The National Association of REALTORS® (NAR) is the largest trade association in the United States. As of 2019, there are over 1.3 million dues-paying members of NAR.
NAR coined the term “REALTOR®”, which is a registered trademark. You must be a member of NAR to call yourself a REALTOR®.
What is a trade association
A trade association, also called a business association or industry trade group, is a 501 C (6) organization. The primary purpose of a trade association is lobbying for public policy. Other examples of well-known trade associations include the American Bar Association, US Chamber of Commerce, and National Home Builders Association.
Associations such as the National Association of REALTORS® offer services to their members:
- Newsletters, magazines, or blogs
- Education and classes
- Networking opportunities
Additionally, associations participate and fundraise for Political Action Committees (PACs). They also create and distribute ads to improve industry image. NAR’s REALTOR® PAC (RPAC) is one of the top 20 largest PACs.
NAR’s ‘Three-Way Agreement’
Most NAR members are licensed real estate agents. Any real estate agent who is a member of the National Association of REALTORS® is also a member of their state and local board of REALTORS®. To become a REALTOR®, a real estate licensee must join all three associations: local, state, and national. NAR refers to this as the three-way agreement.
Each level of the REALTOR® association – national, state, and local – charges membership dues. It is not possible to only join one level as a real estate agent.
The ‘NAR Dues Formula’
Real estate agents join NAR when their employing company (real estate brokerage) is a Member Firm. To join NAR as a Member Firm, the company selects one person to serve as Designated REALTOR® (DR). This is usually the designated broker.
NAR rules state, once a company joins NAR as a Member Firm, they owe dues for all of their licensed real estate agents. This is the NAR Dues Formula.
NAR explains the Dues Formula this way:
Dues obligation to NAR is calculated using the Designated REALTOR® (“DR”) dues formula. Under the dues formula, the DR pays a total dues obligation based on number of licensees in the firm, but gets a credit against the amount due for each individual licensee who chooses to individually hold REALTOR® membership. The licensees that choose to hold REALTOR® membership pay their dues individually to the association.NATIONAL ASSOCIATION OF REALTORS®
The DR (broker) is forced to pay annual NAR dues for their agents, or require their agents to pay NAR dues themselves. The only exception to the NAR Dues Formula is ”Limited Function Referral Only” (LFRO) companies.
History of the NAR Dues Formula
The NAR Dues Formula was created in November 1972. According to NAR, the goal is to “ease the dues burden of REALTORS® having small offices”. At the time, the Dues Formula resulted in dues for a Designated REALTOR® of $30 a year, plus an additional $12 per licensee at their office.
When first implemented, there were 100,000 real estate licensees at NAR Member Firms who were not REALTORS®. In the first year, NAR would collect an additional $1,200,000 from the change in the dues formula. Adjusted for inflation, that would be over $7,000,000 in today’s dollars.
According to NAR, $12 per licensee was an acceptable per-agent dues rate, even for non-producing agents, because “the amount of the dues… was deemed so nominal as to be reasonable in the case of the most marginal salesperson.”
The ‘nominal dues’ of $12, would be $73 today (adjusted for inflation). Yet the true amount of dues today is over $500. Dues for NAR are $185 per year, plus an additional $200 – $900 per year for the state and local associations.
Enforcing the REALTOR® Dues Formula
It is the responsibility of the local boards to collect dues for all 3 levels of the REALTOR® organization: local, state, and NAR. This occurs in one annual dues notice, often in December.
NAR requires the local boards to abide by the dues formula. NAR provides a “dues formula enforcement toolkit” on their website. This toolkit includes a very scary-sounding letter that all DRs (brokers) receive. The letter demands a list of all active real estate licensees at the broker’s company. And, it requires the designated broker to sign and certify that “the individuals on the attached form represent a complete listing of all real estate licensees affiliated with my office”.
NAR uses this list to charge the broker dues for every real estate agent that is not a REALTOR® member.
Defending the NAR Dues Formula
The National Association of REALTORS® has faced backlash for the dues formula, including from their own members. NAR promotes a publication entitled “Going By the Book” that defends the Dues Formula by saying:
First, the criticisms do not focus on the legitimate issues posed by any controversy over dues (i.e. amount, need, allocation among members); andNational Association of REALTORS®
Second, in attacking the REALTOR®’s combination dues structure, the critics have irresponsibly charged that it jeopardizes the independent contractor status of salespersons(which is false), operates as a barrier to Board participation (which is false), and constitutes a form of mandatory membership (which is also false);
Third, these attacks have given great aid and comfort to those opponents of private property rights, in government and without, who want nothing more then to see the National Association, its state associations and its member boards denied the financial resources they require to function effectively.
To translate, the above says if you do not like the dues formula, you are:
Two: Wrong, and
Three: Jeopardizing all of private property rights
In addition to complaints from their own members, NAR faces challenges to the Dues Formula in court. In a California civil lawsuit, the court found NAR guilty of a group boycott that limited MLS access only to NAR members.
The Exception to the Dues Formula
The only exception to the NAR Dues Formula is a Limited Function Referral Office (LFRO). Also called a “referral only brokerage”. A referral only brokerage allows real estate agents to have an active license, without paying NAR dues.
Roosted is a LFRO that does not require real estate agents to pay dues. Roosted agents are active licensed agents. You can earn a real estate commission as a referral only agent with Roosted. Instead of handling transactions, refer buyers and sellers to practicing agents who are members of the National Association of REALTORS®. Roosted has created an app that sends real estate referrals for a 35% referral fee. Full-time, professional real estate agents handle the transactions. The Roosted “referral only” agent receives 35% of that agent’s commission for introducing them.