NAR Settlement FACTS
On March 14, 2024, the National Association of Realtors® announced a proposed settlement agreement to end litigation of claims brought on behalf of home sellers related to broker commissions. The agreement would resolve claims against NAR, over one million NAR members, all state/territorial and local REALTOR® associations, all association-owned Multiple Listing Services (MLSs), and all brokerages with a NAR member as principal that had a residential transaction volume in 2022 of $2 billion or below. The settlement is subject to court approval.
The proposed changes will be implemented on August 16. Columbus REALTORS® will communicate with its membership via email, website, and social media over the coming months.
Here are three key takeaways from the proposed NAR settlement:
- Compensation offers moved off the MLS: NAR has agreed to implement a new rule prohibiting offers of compensation on the 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 on August 16, 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 representation agreements with their buyers. This change will go into effect on August 16, 2024. Columbus REALTORS® staff and the Standard Forms committee are working to make all necessary updates to forms by the implementation deadline.
- Settlement payment: NAR would pay $418 million over approximately four years. NAR’s membership dues for 2024 and 2025 will not change because of this payment.
New Updates
NAR Updated Policy on Steering
- What is NAR’s policy on steering buyers based on the amount of broker compensation?
- Under NAR’s Code of Ethics, steering buyers based on the amount of broker compensation is prohibited. • REALTORS® MUST pledge themselves to protect and promote the interests of their client, putting their client’s best interests before their own. A REALTOR® must never put broker compensation before their client’s interests.
- REALTORS® MUST be honest and truthful in their real estate communications and MUST NOT exaggerate, misrepresent, or conceal pertinent facts relating to the transaction, including facts about broker commissions.
- If a REALTOR® does anything to put their own (or another broker’s) compensation before her client’s interests, they are violating this primary code of ethics and potentially violating the broker’s fiduciary duties to their client (depending on the broker-buyer relationship and state law).
- Does NAR’s settlement address the theoretical possibility of steering?
- Yes. In the agreement, NAR reaffirms its commitment to requiring that MLS Participants must not limit the listings their client sees because of broker compensation.
- Written buyer agreements, required by the NAR practice changes that will be implemented on August 17, 2024, will also outline that MLS Participants may not receive compensation for brokerage services from any source that exceeds the amount or rate agreed to in the agreement with the buyer.
- Since a broker working with a buyer cannot receive more compensation than the buyer has agreed to in that agreement, the amount of any offer of compensation is irrelevant to the buyer-broker’s compensation. Under these practice changes, NAR has eliminated any theoretical steering because a broker will not make more compensation by steering a buyer to a particular listing because it has a “higher” offer of compensation.
- Can a broker tell a potential buyer the amount of broker commissions and explain who is paying those commissions?
- Yes. In fact, REALTORS® must provide this information to potential buyers under NAR’s Code of Ethics. The NAR Settlement also requires that “to the extent that such a REALTOR® or Participant will receive compensation from any source, the agreement must specify and conspicuously disclose the amount or rate of compensation it will receive or how this amount will be determined.”
