The NAR Settlement: What Does It Mean for Sellers and Buyers?
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Melissa Gootee
Melissa Gootee
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The NAR Settlement: What Does It Mean for Sellers and Buyers?
In this blog, I’ll dive into the main concerns that sellers and buyers have regarding the recent NAR settlement.
Many news outlets, papers, and bloggers have suggested that the new changes will eliminate offers of compensation to brokers representing buyers. However, this isn't entirely accurate.
Here's what you need to know:
- Offers of compensation are an option consumers can pursue off-MLS through negotiation and consultation with real estate professionals
- The settlement also 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.
- The key change is that this compensation will no longer be disclosed on the MLS.
- All negotiations regarding compensation will now happen at the time of the offer.
- This means the decision to pay buyer broker compensation is now entirely up to the seller.
Understanding these changes is crucial for navigating the current real estate landscape. Stay informed and feel free to reach out if you have any questions or need further clarification!
Here is the information sourced from the National Association of Realtors. I've highlighted what I believe are the key points of interest for most sellers and buyers.
Why did NAR enter into this settlement?
- From the beginning of this litigation, we had two goals:
- Secure a release of liability for as many of our members, associations, and MLSs as we could; and
- Preserve the choices consumers have regarding real estate services and compensation.
- This proposed settlement achieves both of those goals and provides a path for us to move forward and continue our work to preserve, protect, and advance the right to real property for all.
Changing Business Practices
The settlement agreement also mandates two key changes to the way members and MLS participants do business.
- NAR agreed to create a new MLS rule prohibiting offers of compensation on the MLS. This would mean that offers of compensation could not be communicated via an MLS, but they could continue to be an option consumers could pursue off-MLS through negotiation and consultation with real estate professionals.
- NAR also agreed to create a new rule requiring MLS participants working with buyers to enter into written agreements with their buyers before the buyer tours a home. NAR has long encouraged its members to use written agreements to help consumers understand exactly what services and value they provide, and for how much.
What are the key terms of the agreement?
- Release of liability: The agreement would release NAR, over one million NAR members, all state/territorial and local REALTOR® associations, all REALTOR® MLSs, and all brokerages with an NAR member as principal whose residential transaction volume in 2022 was $2 billion or below from liability for the types of claims brought in these cases on behalf of home sellers related to broker commissions.
- NAR fought to include all members in the release and was able to ensure more than one million members are included.
- Despite NAR’s efforts, agents affiliated with HomeServices of America and its related companies—the last corporate defendant still litigating the Sitzer-Burnett case—are not released under the settlement, nor are employees of the remaining corporate defendants named in the cases covered by this settlement.
- The agreement provides a mechanism for nearly all brokerage entities that had a residential transaction volume in 2022 that exceeded $2 billion, and MLSs not wholly owned by REALTOR® associations to obtain releases efficiently if they choose to use it. Individual members and all brokerages with an NAR member as principal whose residential transaction volume in 2022 was $2 billion or below are released by the agreement and not required to opt in.
- Compensation offers moved off MLS: NAR has agreed to put in place a new rule prohibiting offers of compensation on an MLS. 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 for buyer closing costs). This change will go into effect August 17, 2024.
- Written agreements for MLS Participants acting for buyers: While NAR has been advocating for the use of written agreements for years, in this settlement we have agreed to require MLS Participants working with buyers to enter into written agreements with their buyers before touring a home. This change will go into effect August 17, 2024.
- Settlement payment: NAR would pay $418 million over approximately four years. This is a substantial sum, and it will be incumbent on NAR to use our remaining resources in the most effective way possible to continue delivering on our core mission. NAR will not change membership dues for 2024 or 2025 because of this payment.
- NAR continues to deny any wrongdoing: NAR has long maintained—and we continue to believe—that cooperative compensation and NAR’s current policies are good things that benefit buyers and sellers. They promote access to property ownership, particularly for lower- and middle-income buyers who can have a difficult-enough time saving for a down payment. With this settlement, NAR is confident it and its members can still achieve all those goals.
Practice Changes & MLS Information
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 on an 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 on an MLS to buyer brokers or other buyer representatives.
- Require an MLS to eliminate all broker compensation fields and compensation information on an MLS.
- Require an 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 an 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.
The opt-in agreements
- MLSs that have opted into the settlement agreement have until September 16, 2024, to implement the necessary policy changes and to be considered Released Parties under the settlement, as provided in the relevant appendices they executed. However, in accordance with mandatory NAR policy, REALTOR® MLSs must implement the practice changes by August 17, 2024. If they do not, they will not be in compliance with NAR mandatory policy. NAR recommends all MLSs opting into the settlement implement the practice changes by August 17, 2024.NAR’s accelerated rule change process, during which it released the exact language of the practice changes in early May, gives MLSs over three months to implement the changes by August 17, 2024.
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.
Does this mean buyer brokers may have to work for free?
- No. We have long believed that it is in the interest of the sellers, buyers, and their brokers to make offers of compensation—but using an MLS to communicate offers of compensation will no longer be an option.
- The types of compensation available for buyer brokers would continue to take multiple forms, 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 represent
If you’d like to read the entire NAR Settlement FAQs, CLICK HERE. All information is directly sourced from the National Association of Realtors.
For the most current and accurate information, please refer to this resource. Many news outlets and individuals may present different perspectives, but here you’ll find the true facts.
