Understanding the NAR Settlement and its Impact on Canadian Real Estate

Over the past few weeks, the Canadian real estate industry has been carefully watching the developments with the National Association of Realtors (NAR) lawsuit in the United States. The recent $418 million settlement has raised questions about its potential effects north of the border and while it’s tempting to speculate, the reality is that the decision primarily concerns the practices of realtors governed by the NAR, not those in Canada.

Unanswered Questions in the US

First, let’s understand where things stand. In the US, the settlement introduces two significant changes. Firstly, all buyers must enter into a buyer’s agency agreement before viewing a listing, specifying compensation for their buyer’s agent. This compensation could be paid upfront by the buyer or come from various sources but crucially, it cannot be communicated through the Multiple Listing Service (MLS). Additionally, the buyer’s agent cannot receive compensation exceeding the agreed-upon amount.

Potential Confusion for Buyers

These changes could introduce confusion for buyers, especially first-time buyers. They may need to commit to paying their buyer’s agent a commission on top of their down payment and closing costs. The source of this commission—whether from the seller, listing brokerage, or the buyer themselves—may not be easily accessible on the MLS. Buyers and selling agents may need to search individual brokerage sites to find this information.

Impact on Dual Agency and Transactions

The settlement’s provisions could potentially lead to more transactions being ‘double-ended’ by listing agents. This shift seems contrary to the previous industry push to limit or ban dual agency, raising questions about whether it truly benefits consumers.

Canadian Context

So what effect does a lawsuit like this have on Canada? We’re not without similar cases to keep an eye on; the Sunderland and McFall cases are two class-action lawsuits which were brought by the same Canadian law firm and revolve around competition act violations and alleged price-fixing. However, in these specific situations, the allegations seem out of place given the competitive and negotiable commission rates that have long existed across Canada. Canadian law surrounding competition differs from that of the US, so we won’t see a trial determined by a jury of disgruntled renters.

Separate Markets, Separate Rules

It’s important to keep in mind that the real estate markets in the US and Canada are distinct entities, each with its own regulations and industry associations. As such, the NAR settlement’s direct impact on Canadian realtors is likely to be minimal.

What Comes Next

In my opinion, the only benefit of the NAR settlement appears to be the substantial settlement received by the lawyers who brought the class-action lawsuit. However, the impact on buyers and buyers’ agents remains to be seen and could potentially complicate the home buying process, particularly for first-time buyers.

While the NAR settlement may not directly impact Canadian real estate practices, it does provide an opportunity to reflect on our industry’s principles. Canadian buyers and sellers are familiar with negotiating commission rates, and agents can offer rebates or reduce commissions to facilitate deals. As we observe the developments in the US market, it’s essential to remember the unique characteristics of the Canadian real estate landscape and continue to prioritize transparency and consumer interests.

Todd Shyiak is the Executive Vice President at CENTURY 21 Canada