Brokerages Face Settlement Dilemma Due to "Irrebuttable Presumption" in NAR Case

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Several real estate brokerages find themselves entangled in a legal quagmire following a June 18 deadline for opting into the National Association of Realtors' (NAR) $418 million commission settlement agreement.

Brokerages such as JohnHart Real Estate, ARC Realty, and Nebraska Realty were included in a court-approved list of firms that had reported over $2 billion in residential sales volume for 2022. This list was compiled from the 2023 Real Estate Almanac, published by T3 Sixty. However, a recent court ruling deemed the Almanac's sales figures as an “irrebuttable presumption”—a legal concept meaning these figures are accepted as true despite any contradictory evidence.

JohnHart Real Estate’s General Counsel, Brittany Porter, expressed frustration over the discrepancy, noting that the Almanac listed the firm with a $2.68 billion transaction volume, which the company disputes. T3 Sixty has acknowledged the issue and promised to issue corrections.

The Settlement Agreement: A Tightrope for Brokerages

The settlement agreement stipulates that brokerages with transaction volumes exceeding $2 billion in 2022 must opt into the settlement, potentially incurring substantial additional legal costs. Brokerages below this threshold are automatically covered. The settlement’s complexity has left brokerages struggling to reconcile their reported figures with the legal presumption established by the court.

The NAR settlement agreement offers two options for firms that are not automatically covered:

1. Option 1: Deposit an amount equal to 0.0025 times the brokerage’s average annual transaction volume over the past four years into an escrow account.
2. Option 2: Participate in non-binding mediation with plaintiffs' attorneys if the brokerage cannot meet the financial requirement of Option 1.

For example, JohnHart Real Estate would need to deposit $6.7 million under Option 1 if their reported transaction volume is accurate. ARC Realty and Nebraska Realty face similar financial burdens, with respective amounts of $5.275 million and $5.325 million.

Disputes and Legal Proceedings

Brokerage leaders have expressed dissatisfaction with their inclusion in the list. ARC Realty’s CEO, Beau Bevis, noted that an acquisition in mid-2022 might affect their total volume, while Nebraska Realty’s CEO, Andy Alloway, argued that certain transactions should not count towards their volume, including for-sale-by-owner deals.

With mediation sessions scheduled for July 31, brokerages and plaintiffs' attorneys are grappling with how to resolve these discrepancies. As the legal process unfolds, the resolution of these disputes remains uncertain, with potential implications for the overall settlement and participating brokerages.