Maryland REALTORS® Online

Revisiting the Three-way Agreement

BY CHUCK KASKY
CEO of Maryland REALTORS® and host of the Association’s podcast, “Get Real Estate,” which is available through any podcast app

As we prepare to confront a new business environment with the implementation of the business practices agreed to by the National Association of REALTORS^® (NAR), Maryland REALTORS^® is committed to helping our members adapt and thrive. We are working tirelessly with all stakeholders, including NAR, Bright MLS, lenders, and appraisers to develop the tools we will need to successfully transact business. Keep on the lookout for new forms, plenty of educational and training opportunities, and collateral.

At the same time, we can’t lose sight of other issues, such as the tumultuous past few months at NAR. As you know, the NAR CEO resigned, the NAR President resigned, as did their successor. The internal culture and toxic workplace environment at NAR garnered lots of attention, and negative stories abounded. Many of us found much to be disappointed about.

While all that was happening, Anywhere, Keller Williams, and RE/MAX settled the class action antitrust case before the verdict was announced. Part of those settlements was an agreement to not require REALTOR^® membership (specifically NAR membership) on the part of licensees affiliated with those companies. After the verdict, NAR and the plaintiffs entered into a proposed settlement. Brokers who were not included in the proposed settlement agreement are understandably upset because they now must dedicate precious resources to evaluate the relative benefits of opting into the settlement against the risks of not doing so and being exposed to potential lawsuits later. For context, brokerages with 2022 total transaction volume for residential home sales in excess of $2 billion who choose to opt into the settlement would be required to pay 0.25 percent of their sales for 2022, which for a company with just over that amount would have to pay $5 million.

On a regular basis, I hear from members who are asking whether NAR membership is worth it, and if there is a way to pay state and local association dues but not NAR dues.

The short answer is no. The long(er) answer is below.

It all has to do with the “Three-way Agreement.” The basic concept is simple. The three-way agreement outlines the rights of the member boards (local and state associations) to grant REALTOR^® status to qualified members and binds the member boards to subscribe to the Code of Ethics, maintain good standing, and regulate the REALTOR^® trademark, among other things.

The Three-way Agreement is more of a concept than a written document, although each state and local association is granted a “charter” by NAR. The idea of the agreement, which establishes the relationships between NAR, state associations and local boards, is embodied in a board’s governing documents, its charter, license agreement to use the NAR trademarks, and other documents that define the inter-activity of NAR, state associations, and local boards.

The term “Three-way Agreement” refers to the structure of the REALTOR^® organization. This agreement was established among NAR, the state associations and local boards and associations. In our charters, the state associations and local boards and associations agree to:

• Accept the charge of properly granting and regulating the use of the terms “REALTOR^®”
• Subscribe to the NAR Code of Ethics, and
• Uphold and enforce the Code of Ethics within the board’s/association’s jurisdiction.

Also, each local board agrees to maintain membership, in good standing, in the state association of the state in which the board is located.

In other words, the REALTOR^® organizations are a federation of organizations and this structure allows the REALTOR^® organizations to use their combined resources (both human and financial) and influence to have a unified, powerful voice in shaping public policy, set recognized standards for ethical real estate practice, and contribute to the advancement of the real estate industry.

The state association integrates the work of local, state, and national bodies and act as a link between NAR and its member associations. The local association of REALTORS^® is most visible and best known to the public and our members. Most of the products and services members rely upon every day are delivered by our local boards/associations.

But what about dues? Under NAR’s rules, firms, not individual members, are assessed dues based on how many salespersons/associate brokers are affiliated with the company. Even though it is customary for local associations to bill agents directly, the brokerage is ultimately responsible for payment. This is NAR’s longstanding policy.

This policy is articulated in Article II “ANNUAL DUES,” Section 1 of the NAR Bylaws:

“The annual dues of each Member Board (local Board) as defined in Article III, Section 1(B)(1) of the Constitution, shall be in an amount established annually by the Board of Directors… times the sum of the number of REALTOR^®… members of the Board and the number of individuals who are licensed with such REALTOR^® members of the Board…”

All local associations have adopted this membership formula in their bylaws. Dues are assessed to each principal in a firm based on the number of real estate licensees employed by or affiliated with the firm. The firm receives credit for each agent who is a REALTOR^® member. Under the consolidated dues structure, there is currently no way to be a REALTOR^® member of less than all three levels of REALTOR^® associations.

Admittedly, there are good reasons to be upset with what’s happening in our industry, and it’s natural to look for someone to blame when things aren’t going according to plan. But we should all focus on what lies ahead, not what’s already a done deal. We don’t know all the specifics of the trial or the settlement negotiations, but we should be prepared to give the benefit of the doubt when we can and prepare for the future and all its uncertainty. Rest assured: NAR, Maryland REALTORS^® and our local associations will be here to support you in the coming weeks, months, and years.