Board Pushes for Referral Fee Disclosure – Delegates Pump the Brakes
In mid-November 2025, at the National Association of REALTORS® (NAR) annual conference (NAR NXT in Houston), a major proposal to increase transparency in real estate commissions faced a surprising setback. NAR’s Board of Directors had overwhelmingly approved an amendment to Article 6 of the Code of Ethics to require Realtors to disclose any broker-to-broker referral fees to clients and obtain the client’s consent . This would have closed a long-standing loophole dating back to 1999 that exempted agent-to-agent referral fees from disclosure requirements. The Professional Standards Committee that drafted the change argued there was “no valid reason to continue this exclusion” and that clients have a right to be aware of any financial benefits a Realtor may receive from recommending products or services. In other words, if an agent or brokerage is in the position to earn a referral fee for sending a client to another brokerage, the client should be informed upfront.
Despite strong support from leadership – 83.5% of directors voted in favor of the transparency measure – the final decision lay with NAR’s Delegate Body. The Delegate Body (composed of local REALTOR® association presidents or their alternates) convened just hours later and narrowly rejected the referral fee disclosure rule . Because changes to the Code of Ethics require a two-thirds supermajority of delegates, even a solid majority was not enough. In a razor-thin vote (66.3% in favor, just shy of the required 66.7%), the proposal fell short and was defeated . Many delegates voiced general support for transparency but expressed concerns that the policy was being rushed and could have unintended consequences if implemented without further study . The result left the Code of Ethics unchanged – referral fees between brokers can remain undisclosed to consumers under NAR rules, at least for now.
Why Referral Fee Transparency Matters for Consumers
Broker-to-broker referral fees typically involve one brokerage paying a portion of the commission to another for referring a client. Such fees are common in real estate, but consumers are often unaware of them. In a real estate transaction, consumers should be made aware of all fees and commissions that impact the deal, and that includes any hidden referral fees. When an agent refers a client to another agent (for example, to a specialist or an out-of-area colleague), a referral fee is usually paid out of the commission – often around 25%, but sometimes as high as 40–50% of the total commission . That means a significant portion of the money changing hands is going to a third-party agent’s brokerage, yet the buyer or seller is typically in the dark about it. If the client doesn’t know a referral fee exists, they have no chance to negotiate it or question it, and they might not understand that the referring agent had a financial stake in steering them to a particular brokerage.
Transparency advocates argue that undisclosed referral fees create a potential conflict of interest. The referring agent might choose a recipient agent based on the fee arrangement rather than purely who is best for the client. For this reason, industry leaders and legal experts have been calling for full disclosure as a way to build trust and reduce liability. “Complete transparency is essential for our industry to survive long term and for the public to trust us,” wrote one brokerage CEO after the vote, calling the delegates’ refusal to require disclosure “a very bad policy decision” . In the wake of several high-profile lawsuits challenging real estate commission practices, the push for transparency has only grown stronger. (Notably, NAR’s own leadership framed the referral-fee disclosure proposal as part of aligning the organization with the 2024 Sitzer/Burnett legal settlement over commissions , which demanded greater clarity and fairness in brokerage compensation.) There are even new lawsuits emerging that target hidden referral fees – for example, Zillow’s “Flex” program is currently being sued for allegedly driving up consumer costs via undisclosed referral fees charged to agents . All of this underscores that keeping consumers in the dark about any form of compensation is a risky strategy in today’s environment.
Importantly, referral fees do affect consumers. While the referring and receiving brokers split the commission behind the scenes, that split can influence a client’s experience. If an agent knows they must pay 30% of their commission to a referrer, they might be less flexible on fees or less invested in a lower-priced transaction. Or the client might have chosen a different agent or negotiated a different commission had they known about the referral cut. As Justin Haag, CEO of Northwest MLS, put it: “Buyers and sellers should have complete transparency regarding all fees paid to a real estate brokerage firm, including referral fees paid to another firm” . His organization, Northwest MLS (one of the nation’s largest regional MLSs), moved proactively on this issue in 2025 by introducing a Referral Fee Disclosure form to ensure clients are informed. “Some referral fees can be as much as 50% and may impact a buyer’s or seller’s decision about which broker to engage,” Haag noted, emphasizing that such information can be crucial to consumers’ choices . Disclosing the referral agreement at the outset of the client relationship – rather than at closing or not at all – is essential for an open, trust-based transaction .
The Road Ahead: Pushing for Transparency at Midyear and MLS Level
The defeat of the referral fee disclosure amendment has left many in the industry disappointed, but not deterred. Given how narrowly it failed, there is already talk of revisiting the issue at NAR’s next governance opportunity. The REALTORS® Midyear Legislative Meetings in May 2026 will be the next major gathering of NAR decision-makers, and it could present a chance to bring back the proposal and “do the right thing” for consumers. The need for transparency isn’t going away – if anything, ongoing legal pressures and consumer scrutiny will keep this topic front and center. NAR’s Board of Directors clearly signaled its support, and you can expect member leaders to continue making the case that disclosing referral fees is in the best interest of both clients and the industry’s reputation.
In the meantime, there’s another route to greater transparency: action at the MLS or brokerage level. Individual brokers who believe in upfront referral disclosure can certainly implement it within their own companies – but there’s a catch. In markets where this is not universally required, a lone brokerage that mandates disclosure might face resistance from its agents. Agents worried about uncomfortable conversations or potential loss of referral business might simply “walk” to a competing firm that doesn’t require such disclosure. This is exactly why many believe the onus should be on MLSs (Multiple Listing Services) or regional associations to set a common standard. If the rule is market-wide, the friction is the same for everyone. No single brokerage is put at a competitive disadvantage by being more transparent, and consumers across the board get the benefit of full information.
We’ve already seen a real-world example of this strategy: Northwest MLS’s transparency push. NWMLS didn’t wait for NAR’s mandate; it created a disclosure form and encouraged all its member brokers to use it, resulting in widespread adoption of referral fee disclosure in that region . This kind of MLS-led policy creates a level playing field – every broker in the MLS is playing by the same rules of engagement with clients. Brokers and agents then can’t avoid the conversation by switching offices, and consumers in that market will come to expect disclosure as a normal part of hiring an agent. It’s a bold approach, but one that could be replicated by other MLSs or state Realtor associations if there is sufficient will. After all, when transparency becomes the norm everywhere, those initial awkward explanations about referral fees will become as standard as explaining any other aspect of commission.
Bottom line:
Hidden referral fees have no long-term place in a profession that is striving to rebuild consumer trust. The recent NAR delegate vote may have tapped the brakes, but it also sparked a deeper conversation: Shouldn’t our clients know exactly who is getting paid in their transaction? The next few months will be critical in answering that question. NAR’s leadership has another chance at the midyear meetings to champion transparency, and local MLSs can take up the charge in the interim. Have you spoken to your MLS about adopting a referral fee disclosure policy? If we make it market-wide, the transparency “friction” is the same for everyone – and together the industry can move toward doing right by the consumer, which ultimately benefits us all.
Sources:
- National Association of REALTORS®, Special Report from the Nov. 17, 2025 Board of Directors Meeting
- HousingWire – Brooklee Han, “Transparency? Not today. NAR delegates reject referral-fee disclosure rule” (Nov. 18, 2025)
- Real Estate News – Dave Gallagher, “NAR in 2026: A new plan, new leaders, fewer members” (Nov. 17, 2025)
- NAR Delegate Body Notice – Exhibit A (Oct. 2025), Proposed Code of Ethics Amendment to Article 6 (Referral Fee Disclosure Rationale)
- Real Estate News – Dave Gallagher, “MLS extending push for transparency to referral fees” (June 27, 2025)
