Town Enclosure Installation by CLB Architects | (Photographer: Charles Stemen)
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NAR Settlement: A Topline
If you’ve been following real estate market news recently, you’ve likely heard about the antitrust lawsuits and settlements involving real estate brokerages and the National Association of Realtors (NAR). These settlements are leading to significant changes in how agents are compensated. Media reports, industry experts, and various commentators have presented a mix of facts and misinformation. I hope this will set the record straight, providing a clearer perspective for both buyers and sellers.
What’s Changed?
Listings in the Multiple Listing Service (MLS) databases will no longer include an offer of compensation for buyer’s agents.
Homebuyers must sign a written agreement with their agent before touring any homes. (Which means you need to discuss your agent’s services and agree on the terms of compensation before beginning your home search.)
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What It All Means
The situation is more complex and nuanced than it may seem. How consumers interact with agents in this new environment will vary as each agent and client will adopt different approaches. Many in the industry, including the California Association of Realtors (CAR), are working to develop and clarify these new practices quickly. In California, transparency in how buyer’s agents are compensated has been a priority for over two decades, ever since CAR introduced its first Buyer Representation Agreement in 1999. While the changes resulting from this settlement may be new, the underlying principle is not, at least in California. I actually support full transparency because it ultimately benefits my clients and lets them know exactly what I bring to the transaction.
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Breaking Down The Key Points
- Offers of compensation between listing brokers or sellers to buyer brokers will be eliminated and prohibited within the MLS.
- Cooperation within the MLS will be defined and retained.
- MLS Participants, Subscribers, and Sellers are prohibited from making any offers of compensation to buyer brokers within the MLS.
- All broker compensation fields and information will be removed from the MLS.
- MLSs are barred from creating, facilitating, or supporting non-MLS mechanisms for offers of compensation to buyer brokers.
- It will be prohibited to use MLS data or data feeds to establish or maintain platforms for compensation offers from multiple brokers.
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Change Is Scary—But It’s Also Good
Like with anything new, there will be a period of confusion and adjustment following the new rules of the game. But ultimately, the settlement reinforces the importance of clarity regarding broker compensation. Sellers still have the discretion to offer compensation to buyer’s brokers, and commissions remain negotiable, as they always have been. Of course, one significant change is the requirement for every buyer represented by a NAR-affiliated agent to sign a Buyer Representation Agreement before touring a property. This step, already a requirement in many states, is a good thing. I see these updates as positive steps toward enhancing transparency and professionalism in our industry. We at Compass are fully prepared to adopt these changes, as they align with our commitment to providing exceptional service to our clients. We hope these NAR changes will elevate Realtors to the high standards many of us have always strived to uphold.
These changes become effective on August 17, 2024. By this date, all Realtor MLSs must implement the new policies.