NAR Settlement FAQ: Key Points and Implications for Real Estate Professionals

The recent settlement between the National Association of Realtors (NAR) and plaintiffs in a major litigation case has raised numerous questions and concerns among real estate professionals. This article aims to clarify the key aspects of the settlement, its implications for agents, brokers, industry members, and clients, and provide an overview of the changes and challenges that lie ahead.

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For those wanting a bit more detail on the NAR settlement

What Does This Mean for You?

The settlement has several critical components that will directly impact how real estate professionals operate. Here’s a breakdown:

1. Release of Liability: The settlement releases over one million NAR members, local and state REALTOR® associations, REALTOR® MLSs, and brokerages with an NAR member as a principal whose residential transaction volume in 2022 was $2 billion or below from liability related to broker commissions.
2. Compensation Rules: Offers of compensation can no longer be made through MLS systems. This means compensation offers will now be handled off-MLS through direct negotiation between buyers, sellers, and their agents.
3. Written Agreements: MLS participants working with buyers are now required to enter into written agreements with their clients before touring homes. This change emphasizes transparency and ensures that clients understand the services and compensation terms.

Key Changes and Their Impact

Offers of Compensation

• New Rule: The prohibition of offers of compensation on MLS.
• Implications: Agents must now negotiate compensation directly with clients or through other means, ensuring that all parties understand the terms.

Written Agreements

• Requirement: Agents must have written agreements with buyers before home tours.
• Benefits: This promotes clarity and transparency, helping clients understand their financial commitments and the services they will receive.

Steering

• Policy Reinforcement: NAR reaffirms that steering buyers based on compensation is prohibited.
• Impact: This aims to maintain fair practices and ensure clients’ interests are prioritized over agents’ compensation.

Frequently Asked Questions

Why Did NAR Enter Into This Settlement?

NAR was aiming to secure its members a broad release of liability and preserve consumer choices regarding real estate services and compensation.

What Are the Key Terms of the Agreement?

The settlement includes the release of liability for NAR members, a prohibition on MLS-based compensation offers, mandatory written agreements for buyer agents, and a $418 million settlement payment by NAR.

How Does This Affect Agents and Brokers?

Agents and brokers must adapt to new rules regarding compensation offers and written agreements, which could change their negotiation and client interaction strategies.

How Will Compensation Offers Be Handled Now?

Offers of compensation will continue off-MLS through direct negotiation. This means agents need to have clear, transparent discussions with their clients about compensation terms.

Does This Settlement Mean NAR Admits Wrongdoing?

No. NAR continues to deny any wrongdoing in connection with the MLS cooperative compensation model rule. The settlement aims to resolve litigation while preserving consumer choice and protecting NAR members.

What About Agents Affiliated with HomeServices of America?

Agents affiliated with HomeServices of America and its related companies are not released under the settlement. They will need to address their legal liabilities separately.

Practice Changes and MLS Information

Effective Date of Changes

The mandatory MLS policy changes will take effect on August 17, 2024. This date provides a three-month window for NAR members and MLSs to prepare.

Non-Filtering of Listings

NAR’s policies prohibit filtering out or restricting MLS listings based on compensation offers. This ensures all listings are available to consumers without bias.

Impact on the Real Estate Industry

For Home Sellers and Buyers

The settlement preserves the choices consumers have regarding real estate services and compensation. Sellers can still offer compensation, but it must be communicated off-MLS.

Financing and Mortgages

The settlement does not change access to mortgages for buyers. Buyers still have the same options for compensating their real estate representatives, and these can be financed through traditional methods.

NAR Operations and Future Outlook

Funding the Settlement

NAR will pay the $418 million settlement over approximately four years. This structured payment plan allows NAR to manage its resources effectively without immediate drastic changes to membership dues.

NAR’s Value Proposition

Despite the settlement, NAR maintains that it provides unparalleled value to its members through advocacy, learning opportunities, research, and member tools.

Conclusion

The NAR settlement marks a significant shift in real estate practices, emphasizing transparency and consumer choice. While the changes present challenges, they also offer opportunities for real estate professionals to enhance their service quality and client relationships. As the industry adapts, staying informed and compliant with these new rules will be crucial for success.