Why WA agents are leaving real estate’s most powerful group

The state recorded a nearly 10% decline in members of the National Association of Realtors in December, the largest year-over-year drop of any state.

NAR and its state affiliate, the Washington Realtors, blame the drop on a cooling housing market that has made real estate a more difficult business. But others in the industry are openly questioning whether remaining affiliated with NAR in the wake of antitrust litigation and sexual harassment allegations is doing their reputation more harm than good.

Most real estate agents work hard to protect their clients, said Lake Tapps agent Kim Harlington, whose brokerage recently decided to leave NAR. But “now, if you say I’m a Realtor, people think, ‘Oh, those shady guys that were engaged in price-fixing?’”

Controversies rock NAR

With more than 1.5 million members nationwide, NAR and its state and local affiliates are dominant players in the real estate industry. The group owns the trademark on the term Realtor and, in many areas of the country, controls access to important property listing services. Membership offers agents access to training and includes a code of ethics for agent behavior. Local and national Realtor groups are also major political forces, spending tens of millions of dollars a year on lobbying and backing candidates at all levels of government.

But controversies have begun to threaten the Chicago-based association’s influence. In August, NAR’s then-president Kenny Parcell resigned after several women accused him of sexual harassment. A couple of months later, the association lost a high-profile antitrust lawsuit that challenged the common way real estate agents earn commissions on home sales. NAR denied the allegations in the commission lawsuit and plans to appeal the decision.

More lawsuits have been filed since.

In another dramatic event, NAR president Tracy Kasper resigned this week after the organization said she had received “a threat to disclose a past personal, nonfinancial matter unless she compromised her position at NAR.” She “refused to do so” and notified law enforcement, according to NAR.

Amid these circumstances, NAR membership has taken a hit. Nationally, NAR membership dipped about 2% in December from the prior year, a loss of 26,400 members. Membership in Washington fell 9.5%, a loss of 2,200 members.

Many of those appear to have dropped their affiliations with NAR recently: Washington membership fell by about 1,300 from November to December. At the end of December, nearly 21,000 people were members of NAR in Washington. Membership includes both national and local Realtor groups and runs about $700 a year in the Seattle area, agents say.

After Washington state, Washington, D.C. recorded the next largest drop in December (9%), followed by Louisiana (6%).

The trade group blames market trends for the decline, as high interest rates slow homebuying.

Membership is “primarily influenced by the housing market’s fluctuations,” Washington Realtors CEO Nathan Gorton said in a statement. “While recent challenges faced at [NAR] have contributed to a limited decline in [Washington Realtors] membership, local housing market conditions in Washington also play a significant role.”

NAR’s count of members last declined significantly in the years following the 2008 financial crisis that upended the housing market. From 2007 to 2008, membership fell 10.5%.

During that housing crash, “Washington experienced more up and down swings in membership compared to the national average,” NAR chief economist Lawrence Yun said in an email. “We expect a similar trend to be playing out today.”

Membership changes “during boom and bust years” reflect “the fiercely competitive nature of the real estate business,” Yun said.

Indeed, some real estate agents bowed out of the business even before the late October commission ruling against NAR.

The number of active real estate broker and managing broker licenses in Washington declined by about 2%, or 800 people, in early October 2023 compared to the year before, according to Washington State Department of Licensing data. By the end of the year, licenses had declined 4% from 2022. Brokers must renew their state license every two years. (Not all licensed brokers are NAR members.)

‘Black eye’

Still, more is at play than just the market downturn.

Seattle-based Redfin announced in October it would leave NAR in some markets, citing commission policies and the sexual harassment allegations. It’s not clear how many Redfin agents work in Washington, but the company said it employed about 1,700 agents nationwide as of the fall. Redfin declined to make anyone available for this story.

Another local brokerage, Coldwell Banker Danforth, also announced plans to leave starting in the new year, objecting to an “all in, all out” NAR rule that requires all members of a brokerage to be members or none to be. (It’s not yet clear how Redfin will get around this rule.)

In a legal settlement in October, Coldwell Banker’s parent company Anywhere Real Estate, which also owns Sotheby’s and other brokerages, agreed to no longer require its brokerages or franchises to be NAR members, opening the door for offices like Coldwell Banker Danforth to leave.

Harlington, who works with Coldwell Banker Danforth, said she supports Washington Realtors’ local work, but doesn’t want to be a member of the national group.

“I don’t want to be associated with an organization that in other states has been found to have engaged in price-fixing,” she said. “It’s anti-consumer behavior.”

The federal lawsuit in question challenged NAR rules and common industry practices in which home sellers pay the commission of agents representing both the buyer and seller. Those commissions are typically 5% to 6% of the home price, split between the two agents. Critics say NAR and large brokerages conspire to keep those rates high, hurting consumers. NAR and its supporters say those commissions are always negotiable and that requiring buyers to pay their agents directly instead would make affording a home more difficult.

Western Washington is a bit of an outlier on commission practices. Even before the landmark jury ruling against NAR in October, the Northwest Multiple Listing Service changed its rules in 2019 to do away with the requirement that sellers offer commissions to buyer agents, though the change does not appear to have significantly driven down local commissions.

Leaving NAR is also easier in western Washington than in many other areas of the country. Elsewhere in the country, NAR controls multiple listing services, critical platforms where agents share listing information, but western Washington’s Northwest Multiple Listing Service is independent from NAR. Agents can access the service covering 26 of Washington’s 39 counties without NAR membership.

That creates “a greater opportunity for agents and brokerages who are in a financial crunch to look at their budgets and say, ‘Well, do I really want to spend 700 bucks a year on NAR membership?’” said Seattle real estate agent Sol Villarreal.

That sentiment may be especially prevalent among brokers who paid little attention to industry groups before the scandals of the last year. But Villarreal, who is active with local Realtor groups, calls leaving NAR and its affiliates a “penny-wise and pound-foolish decision.” His brokerage, Windermere, plans to remain in the association.

Praising NAR advocacy for homeowner-friendly policies such as the mortgage interest tax deductions, Villarreal argued “NAR is the reason why the real estate business model works as well as it does, both for agents and consumers.”

Villarreal sits on policy committees of both the Washington Realtors and the Seattle King County Realtors, local affiliates of NAR.

Although Harlington agrees that NAR has lobbied for helpful homeownership policies, “this black eye that they have right now is just, I think, destroying their credibility,” she said. “I don’t know how effective they can be — at least in the near future.”

The future indeed remains hazy for NAR and its membership count. Along with more lawsuits, the Department of Justice continues to investigate real estate commissions. And the housing market is expected to remain cool this year.

Washington Realtors hopes membership will rebound “as interest rates decrease and more properties become available,” CEO Gorton said, but Yun with NAR said the national group expects further drops in membership throughout this year.