Redfin put the real estate industry on notice Monday morning, announcing that it will require agents to cancel their National Association of Realtors membership where possible.

While Redfin’s news certainly surprised the industry and seemingly drew a line in the sand, Joe Rath, the firm’s head of industry relations, said the decision was a long time coming.

“We started this process back in June when I resigned our NAR board seat, which are appointed to the top 50 brokerages in the country,” Rath told HousingWire in an interview Tuesday. “That is really when we started the process of evaluating where we can drop memberships for our agents. There is a lot of unwinding to do there.”

Rath cited the same two reasons for the decision as Redfin executives highlighted in their open letter: “NAR policies requiring a fee for the buyer’s agent on every listing” and “a pattern of alleged sexual harassment.” 

“The through line between both of these subjects was really that NAR is antithetical to our mission and who we are as a real estate company,” Rath said. “We exist to give customers a better deal and we aim to be real estate’s best employers, so really at that point, it is like Glenn said, ‘Enough is enough’ and that is why we actually took action this week.”

In response to Redfin’s letter, NAR’s Vice President of Communications Mantill Williams told HousingWire that Redfin had informed NAR of their decision to leave the trade group and that NAR “respects their choice to do so.”

“The U.S. model of local MLS broker marketplaces has long been — and still is — considered the best value in the world. NAR stands by its pro-consumer, pro-competitive guidance for affiliated local broker marketplaces that ensure equity, efficiency, transparency and market-driven pricing options for home buyers and sellers,” Williams wrote in an email. “Agent compensation is set between brokers and their clients and has always been negotiable at any point in the transaction.”

So far, Rath said the response from the industry to Redfin’s choice has been respectful.

“I am at an MLS conference this week and I was thinking I might be that kid sitting alone in the school cafeteria, but as it turns out, this is something that other industry folks are excited to talk about,” Rath said. “One thing we want is for the MLSs to be allowed to make their own decisions and not be bound by national rules set by a trade organization.”

MLS ‘decoupling’ from Realtor associations is a thorny issue

Redfin’s desire for a world in which Realtor organizations and the MLSs “decouple” may not be as simple as it seems.

According to industry analyst Rob Hahn, NAR has won all but one lawsuit requiring Realtor association membership for MLS access. Following the loss of the Thompson suit, NAR changed its policy, eliminating the requirement that participants in Realtor-association MLSs must be Realtor members. 

As a result of this policy change, MLSs can choose whether non-NAR members may or may not be allowed to participate in the MLS.

“In short, NAR’s response to Redfin will be (and should be), ‘We already did that.’ NAR has already decoupled MLS access from REALTOR membership. Requiring REALTOR membership is an optional rule,” Hahn wrote in the Oct. 2 edition of his Notorious ROB email newsletter. “Accordingly, I think Redfin will be told to go lobby hundreds of local MLSs to remove the REALTOR-only requirement. Which … will be met with … shall we say resistance?”

Hahn concedes that it’s possible a local Realtor association will allow Redfin and its agents to join an MLS despite not being Realtor members. However, it would mean a major loss in dues for the local Realtor association.

“In fact, most regional MLSs I know of use a ‘wholesale-retail’ model in which the MLS actually sells its services to the local Association, and the only way to purchase MLS subscriptions is through the local Association,” Hahn wrote. “They’re all going to give that up? Maybe. I doubt it, but maybe.”

Redfin’s public divorce from NAR sets stage for future battles

Due to this, Hahn believes Redfin’s choice is more symbolic than anything else. But when coupled with the Anywhere and RE/MAX buyer-broker commission lawsuit settlement agreements, which many believe include a provision no longer requiring Realtor membership for brokerages or agents, Hahn says this could be the start of something more.

“Redfin’s decision and letter is the first move in a longer conflict. It sets the stage, as it were, for bigger and more important battles ahead involving far more than just Redfin,” Hahn wrote.

He continued: “It gives permission to other brokerages — including those who will be subject to a settlement agreement with money-hungry lawyers — to think about NAR in a very different way. In a real way, symbolism can be important. Redfin is like the child who noticed that the emperor has no clothes … and said so. That’s symbolic too, but boy, did those words matter. Sometimes, noticing and speaking are revolutionary acts.”

Steve Murray, the co-founder of RealTrends Consulting, shares a similar sentiment.

“There is likely to be some other certain brokers in certain markets who are going to drop their membership now,” Murray said. “I don’t know how widespread that will be, but it is significant — it’s a crack in the wall. It is just the beginning, and we don’t know how far it will go.”

As for right now, Rath said Redfin is continuing to explore its path to leaving NAR, while still ensuring agents have access to all the tools they need to do their jobs.

“We feel pretty confident that we can get out of about half of our top-20 markets by the end of this year,” Rath said.

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