What Is the National Association of Realtors?
The National Association of Realtors (NAR) is the largest trade association in the United States, representing professionals involved in the real estate industry. As a real estate professional organization, it advocates for its members, influences public policy, and sets professional standards within the housing and commercial property sectors. The National Association of Realtors includes residential and commercial real estate brokers, salespeople, property managers, appraisers, and counselors33. Its mission is to empower its members, promote homeownership, and advance the right to real property for all31, 32.
History and Origin
The National Association of Realtors was founded on May 12, 1908, in Chicago, Illinois, originally named the National Association of Real Estate Exchanges30. With 120 founding members, its initial objective was "to unite the real estate men of America for the purpose of effectively exerting a combined influence upon matters affecting real estate interests"29. The organization changed its name several times, adopting "The National Association of Real Estate Boards" (NAREB) in 1916, and eventually becoming the National Association of Realtors (NAR) in 197228. A significant milestone in its history was the adoption of its Code of Ethics in 1913, which aimed to establish principles for the burgeoning real estate profession before comprehensive licensing laws existed27.
Historically, NAR faced criticism for its role in upholding discriminatory housing practices. A clause in its Code of Ethics that encouraged segregation was not fully removed until 1974. The organization also opposed the Fair Housing Act of 1968, a landmark piece of legislation that outlawed racial discrimination in home sales26.
Key Takeaways
- The National Association of Realtors (NAR) is the largest trade association for real estate professionals in the U.S.
- It establishes a Code of Ethics and provides professional development opportunities for its members.
- NAR plays a significant role in advocating for policies that affect the housing market and property rights.
- The organization maintains and influences the Multiple Listing Service (MLS) systems used by its members.
- Recent legal settlements have led to changes in real estate commission structures, impacting how agents are compensated25.
Interpreting the National Association of Realtors
The National Association of Realtors serves as a central authority and advocate for real estate professionals, impacting the industry through its standards, data, and lobbying efforts. Understanding its role involves recognizing its influence on market practices, member conduct, and legislative developments. The NAR's ongoing collection and dissemination of housing market statistics provide valuable insights into housing trends, sales data, and affordability, which are closely watched by analysts, policymakers, and consumers alike23, 24.
Hypothetical Example
Imagine Sarah, a new real estate agent, is looking to establish her career. To gain access to the most comprehensive property listings and enhance her credibility, she decides to join her local real estate board, which requires membership in her state association and the National Association of Realtors. Through NAR, she gains access to the Multiple Listing Service, a critical tool for identifying properties for her clients. She also benefits from NAR's extensive professional development courses, helping her understand complex real estate transactions and market dynamics. This membership allows her to network with experienced professionals and leverage the association's advocacy for policies that support the real estate industry.
Practical Applications
The National Association of Realtors impacts various aspects of the real estate and financial landscapes:
- Market Data and Research: NAR publishes extensive data on existing home sales, median home prices, and housing inventory, which are crucial for market analysis and forecasting by economists and investors21, 22. This information helps in assessing overall financial security tied to real estate.
- Lobbying and Advocacy: The organization is a significant lobbying force in Washington D.C., advocating for legislation and policies that affect homeownership, property rights, and the real estate industry broadly20.
- Professional Standards: NAR's Code of Ethics and Standards of Practice aim to ensure ethical conduct among its members, providing a framework for professional behavior in real estate transactions18, 19.
- MLS System: NAR plays a crucial role in the operation and regulation of Multiple Listing Service (MLS) systems across the country, which are essential tools for agents to list and find properties.
- Legal Landscape: Recent antitrust lawsuits against NAR have resulted in significant changes to long-standing commission rules, potentially reshaping how real estate agents are compensated and impacting buyer and seller costs16, 17. These changes, which include prohibiting listing brokers from offering compensation to buyer brokers on the MLS, went into effect in August 202415.
Limitations and Criticisms
Despite its prominent role, the National Association of Realtors has faced criticism and legal challenges, primarily concerning its rules and their impact on competition and consumer costs.
One significant area of critique has been its historical practices related to antitrust laws. For decades, NAR's rules, particularly those governing agent commissions and access to the Multiple Listing Service, have been challenged as anticompetitive. These challenges culminated in landmark class-action lawsuits that alleged NAR conspired to inflate real estate commissions13, 14. In March 2024, NAR agreed to a $418 million settlement, which included substantial changes to its rules, such as eliminating the requirement for listing brokers to offer compensation to buyer brokers through the MLS11, 12. This settlement is expected to lead to lower real estate commissions and may impact agent employment.
Furthermore, NAR has faced scrutiny for its mandatory membership requirements. Agents often need to join local, state, and national associations to gain access to essential MLS services, which critics argue can constitute an unlawful tying arrangement, limiting competition and imposing financial burdens9, 10. The U.S. Justice Department has also withdrawn from previous settlements with NAR to pursue broader investigations into the organization's rules and conduct, indicating ongoing governmental interest in ensuring market competition8.
National Association of Realtors vs. Real Estate Broker
The terms "National Association of Realtors" and "Real Estate Broker" refer to distinct entities within the real estate sector. The National Association of Realtors is a professional trade organization that serves as an umbrella body for individuals working in the real estate industry. Its membership includes real estate brokers, agents, appraisers, and other professionals. It sets standards, provides resources, and advocates for the industry.
In contrast, a real estate broker is an individual licensed to negotiate and arrange real estate transactions, typically for a commission. Brokers often own their own brokerage firms and oversee real estate agents. While a broker can operate independently, many choose to become members of the National Association of Realtors to gain access to benefits like the Multiple Listing Service, adhere to a shared Code of Ethics, and participate in the industry's broader professional community. Thus, while a broker is a practitioner in the field, NAR is the organization that many brokers and agents choose to join for professional affiliation and industry support.
FAQs
What does the National Association of Realtors do?
The National Association of Realtors (NAR) serves as a trade association that advocates for the real estate industry, sets ethical standards through its Code of Ethics, provides professional development opportunities, and compiles valuable housing market data. It represents its members' interests in policy-making and promotes homeownership and property rights6, 7.
Who can become a member of the National Association of Realtors?
Membership in the National Association of Realtors is open to licensed real estate brokers, salespeople, property managers, appraisers, and other professionals involved in all aspects of the real estate industry5. Members typically join through their local and state real estate associations4.
What is the significance of the "Realtor" trademark?
The term "REALTOR®" is a registered trademark of the National Association of Realtors. It identifies real estate professionals who are members of NAR and subscribe to its strict Code of Ethics. This trademark differentiates NAR members from other licensed real estate agents or brokers who are not affiliated with the association.3
How does NAR impact real estate commissions?
Historically, NAR's rules, particularly the "cooperative compensation rule" within the Multiple Listing Service, influenced how real estate commissions were paid.2 However, as a result of recent antitrust lawsuits and a settlement reached in March 2024, NAR is implementing rule changes that prohibit the listing broker from offering compensation to the buyer's agent on the MLS. This change, effective August 2024, allows for greater negotiation of agent compensation and may lead to changes in commission structures.1