, operating the top political action committee in the country, raising more than $80 million for both Democratic and Republican candidates in the 2022 election cycle alone.

The Justice Department sued N.A.R. over its M.L.S. policies in 2008. They reached a 10-year settlement, and when it expired, the D.O.J. began issuing statements of interest — legal briefs that point out how the cases will affect the public — in multiple pending antitrust lawsuits, including the Missouri case and a separate class-action suit in Chicago over inflated fees.

Despite its mounting legal headaches, N.A.R. is not backing down. The organization has taken the U.S. government to court, suing the D.O.J. in 2021 to stop them from investigating their policies. After an initial victory in D.C. District Court, the D.O.J. appealed the ruling earlier this year.

“The D.O.J. is in this for the long haul,” said Randy Airst, the chief executive of Exceedant, the real estate data analysis firm.

At the heart of the justice department’s investigation is the question over whether N.A.R. can keep M.L.S. access behind a velvet rope.

Getting permission to use the M.L.S. is part of the draw to the organization for 1.6 million members. N.A.R. also has a commission policy that can be lucrative, depending on the market.

Under a N.A.R. rule, a home seller is required to pay commissions to the agent representing the buyer. Home sellers have long claimed that the rule forced them to pay excessive fees to the agents, but in the case of Missouri, a group finally sued.

The home sellers said the brokerages collaborated with N.A.R. to enforce what is called the “cooperative compensation rule.” The trial lasted 11 days; the jury deliberated for less than three hours.

Under the verdict, sellers would no longer be required to pay buyers’ agents, and agents would be free to set their own commission rates. For example, a home seller with a $1 million home can now pay as much as $60,000 in agent commissions — $30,000 to their agent and $30,000 to the buyers’ agent.

“The basic fabric of the U.S. real estate market is being disrupted,” said Thomas Ma, who co-founded Real Messenger, a messaging app for real estate agents.

N.A.R. was sued alongside a handful of brokerages, and the verdict allows the court to issue treble damages that could swell to more than $5 billion, far more than N.A.R. has in its coffers.

N.A.R. has said it will appeal.

The same day the home sellers in Missouri won their case, their lead attorney, Michael Ketchmark, had filed yet another case. This one has potentially catastrophic implications for the Realtor organization.

The new suit, which is being called Gibson after the name of its lead plaintiff, also makes an accusation of conspiracy over inflated real estate commissions. It names a number of major brokerages as defendants alongside N.A.R. — this time they include eXp World Holdings, Compass and Redfin.

This new case represents home sellers in every state. When the suit was filed, the requested damages were enough to make industry insiders’ jaws drop: Mr. Ketchmark and his team are seeking $200 billion this time around, with the knowledge that the judge could again choose to treble that number up to $600 billion.

“I’ve always referred to it as Whack-a-mole,” Mr. Ketchmark said of taking on N.A.R.’s influence. “Our goal is to unplug the Whack-a-mole machine and topple them completely.”

Industry analysts say they do not see N.A.R. surviving.

“This is done,” said Mr. Airst. To come back from the verdict with its finances intact, he said, “There are so many gantlets that N.A.R. would have to run through, and win every time.”

The first gantlet, Mr. Airst said, is coming up with billions of dollars for appeals.

“The money is not there,” he said.

Alternatives

Should N.A.R. implode, some industry leaders say they are ready to fill the vacuum.

Mr. Haber, the Compass agent, said he has been seeking out funding for a new trade organization, with aspirations to establish it by the middle of 2024 if N.A.R. doesn’t recover.

Real estate mogul and reality TV star Mauricio Umansky, who is currently suing N.A.R. after they tried to shut down his private home listings site, also said he is laying the groundwork to start an alternative association.

“They’re making decisions to protect themselves and the multiple listings services,” Mr. Umansky said of N.A.R. “They worry more about that than protecting the realtors.”

Mr. Umansky and Mr. Haber both said they have spoken to each other and are open to joining forces.

Robin Philips, a Realtor in Dodge, Neb., has been a member of N.A.R. for 22 years. She said she was stunned that N.A.R. had not launched a stronger defense in court and is worried about losing income if the rules for commissions are changed.

“I feel like we were really let down in these lawsuits. We pay a lot of money to be defended and I don’t believe we were,” she said.

Women, though not always in high positions in the organization, make up about 66 percent of N.A.R.’s membership, and there is a fear that they will leave and take their dues with them.

Following the convention, N.A.R.’s 69-person executive committee approved a new policy: a lifetime ban from all N.A.R. events for any elected officer who resigns or is removed from office.

The changes might not be enough. The sexual harassment allegations have already inflamed frustrations, said Dustin Brohm, a Realtor in Salt Lake City who hosts a popular real estate podcast, Massive Agent.

“Most agents I talk to say if they had the choice to not be a member, they would choose not to,” Mr. Brohm said. “The sexual harassment allegations feel like the straw that broke the camel’s back, and a lot of people are now saying, ‘This is just insane.’”

Even agents who describe themselves as longtime loyalists said they are growing more disenchanted.

“N.A.R. has done a horrible job of telling us what they do for us,” Mr. Brohm said.

On his Instagram page, he recently asked his more than 20,000 followers if they think their N.A.R. membership offers them value for money.

About 97 percent of respondents said no.