NAR rulemaking among ‘biggest systemic risks’ to the industry 

After paying millions of dollars to settle antitrust claims over NAR policies and practices, leaders of some of the largest brokerages are worried that the organization hasn't done enough to prevent another potential round of litigation in the future.

"I think a light was shown on the industry, and NAR specifically" following its settlement in several commissions-related cases, United Real Estate CEO Dan Duffy told Real Estate News. And what it illuminated, according to Duffy, is that the way industry rules were developed represents "one of the biggest systemic risks we had as an industry."

In April, a group of 15 executives representing about 100,000 agents formed the Pro-Agent Restore Trust in NAR Working Group. Their goal? To compel NAR to address issues they believe have left the organization bloated and self-serving — and continue to put the industry at risk.

In a wide-ranging conversation, Duffy — the group's current spokesperson — discusses the mood of real estate professionals and the importance of fast action.

"We're expecting more from NAR than what they're giving us," Duffy said, adding that rebuilding trust relies not only on promises to do better but on "the actions you're taking."

Here Duffy shares his biggest issues with NAR — and what his group wants to see changed. Responses have been edited for length and clarity.

Agent 'fury' still lingers

Our group is not about the CEOs and their opinions. It is about the tens of thousands of agents who are honestly furious that NAR threw us into that situation where their reputations were harmed and their economic opportunity was put at risk.

NAR didn't defend the industry, and they put us in the situation to begin with. A billion dollars. It was an abject depletion of resources that could otherwise have been directed to delivering better goods and services to customers, better outcomes for buyers and sellers, and more and better programs to improve the efficiencies and the outcomes of agents.

Bring in an independent governing body

When we started digging in, a few things emerged. One was, the self-governing body and the lack of independent directors and governance of NAR was just shocking. It's a risk mitigant to the organization and to the leaders to have independent governance — differences of thought that aren't anchored to years and years of personal relationships and incremental decisions that, in aggregate, can sometimes lead to bad outcomes and systemic risk. 

Let's bring in some truly independent directors — not selected by the leadership team — who come in and do their job on a regular basis, reviewing interim financial statements and holding the leadership team accountable for executing on its mission. That would go a very long way to solving a lot of our concerns.

More financial transparency needed

Over the last decade or two, NAR has created a balance sheet that is unnecessarily frothy. It has a huge balance sheet, and still to this day has incredible reserves. It's super important that the audience start to look at when the 990 tax forms are released. It gets summarized on ProPublica, and all the schedules are in there. 

We don't have the 2024 990 yet — NAR hasn't historically published it until the last available opportunity. It makes you wonder: Why would you wait so long to tell everyone, all of your members, what you did the prior year?

Even if there's nothing controversial in there, it gives the perception of wanting to avoid facing the hard numbers because the members might be upset with certain things in there — including compensation, fringe benefits, international travel and other expenditures.

NAR has made commitments to publish an annual report. But an annual report is different than an audited 990 because it's their take on their financial performance — pluses and minuses, investments, restructuring changes. 

The risk of future litigation

No one is going to go and sue an organization that doesn't have any money. NAR is a target for future litigation in large part because of that huge balance sheet that makes a lot of very smart people scrub every action and every rule and everything you do to ask, "Did you make a mistake, or did you do something with unintended consequences?" 

And now NAR gets drawn in, and the rest of the industry gets drawn in, costing us billions of dollars. Continuing to operate with excess working capital is drawing a bright target on a NAR's back for a year from now, five years from now, 10 years from now.

Spend smarter

NAR has also become bloated in its expenses. This superficial, immaterial restructuring of costs is woefully insufficient. There are numerous areas where substantial tens of millions of dollars could be removed from the operating expenses of NAR without impacting its ability to deliver advocacy and training and education, which are the two core pillars of why NAR exists. 

Our working group very much wants to see a new paradigm as it relates to NAR: One where the agents are excited to pay their annual dues, they know what they get for their money, and they don't feel obligated — or required — to be a member, and they don't throw their hands up in the air and say, "I have no idea what NAR does."