FAQs for NAR Settlement Agreement — Part 1 Series

On March 15, 2024, the National Association of REALTORS® (NAR) and attorneys for the class action Plaintiffs signed a proposed NAR Settlement agreement. NAR agreed to pay $418 million over approximately four years.

As a helpful guide to better understand the 108-page Settlement Agreement, NAR published  useful Resources and Frequently Asked Questions (95) at https://www.nar.realtor/the-facts

In this Part 1, we will highlight the FAQs that we feel are most relevant to the practice of the professional real estate agent. Please review the FAQs and use the Reply section below to let us know if you have further questions or clarifications.

In Part 2 of this series,  The Data Advocate will comment on our clarifications or further opinions on certain specific FAQs (such as touring, Buyer Rep Agreements, amendments, steering, concessions, fiduciary duties). We will consider your Replies.

    • NAR SETTLEMENT FAQS
        • Last Updated: May 9, 2024; 10:00PM ET

        1.      How quickly do you expect the settlement to be reviewed and/or approved by the court?

        • The court granted preliminary approval on April 24,
        • The practice changes set forth in the settlement agreement will take effect August 17, 2024, and class notice will take place no earlier than that date.
        • The settlement is subject to final court approval.  The final approval hearing is scheduled to take place on November 26, 2024.
        • There are strong grounds for the court to approve this settlement because it is in the best interests of all parties and class members.

        2.   How does the settlement affect state/territorial and local associations?

        • The agreement would release all state/territorial and local REALTOR® associations from liability for the types of claims brought in these cases on behalf of home sellers related to broker commissions and would also require their compliance with the practice changes agreed to in the settlement.

        3.    What MLS policies have changed?

    The policy changes, agreed to by NAR leadership, were reviewed and updated with the changes as outlined below:

    • Eliminate and prohibit any requirement of offers of compensation in the MLS between listing brokers or sellers to buyer brokers or other buyer representatives.
    • Retain, and define, “cooperation” for MLS Participation.
    • Eliminate and prohibit MLS Participants, Subscribers, and sellers from making any offers of compensation in the MLS to buyer brokers or other buyer representatives.
    • Require the MLS to eliminate all broker compensation fields and compensation information in the MLS.
    • Require the MLS to not create, facilitate, or support any non-MLS mechanism (including by providing listing information to an internet aggregator’s website for such purpose) for Participants, Subscribers, or sellers to make offers of compensation to buyer brokers or other buyer representatives.
    • Prohibit the use of MLS data or data feeds to directly or indirectly establish or maintain a platform of offers of compensation from multiple brokers or other buyer representatives. Such use must result with the MLS terminating the Participant’s access to any MLS data and data feeds.
    • Reinforce that MLS Participants and Subscribers must not, and MLSs must not enable the ability to filter out or restrict MLS listings that are communicated to customers or clients based on the existence or level of compensation offered to the cooperating broker or the name of a brokerage or agent.
    • Require compensation disclosures to sellers, and prospective sellers and buyers.
    • Require MLS Participants working with a buyer to enter into a written agreement with the buyer prior to touring a home.

      4.    How has the definition of an MLS Participant been changed?

      • The definition has been amended to remove any references to offers of compensation and to establish that a Participant has the duty to cooperate, which is to share information on listed property and to make property available to other brokers for showing to prospective purchasers and tenants when it is in the best interest of their clients.

      5.   Does this mean buyers won’t have to use a buyer broker to purchase a property?

      • As always, the consumer chooses whether to use a real estate professional.

      Research has confirmed that consumers find great value in the services provided by a buyer broker, and we continue to believe it is imperative for buyer brokers to clearly articulate what services and value they are providing to consumers.

      6.    How will buyer brokers get paid now?

      • Offers of compensation will continue to be an option consumers can pursue off-MLS through negotiation and consultation with real estate professionals.
      • The types of compensation available for buyer brokers would continue to take multiple forms, depending on broker-consumer negotiations, including but not limited to:
        • Fixed-fee commission paid directly by consumers
        • Concession from the seller
        • Portion of the listing broker’s compensation
        • Compensation would continue to be negotiable and should always be negotiated between agents and the consumers they serve.

      7.    What should listing brokers advise their clients about the prohibition of offers of compensation on an MLS?

      • Listing brokers should inform their clients that offers of compensation will no longer be an option on an MLS.
      • This change will not prevent offers of cooperative compensation off an MLS. And it will not prevent sellers from offering buyer concessions on an MLS (ex. concessions for buyer closing costs).
      • Compensation would continue to be negotiable and should always be negotiated between agents and the consumers they serve.

      8.    How will offers of compensation be communicated if brokers can’t use MLSs? Doesn’t this just make broker compensation less transparent?

      • Offers of compensation could continue to be an option consumers can pursue off-MLS through negotiation and consultation with real estate professionals. And sellers can offer buyer concessions on an MLS (for example—concessions that can be used for buyer closing costs).
      • The settlement does not change the ethical duties that NAR members owe their clients.
      • REALTORS® are always required to protect and promote the interests of their clients and treat all parties in a transaction, honestly (Article 1, COE).
      • NAR members will continue to use their skill, care, and diligence to protect the interests of their clients.
      • NAR remains dedicated to promoting transparency in the marketplace and working to ensure that consumers have access to comprehensive, equitable, transparent, and reliable property information, as well as the ability to have affordable professional representation in their real estate transactions.

      9.   How does this affect the existing listing agreements that require an offer of compensation to be made in the MLS?

      • After the new rule goes into effect, listing agreements should be amended

      to reflect that offers of compensation cannot be communicated via the MLS.

      • The settlement expressly provides that sellers may communicate seller concessions—such as buyer closing costs—via the MLS provided that such concessions are not conditioned on the use of or payment to a buyer broker.

      10.       If the seller or the listing broker offers a bonus or financial incentive in addition to the offer of broker compensation, can the buyer broker accept the extra compensation?

      • The buyer broker may not receive compensation for brokerage services from any source that exceeds the amount or rate agreed to in the agreement with the buyer.

      11.       Does Standard of Practice 16-16 prohibit the negotiation of buyer broker compensation in a buyer’s purchase offer?

      • No. A buyer can always ask their buyer broker to make it a term of an offer to

      purchase that the seller pay certain compensation to the buyer broker.

      • Standard of Practice 16-16 prohibits a REALTOR® from attempting to modify the terms of a listing agreement through the terms of an offer because the listing agreement is a contractual matter between the seller and the listing broker. However, the seller and the listing broker may independently choose to amend the listing agreement or take any other action they deem appropriate based on the seller’s negotiations with the buyer. Standard of Practice 16-16 also prohibits a REALTOR® from delaying or withholding delivery of a buyer’s offer while attempting to negotiate a buyer broker compensation.

      12.       Can a buyer request the listing broker to pay compensation to the buyer broker?

      • Yes

      13.      Can an MLS have a Yes/No Compensation  Field?

      • No. The new MLS policies prohibits any information about compensation in the MLS.

      14.      Can a listing broker communicate offers of compensation on a broker website which has an IDX or VOW feed?

      • Yes, MLS Participants may augment MLS data or data feeds with offers of compensation to buyer brokers or other buyer representatives for only listings of their own brokerage.

      15.      Can an MLS Participant use or share their MLS data or data feeds to establish or maintain a platform for offers of compensation from multiple brokers and buyer brokers or other buyer representatives?

      • No, use of MLS data or data feeds to directly or indirectly establish or

      maintain a platform of offers of compensation from multiple brokers to buyer brokers or other buyer representatives is prohibited.

      16.      Can an MLS allow MLS listings to link to a listing broker’s contact information (e.g., telephone number, broker’s preferred communication method)?

      • Yes.

      17.      Can disputes about an offer of compensation still be arbitrated or mediated?

      • Yes, REALTORS® are bound to arbitrate or mediate pursuant to Article 17 of the Code of Ethics, and for MLS Participants who are non-REALTORS® they are bound to arbitrate or mediate pursuant to their MLS’s local rules.

      18.      What provisions must be included in written buyer agreements?

      • The written agreement must include:
      1. A specific and conspicuous disclosure of the amount or rate of compensation the Participant will receive or how this amount will be determined, to the extent that the Participant will receive compensation from any source.
      2. The amount of compensation in a manner that is objectively ascertainable and not open-ended.
      3. A term that prohibits the Participant from receiving compensation for brokerage services from any source that exceeds the amount or rate agreed to in the agreement with the buyer; and
      4. A conspicuous statement that broker fees and commissions are not set by law and are fully negotiable.

      19.    Who will be responsible for enforcing the written agreements and ensuring all parties follow this new practice change?

      • The MLS will be responsible for enforcing the rule regarding written agreements, like the MLS enforces other existing rules.

      20.     The practice change requiring written agreements with buyers is triggered by two conditions: it only applies to MLS Participants “working with” buyers and is triggered by “touring a home.” What does it mean to be “working with” a buyer?

      • The “working with” language is intended to distinguish MLS Participants who provide brokerage services to a buyer—such as identifying potential properties, arranging for the buyer to tour a property, performing or facilitating negotiations on behalf of the buyer, presenting offers by the buyer, or other services for the buyer —from MLS Participants who simply market their services or just talk to a buyer—like at an open house or by providing an unrepresented buyer access to a house they have listed.
      • If the MLS Participant is working only as an agent or subagent of the seller, then the participant is not “working with the buyer.” In that scenario, an agreement is not required because the participant is performing work for the seller and not the buyer.
      • Authorized dual agents, on the other hand, work with the buyer (and the seller).

      21.     What does it mean to tour a home?

      • Written buyer agreements are required before a buyer tours a home for sale listed on the MLS.
      • Touring a home means when the buyer and/or the MLS Participant, or other agent, at the direction of the MLS Participant working with the buyer, enter the house. This includes when the MLS Participant or other agent, at the direction of the MLS Participant, working with the buyer enters the home to provide a live, virtual tour to a buyer not physically present.
      • A “home” means a residential property consisting of not less than one nor more than four residential dwelling units.

      22.       Does the requirement for a written agreement with buyers mean that MLS Participants and buyers must enter into a written agency agreement?

      • MLS Participants and buyers will still be able to enter into any type of professional relationship permitted by state law.
      • NAR policy does not dictate:
        • What type of relationship the professional has with the potential buyer (e.g., agency, non-agency, subagency, transactional, customer).
        • The term of the agreement (e.g., one day, one month, one house, one zip code).
        • The services to be provided (e.g., ministerial acts, a certain number of showings, negotiations, presenting offers).
        • The compensation charged (e.g., $0, X flat fee, X percent, X hourly rate).

      23.       What does it mean to be “inconsistent with state or federal law or regulation”?

      • All MLS Participants working with a buyer must have a buyer written

      agreement prior to touring, unless state law requires an agreement earlier in time.

      24.       If an MLS Participant hosts an open house or provides access to a property,  on behalf of the seller only, to an unrepresented buyer, will they be required to enter into a written agreement with those buyers touring the home?

      • No. The new rule will cover every type of relationship where an MLS Participant is working with a buyer.

      25.     Are written buyer agreements required when listing agents talk with a buyer on behalf of a seller only or as subagents of the seller?

      • No. If the MLS Participant is working only as an agent or subagent of the seller, then the participant is not working for the buyer. In that scenario, an agreement is not required because the participant is performing work for the seller and not the buyer.

      26.       Are written buyer agreements required when MLS Participants perform ministerial acts?

      • Yes. The obligation is triggered once the MLS Participant is working with that buyer and has taken them to tour a home, regardless of what other acts the MLS Participant performs.
      • But an MLS Participant performing only ministerial acts—without the expectation of being paid for those acts and who has not taken the buyer to tour a home—is not working for the buyer.

      27.       If an MLS Participant enters into a non-agency relationship with a buyer, is a buyer written agreement still necessary?

      • Yes, regardless of whether it is an agency or non-agency relationship, the obligation is triggered once the MLS Participant works with that buyer and has taken her to tour a home.

      28.       Are written buyer agreements required in a dual agency scenario when a single agent works both for the seller and for the buyer?

      • Yes. If an MLS Participant is working as an agent for a buyer, a written agreement is required.

      29.      Are written buyer agreements required in a designated agency scenario, when a single broker works both for the seller and for the buyer, and designates an agent to represent the buyer?

      • Yes. If an MLS Participant is working as an agent for a buyer, a written agreement is required.

      30.     Do the written buyer agreement requirements change my state’s disclosure requirements to an unrepresented buyer?

      • No, you must still comply with all your state and local legal requirements. MLS policies and rules are subject to state and local laws and regulations.

      31.     How will state laws affect the implementation of the practice change requiring written agreements with buyers?

      • Written buyer agreements will be required of all MLS Participants working with buyers prior to touring a home, unless state law requires a written buyer agreement earlier in time.

      32.      Will MLSs be required to get a copy of buyer written agreements?

      • No, the MLS is not required to receive a copy but can request it as a matter of their local enforcement.

      33.       MLS Participants may not receive compensation for services from any source that exceeds the amount or rate agreed to in the buyer agreement. Does this mean that brokerages can only have one agreement with the buyer?

      • No. NAR policy does not dictate:
        • What type of relationship the professional has with the potential buyer (e.g., agency, non-agency, subagency, transactional, customer).
        • The term of the agreement (e.g., one day, one month, one house, one zip code).
        • The services to be provided (e.g., ministerial acts, a certain number of showings, negotiations, presenting offers).
        • The compensation charged (e.g., $0, X flat fee, X percent, X hourly rate).
      • Compensation continues to be negotiable and should always be negotiated between MLS Participants and the buyers with whom they work.

      34.       In the buyer agreement, can buyers and buyer brokers agree to a range of compensation?

      • NAR policy will not dictate the compensation agreed between buyers and buyer brokers (e.g., $0, X flat fee, X percent, X hourly rate).
      • Under the settlement, any compensation agreed to must be objectively ascertainable and not open-ended.
      • For example, the range cannot be “buyer broker compensation shall be whatever amount the seller is offering to the buyer.”

      35.       Should active buyer agreements entered into before the MLS policy change be amended to make sure any compensation is not open-ended and is objectively ascertainable?

      • Yes. MLS Participants working with a buyer after the effective date of the policy should take steps to ensure that the buyer has agreed to the necessary terms required by the settlement agreement.

      36.       Should active buyer agreements entered into before the MLS policy change be amended to remove any provision that authorizes the buyer broker to keep any offers of compensation exceeding the amount of compensation agreed with the buyer?

      • Yes. MLS Participants working with a buyer after the effective date of the policy should take steps to ensure that the buyer has agreed to the necessary terms required by the settlement agreement.

      37.      Does the settlement agreement’s requirement of “objectively ascertainable” and “not open-ended” apply to listing agreements or the compensation sellers pay listing brokers?

      • No. Unlike the settlement agreement’s requirements that compensation in buyer agreements be objectively ascertainable and not open-ended, listing agreements can be structured however the seller and listing broker agree, so long as the listing agreement complies with the law, pre- existing MLS policy, and “specifies the amount or rate of any payment” from the seller to the listing broker.

      38.      Is there an NAR MLS policy about seller concessions?

      • No, MLSs will continue to have local discretion on seller concessions. This includes determining what local rules to have about seller concessions, except under the settlement the MLS must ensure that the seller concessions are not limited to or conditioned upon the retention of or payment to a cooperating broker, buyer broker, or other buyer representative.

      39.    Can an MLS have a Yes/No seller concession field that indicates whether a seller is offering any concession?

      • Yes, it is a matter of local discretion which may depend on the MLS’s technological capabilities and what the MLS deems to be in the interests of its market.

      40.     Is an MLS required to have a seller concession field?

      • No, it is a matter of local discretion for each MLS.

      41.       If my MLS removes the compensation field, can I choose to publish my cooperative commission offer in the agent remarks?

      • No. The new rule would prohibit offers of compensation on the MLS.

      42.      Can MLSs allow decimal points to be used for seller concessions?

      • Yes, it is a matter of local discretion which may depend on the MLS’s technological capabilities and what the MLS deems to be in the interests of its market.

      43.     Will seller concessions communicated in the MLS be binding on the seller?

      • As a general matter, seller concessions usually aren’t binding until they are established in an executed contract such as a listing agreement or a purchase contract.

      44.      Can the seller concession be a total sum or the percentage of the purchase price? 

      This is a matter of local discretion. But the MLS must ensure that the seller concessions are not limited to or conditioned upon the retention of or payment to a cooperating broker, buyer broker, or other buyer representative.

      45.      What does it mean to “filter-out” a listing?

      • Filtering out listings means to remove listings or block MLS listings from being communicated to customers or clients based on the amount of compensation offered, the existence of an offer of compensation, or based on the listing firm or listing agent.
      • Participants have the duty to cooperate which is to share information on listed property and to make property available to other brokers for showing to prospective purchasers and tenants when it is in the best interest of their clients.

      46.     Is “ranking” or “sorting” different from “filtering out” listings?

      • Yes, “ranking” or “sorting” listings is the ability to organize a list of MLS listings in a particular order. Examples of criteria that may be used to rank or sort may be the property sales price, the number of bathrooms or bedrooms, the property location, etc. Ranking or sorting must not involve the removal or the blocking of MLS listings which prevent the communication of those listings to a client or customer.

      47.  Can the MLS have a function within its system that automatically pushes out emails to clients about available properties hitting the market and allows Participants or Subscribers to filter out listings based on the offer of compensation, listing firm or the listing agent?

    • Since offers of compensation may no longer be communicated on the MLS, it should not have any functionality related to broker compensation.
      • As for filtering based on listing firm or listing agent, just like the inability of Participants or Subscribers to withhold listings based on those criteria in IDX and VOW displays, MLSs cannot enable that same ability within other MLS functions that provide listing data to consumers.
      • An MLS must take appropriate action if it becomes aware that a Participant or Subscriber acts inconsistently with this MLS policy.

      48.      Will NAR raise dues or levy an assessment on members to fund the settlement?

      • NAR will not change membership dues for 2024 or 2025 because of this payment.

      RELATED RESOURCES:

      Nar_Settlement_Agreement

    • Complete NAR FAQs Click HERE
    • Will the DOJ Intervene? Click HERE

 

 

 

 

 

Share This Post

One Response

  1. I love this! It can be so helpful to stop the nonsense and understand the facts. Thank you John for doing this. I am adding it to my newsletter and passing it on where ever I can.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Stay connected.

Get up to the minute updates and resources.

Search
Other Articles

Stay Connected.

Get up to the minute updates and resources.