MLS Choice and the NAR Three-Way Agreement

Three-Way Agreement

When will we see an end to these escalating federal and state antitrust complaints being filed attacking the NAR policy on Three-Way Agreements? There already are related legal filings in Michigan, Alabama, Phoenix, Louisiana, Pennsylvania(2), California, and Texas, some of them copycat cases, at least four of which are drafted and filed in federal court by individual plaintiffs “Pro Se” (without an attorney for $405).

Looking into the MLS Choice policy

Before we look into the rapid increase in legal filings focused on NAR’s Three-Way Agreement policy that are covered in published articles cited below, let’s closely examine the pivotal issues raised by the Phoenix Association of REALTORS® (PAR) recent challenge to NAR’s Three-Way Agreement under PAR’s recently launched MLS Choice policy. It appears that both the NAR and PAR have ‘dug in their heels’ over their respective positions on the key issues of their dispute.

The central disagreement regarding PAR’s MLS Choice is whether it is a PAR membership program (NAR’s position) or a non-member subscription service for selected agents of PAR brokers (PAR’s position). That’s when the parties have laced up their boxing gloves ready to duke it out in an internal dispute over the NAR policy on the Three-Way Agreement.

And, regardless of the winning position, the next issue becomes what is the alternative resolution that could have major implications spreading throughout the real estate industry on strategic policy decisions affecting membership number counts and annual dues revenue. It is evident that we are poised on the brink of dramatic big changes in the wings.– a paradigm change in the fundamental way real estate is practiced.

Is there an easy resolution to this dispute? If we had the answer, this article would be much shorter. Instead, we’re going to load you up with lots of collateral material to educate you on the issues and the impact of any resolution or compromise. After absorbing this material, you will have to come up with your own opinion what is a better fit for you: the Three-Way Agreement or MLS Choice.

So, the combatants are in the boxing ring. In this corner, we have the position of the Phoenix Association of REALTORS®:

  • MLS Choice is a unique offering to brokers in which PAR brokers can consider giving their agents a choice. What’s the choice? In essence, for the first time, PAR brokers can offer their agents the opportunity to access both the MLS and local legal forms, along with a number of existing benefits (like free CE, broker legal hotline, market stats). And — here’s the key — all of these benefits can be offered to agents outside of the traditional 3-tier membership system with local, state and national associations — for an annual price of $249 (versus the traditional 3-way REALTOR®membership of $511 that is collected at the local association level and distributed to the state and NAR respectively).
  • MLS Choice is best described by PAR in its website (read all FAQs and Chart). https://www.phoenixrealtors.com/main/mls-choice/ with this notice to PAR brokers: “Your Business. Your Choice.  We’re proud to introduce MLS Choice, a modernized offering for our brokers to consider. Brokers can make the choice to give their agents a choice. Anyone switching to MLS Choice in your office will become MLS Choice on January 1, 2025: This allows you and the agents in your office time to train on navigating the new forms while you still have access to your current forms.
    You paid for the year in dues, so we want to make sure you get the full year out of it before switching to the lower dues fee.”
  • The notice reads further: Real estate professionals need different levels of support to succeed, and we believe that having a choice is important. Moreover, due to recent brokerage settlements related to the Sitzer/Burnett case which removed the requirement for brokerages to be a member of NAR, we have updated what was previously our MLS Only option to adapt to the new ways brokers may want to do business. We believe that the real estate landscape is evolving, and we want to continue to evolve with it. Our website is designed with a helpful FAQs and Comparison Chart. We encourage you to educate yourself as much as possible about MLS Choice to determine if it’s the right fit for you and the agents in your office.
  • MLS Choice FAQ for Brokers — read the Questions and Answers to help inform you. Covering : How is MLS Choice Even Possible?; Is MLS Choice the Same as Being a REALTOR®?; Can I Offer Both MLS Choice and REALTOR® Membership in My Brokerage?; What Forms Will MLS Choice Agents Use?; What Other Benefits Do MLS Choice Agents Get?; What Does MLS Choice Cost? 
  • Comparison Chart for Brokers: What’s Included? The chart illustrates what a traditional REALTOR® member receives with their membership, which includes the local, state and national associations, versus what’s included for MLS Choice real estate professionals. Please review the benefits of each to help you choose which best fits your business. Local Benefits: Included in Traditional REALTOR® Membership and MLS Choice Professional ARMLS Access. The chart compares the fees and the following benefits: Advocacy; Business Discounts – same for PAR and MLS Choice; Professional Tools – same for PAR and MLS Choice; Education – same for PAR and MLS Choice.
  • A Comprehensive Guide to Your Local Benefits — https://www.phoenixrealtors.com/index.php?src=gendocs&srctype=detail&id=104

AND, in this corner, we have the position of the National Association of REALTORS®:

NAR supports 3-way agreement  —  In a speech with the NAR board of directors, the current CEO Nykia Wright  “doubled down on NAR’s governance, particularly its so-called “three-way agreement.“  Some of you have heard rumblings of the challenging of the three-way agreement,” she said. “Well, we are here to make sure that those rumblings subside because it is our duty to make sure that people understand what happens at the local level, the state level and the national level, and really make sure that people understand that there isn’t a cannibalization of services, but it really is working together … to make things work.” Subscription based Source: — https://www.inman.com/2024/11/11/nar-ceo-signals-support-for-3-way-agreement-amid-realtor-pushback/

NAR position:  https://www.nar.realtor/about-nar/policies/the-three-way-agreement      In the simplest of terms, the federated structure allows the REALTOR® organization to use its 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 betterment of the real estate industry.

The Three-Way Agreement & Dues Policies from the 2023 NAR FAQs

Q: What is the Three-Way agreement? A: The term “Three-Way Agreement” is the foundation of the REALTOR®organization, established among the national, state, and local associations. This agreement grants state and local associations the authority to control the term “REALTOR®” and “REALTOR-ASSOCIATE®.” In exchange, state and local associations must adhere to the Code of Ethics of NAR, enforce the Code of Ethics within their jurisdiction, and properly grant and regulate the use of the terms “REALTOR® and REALTOR-ASSOCIATE®.” The Three-Way Agreement means that local associations and their REALTOR® members are members of the state association of their local board and NAR.

Q: Why is the Three-Way Agreement in place? A: The Three-Way Agreement has been in place for more than 100 years and empowers the REALTOR® organization to use its combined resources and influence to have a unified, powerful voice in shaping public policy, setting recognized standards for ethical real estate practice, and contributing to the betterment of the real estate industry. This federated structure fosters unity and allows for a coordinated, collaborative approach on achieving our collective mission of protecting, preserving, and advancing property rights for all.

Q: Is it possible to only pay local and state dues and not NAR dues? A: The word REALTOR®means a member of the National Association of REALTORS®. Therefore, all REALTORS® belong to the National Association of REALTORS® and agree to abide by our Code of Ethics. In order to maintain REALTOR® membership, members must pay local, state, and national association dues and assessments. There is no ability to bifurcate membership between local, state, or national associations.

Q: I see that other brokerages are no longer requiring their agents to be members of NAR. How do I implement this change at my brokerage? A: The decision to require agents to be members of NAR has always been at the discretion of the broker. NAR cannot and does not require brokers to mandate membership in the REALTOR® organization.

Q: Are there any REALTOR® association that I can join that don’t require me to belong to NAR? A: The term REALTOR® is a registered trademark of the National Association of REALTORS® and only local and state associations enforcing NAR’s trademark, membership qualifications, and Code of Ethics are considered REALTOR® associations. All local and state REALTOR® association members are members of the National Association of REALTORS®.

Q: I’ve heard that certain brokerages like RE/MAX and Anywhere Real Estate Inc., are severing ties with NAR. What does that mean? A: The brokerages you’re referencing did not announce that they are severing ties with NAR. You could be referring to the recent settlement agreements that RE/MAX and Anywhere Real Estate, Inc. reached with the Plaintiffs in the lawsuit Burnett et. al v. National Association of REALTORS® et.al. In that proposed settlement, those companies agreed to remove the membership requirement from their franchisor agreements, thus leaving the decision to belong to NAR to each of their independent franchisees. If these independent brokerages find value in belonging to the local, state, or national association, then they will continue to belong.

Q: What value does NAR membership provide? A: NAR is the unrivaled advocate and resource in the real estate market for its members and their clients, and only NAR members can call themselves REALTORS®. NAR delivers value in the following ways: – Advocacy – Ethics and Professionalism – Learning Opportunities and Resources – Recognized REALTOR® Brand and Consumer Awareness – Unmatched Networking Opportunities – Community Outreach – Innovative Technology Tools and Resources – Leading Economic, Research, and National Property Data – Legal and Risk Management Support.

Q: What benefits will I lose if I no longer belong to NAR?  A: NAR membership includes robust benefits such as exclusive access to health, dental, and vision insurance, as well as savings on auto, home, and renters’ insurance. In addition to member discount programs, NAR offers business and marketing services, and unparalleled opportunities for learning through designation and certification programs. It’s important to remember that you will also lose the ability to use the term REALTOR®, and the distinction that is associated with it. For more information on all the many benefits of membership in NAR, please visit: https://www.nar.realtor/realtor-benefits-program.

Q: How does MLS access factor into my REALTOR® membership? A: Many local REALTOR® associations own or operate an MLS. MLS participation is optional and criteria for participation is determined at the local level. Some local associations provide their MLS services only to REALTOR® members and some local associations provide their MLS services to non-members as well. We recommend checking with your MLS to verify participation requirements.

Q: Can I subscribe to the MLS without REALTOR® membership? A: MLS participation is determined at the local level. Some local associations provide their MLS services only to REALTOR® members and some local associations provide their MLS services to non-members as well. We recommend checking with your MLS to verify participation requirements.

The internal dispute has now turned public so let’s hear from some external sources:

Saul Klein offered his historical perspective on the Three-Way Agreement during a recent  ‘The Update’ podcast at Saul podcast especially Minutes 2:30 to 6:30. In addition to the Three Way Agreement itself, Saul examined the impact of the Broker Dues Formula on revenues, and the potential decrease in the number of REALTORS®. Like California, Arizona is a state where licensee non-members can access MLS (MLS Only).  He noted that about half of the licensees with access to the MLS do not make any sales. He also mentioned  the possible scrutiny of the Department of Justice to explore any improper “tying arrangement.”

Housing Wire reporter Brooklee Han penned this article on NAR’s  quick response to PAR with a cease and desist letter to PAR and considering a charter revocation process.

  •  As reported in Housing Wire, NAR steps up the battle against Phoenix Realtors NAR is looking to revoke PAR’s charter after the local trade group refused to end its MLS Choice membership program – NAR is looking to revoke PAR’s charter after the local trade group refused to end its MLS Choice membership program. In response to a question about its decision to begin the revocation process, a NAR spokesperson wrote in an email that per their charters, state and local associations are prohibited from adopting any practice inconsistent with NAR’s bylaws and Constitution.
  • NAR stated that “Phoenix Realtors is violating NAR’s bylaws and Constitution by offering a non-Realtor membership option. Without action, we put the benefits NAR members rely on—such as market research, business resources, a unified advocacy platform, and a single Code of Ethics—and the organization itself at risk,” the spokesperson wrote. “NAR has begun the process—as outlined in our bylaws—to revoke Phoenix Realtors’ charter. As a next step, Phoenix Realtors will have an opportunity to meet and discuss with a panel of NAR’s Executive Committee. Should the local association continue to violate NAR policy, a hearing before a larger panel of our Executive Committee will be scheduled.”
  • In an emailed statement, the CEO and President of PAR’s public relations firm Andrea Aker called NAR’s decision “a disservice to the industry.”
  • “We’ve been transparent from the beginning that the MLS Choice subscription is a scaled-down option of non-membership for real estate professionals to consider. It allows them to ask the question, ‘What level of programs and services do I actually need to be successful?’ And anyone serving real estate professionals should stand in support of that: creating the ideal environment for success,” Aker wrote. “A ‘one-size-fits-all’ approach does nothing to spur this industry forward, something that desperately needs to happen.” Aker said PAR is committed to Realtors and evolving alongside the changing industry, but she does not feel that NAR shares the same conviction.    Note: following cartoon is submitted by TDA editor:
  • “NAR has clearly committed to hampering innovation,” she wrote.
  • “We are prepared to continue defending the necessity of subscription options like MLS Choice, and we stand behind all of the professionals we serve,” Aker added.

As sourced from Real Estate News, https://www.scottsdalerealtors.org/2024/12/20/nar-hits-phoenix-realtors-with-cease-and-desist/  —  In an email sent Dec.18 by NAR to its board of directors, association leaders and others, NAR General Counsel Lesley Muchow said it was taking “necessary action” to defend its three-way agreement, which requires Realtors® to join local, state and national associations, and to enforce the NAR constitution and bylaws. The National Association of Realtors® has sent a cease and desist letter to Phoenix Realtors®, saying that the association’s new MLS Choice option “purports to allow real estate licensees to become members of PAR without becoming a member of the Arizona Association of Realtors® or NAR. ”The site distinguishes MLS Choice from association membership, stating that real estate professionals who choose it cannot call themselves “Realtors®” and will lose access to association benefits.  The Phoenix Realtors®site describes MLS Choice as a way for brokers to “offer their agents the opportunity to access both the MLS and legal forms, along with several existing benefits, outside of the traditional three-tier membership system.”  Source: subscription based Real Estate News https://www.realestatenews.com/2024/12/19/nar-hits-phoenix-realtors-with-cease-and-desist-over-mls-choice  

Inman Articles (subscription based)

More Inman coverage at https://www.inman.com/2024/12/24/phoenix-realtors-to-nar-we-will-not-withdraw-mls-choice/

From noted industry commentator Rob Hahn of the Notorious POD: Wargaming the PAR vs. NAR Battle (12/24/24). Note:  If you like well-researched curated real estate industry and lawsuit commentary, see the Notorious ROB subscription.

PAR’s CEO Andy Fegley said: ”NAR has clearly committed to ‘hampering innovation’ “ We are prepared to continue defending the necessity of subscription options like MLS Choice, and we stand behind all the professionals we serve. We are committed to realtors and evolving alongside a changing industry, but NAR has clearly committed to hampering innovations.

  • PAR is upset that NAR notified agents of the option to choose another association; it talks specifically about informing current Phoenix realtor members,  that they could join a different association, like say Scottsdale or something else, and maintain their realtor status. Phoenix is saying, you’re trying to take our members away, you know, cut that out. And then I do love this section where PAR seeks an amicable resolution.  And this is what got Phoenix real mad, because my assumption is phone calls, emails, whatever went out to the members saying, hey, Phoenix is not being loyal, so you should leave Phoenix and join Scottsdale,
  • So this is what MLS Choice, according to their own words, is. They say outright MLS choice is not membership in Phoenix associate realtors. They’re not realtors. So here it is right here. Is MLS choice the same as being a realtor? No, real estate professionals who make the decision to go MLS choice may not call themselves realtors.
  • It’s a constitutional issue to join one of the other local associations, right? Okay. So the first question to be asked, the real conflict here is this versus NAR’’s position, Phoenix’s position, right? Phoenix’s position is MLS choice is not membership; it’s a subscription.. And NAR’s position is MLS choice is membership. And that’s going to be, I would assume, where the fight really takes place.
  • PAR’s position is that MLS Choice is not membership, versus NAR position that it is membership in PAR (and NAR is considering initiating the charter revocation process). They’re going to get about 1100 local associations that go, Hey, guess what? We’re doing an MLS choice program, exactly like Phoenix.
  • PAR recognizes that a number of franchises or brokerages will be having agents drop out of NAR so why not offer to agents some benefits to access our MLS and other benefits/services. These are PAR forms, not state forms
  • Rob feels PAR may lose its argument that it is a subscription service not a membership in PAR because MLS Choice maintains most of the benefits PAR offers members. Looks like a Duck and Quacks like a Duck.
  • Raises the issue of enforcement, what if PAR resigns; what does NAR do next?
  • What are the most essential tools for agents? MLS access; (local) forms; maybe lockbox. Really not free continuing education, legal hotline, store, free stats.
  • Is compromise a solution? Rob recommends that NAR come up with carrots and not sticks to resolve the issue. It isn’t as if NAR could forgive the current leadership at Phoenix for what they’ve done. Like, what they’ve done is, it’s a challenge to one of the most hallowed, sacrosanct, structural things in NAR.
  • What’s more likely to me is that Phoenix would be able to go to Scottsdale and take their members, right? Tell Scottsdale agents to just leave and like join Phoenix Association, you get access to ARMLS, you get access to forms, you get access to lockbox, you get access to things you need in order to be successful in your business.

More external commentary

  • The three-way agreement that helped NAR grow has also imposed a three-tier membership structure that may no longer serve members’ best interests. Sunsetting this agreement would allow associations at all three levels to tailor their value propositions to better meet member needs.
  • Agents are required to join all three tiers, even if they find little value in one or more levels. This requirement leads to additional membership fees, as agents must pay dues to all three levels, which can be burdensome for smaller brokerages or individual agents.
  • Allowing professionals to choose their affiliations offers several key benefits: Freedom of Choice, Accountability and Quality, Cost Efficiency, and Encouraging Competition: Voluntary membership encourages competition between associations, leading to improved offerings, more focused services, and a wider range of choices for professionals.
  • Approximately 35 percent of local Realtor associations have fewer than 200 members, with some micro-associations consisting of as few as 10 members. Small, micro-associations should be integrated into larger, more effective local associations.
  • The industry is crowded with second career and part-time agents who often adopt a short-term, transactional approach, with limited consideration to long-term growth and innovation. The real estate industry must recruit more full-time, dedicated talent at scale, deliberately shifting toward a new workforce composed of fewer, but more career-focused agents and brokers. It is time to evolve past the current salesperson mentality to that of professional advisor. This focus will not only attract higher-caliber individuals, it will help eliminate many of the inefficiencies and the operational waste currently plaguing the industry. We’re going to see a separation of the herd— people who adapt to the new rules will thrive, while those who can’t let go of the past, will struggle.
  •  Decoupling MLSs from Realtor association is seen as the most effective path forward, allowing MLSs to operate without the constraints of association politics. Associations should focus on their core missions—ethics, political advocacy, and education—while MLSs should concentrate on providing extensive, data-driven value to brokers and agents.
  • To stay relevant, MLS organizations should be fully enabled to develop strategies that address shifting market demands and competitive innovation.
  • If we don’t separate MLS and associations, the FTC or DOJ might do it for us.

Consequential Impact of the NAR “Designated REALTOR® Dues Formula”

https://www.nar.realtor/ae/manage-your-association/the-realtor-s-dues-formula-a-fair-share  — also known as the Broker Dues Formula, a rule that has been in place for decades.

  • The Designated REALTOR® (DR) pays personal dues plus Membership benefits and services received by the REALTOR® which are proportional to the number of such persons affiliated with the REALTOR® who benefit from his REALTOR® membership and its benefits and services, but do not personally hold membership and pay no dues. The DR pays a base amount plus an assessment for each non-member licensee in the firm, receiving a credit for each licensee who chooses to become a REALTOR® and pay dues individually.

So, if PAR is successful in the fight for the subscription model, there will be no requirement for the DR to pay dues for any of the licensed non-members affiliated with the broker’s office. That would be a big hit suffered by the state and national associations. Think about the drop of members and the loss of revenue.

And, if NAR is successful in its fight for the membership model thus requiring the DR to pay for the non-members in the office, it would be a setback for the MLS Choice model.

If PAR and NAR cannot reach a compromise, what is next?

Well, NAR could pursue the Charter Revocation process by sending an executive team to Phoenix to make its membership case and seek to win over the members. If that fails, then the next step might be the uncharted waters of a lawsuit. Or, PAR might decide to resign its territorial charter pursuant to NAR bylaws which would require  a difficult to obtain majority of the PAR membership.

FINAL THOUGHTS

While we’ll be looking at the increasing number of lawsuits centering around the Three-Way Agreement issue, it is worth keeping a close eye on the reaction of local associations to challenges voiced by some of its members to reduce the costs for services they don’t consider essential to their business.

The trend of the challenges to the 3-way agreement will likely have a major impact throughout the entire real estate industry. As to what we mean by the extensive structure and reach of the real estate industry, check out this 20 minute video on The DataAdvocate

 

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John Reilly

Real Estate Attorney, Educator, Author of Language of Real Estate 8th Ed; Hamilton College, Fordham Law; Past Pres of Real Estate Educators Assn

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2 Responses

  2. Flashing News today! Updated April 8, 2025
    Roger P.Alford now working for the DOJ! — Certainly no fan of NAR and its policies.

    https://www.justice.gov/atr/staff-profile/roger-alford-principal-deputy-assistant-attorney-general
    Roger Alford will serve as Principal Deputy Assistant Attorney General. Mr. Alford previously served in the first Trump Administration as Deputy Assistant Attorney General in the Antitrust Division. Prior to returning to the division, he was a tenured Professor of Law at the University of Notre Dame Law School for nearly thirteen years. During that time, he also consulted on antitrust matters, including as an expert witness in the landmark 2023 real estate $1.8 billion litigation against the National Association of Realtors, and since 2019 consulting for Texas Attorney General Ken Paxton in Texas v. Google. He served as a law clerk to Judge James Buckley of the United States Court of Appeals for the D.C. Circuit, and Judge Richard Allison of the Iran- United States Claims Tribunal in The Hague, Netherlands. He also practiced law with Hogan Lovells in Washington, D.C. and was a Senior Legal Advisor to the Claims Resolution Tribunal for Dormant Activities in Zurich, Switzerland.
    He earned his B.A. with Honors from Baylor University in 1985, his M.Div. from Southern Baptist Theological Seminary, his J.D. with Honors from New York University, and his LL.M., first in class, from Edinburgh University.

    Reply

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