The National Association of REALTORS® (NAR) has been in the news quite often recently, and there has been a lot of misinformation. This article summarizes what has happened, what will change, and how it will impact buyers and sellers. Visit facts.realtor to get updated information and more details. Most of the following details come directly from that site and other NAR resources.
On March 15, 2024, NAR announced an agreement that would end litigation of claims brought on behalf of home sellers related to broker commissions. Preliminary approval was granted on April 23rd. Significant policy changes for REALTORS® and consumers will occur in August. A motion in support of final approval is expected in September with a hearing for final approval in November.
Under the terms of the agreement, NAR would pay $418 million over approximately four years. NAR denies any wrongdoing in connection with the Multiple Listing Service (MLS) cooperative compensation model rule that was introduced in the 1990s in response to calls from consumer protection advocates for buyer representation. Offers of compensation help make professional representation more accessible, decrease costs for home buyers to secure these services, increase fair housing opportunities, and increase the potential buyer pool for sellers.
The agreement would resolve claims against NAR, over one million NAR members, all state and local REALTOR® associations - including the Greater Albuquerque Association of REALTORS® (GAAR), all REALTOR® association-owned MLSs - including Southwest MLS owned by GAAR, and all brokerages with a NAR member as principal that had a residential transaction volume in 2022 of $2 billion or below. There is a way for nearly all brokerages to obtain releases efficiently if they choose to use it.
The policy changes will go into effect around the nation by August 17th, and GAAR announced they will implement these changes locally on August 1. Over 3,000 local real estate professionals are members of GAAR and Southwest MLS. These changes will impact all of those REALTORS® in and around Albuquerque and their clients.
So what’s changing? The settlement agreement mandates two key changes to the way REALTORS® and MLS participants do business.
First, NAR agreed to create a new MLS rule prohibiting offers of compensation on the MLS. This means that offers of compensation to buyers’ brokers will not be communicated via an MLS. But they can continue to be an option consumers could pursue off-MLS through negotiation and consultation with real estate professionals.\
Second, NAR also agreed to create a new rule requiring MLS participants working with buyers to enter into written Buyer Broker 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.
Both changes will go into effect on August 17th under the terms of the settlement.
How will this impact consumers? If you are a buyer working with a REALTOR® to purchase a property, you must sign a Buyer Broker Agreement (BBA) stating how much the REALTOR will be paid and the duration of the agreement before touring any properties for sale. The agreement can be established for viewing a specific home, any homes shown over a particular week or weekend, or for one or more months. If you’re meeting a REALTOR® for the first time on a Saturday, you could start with an agreement for that day. If you like the service provided and want to continue working together, you could sign another BBA committing to working exclusively with that REALTOR® for the next two months, for example. There are multiple benefits to buyers who commit to getting to know and work with a professional local REALTOR® who will help them find and purchase a property and negotiate on their behalf.
Since offers of compensation will no longer be offered through MLS, the fee for the REALTOR® is another key term that will need to be discussed and negotiated upfront. The fee can be a fixed amount, a specific percentage of the purchase price, or some other agreed-upon arrangement. It’s important to note that the fee can still be paid in part or in whole by the seller of the property. The buyer’s broker will need to communicate directly with the listing broker to determine if the seller is offering compensation to a buyer broker and, if so, how much. That amount, if any, will be negotiated and documented in the purchase agreement and become part of the contract.
For sellers who want to encourage the most buyers to purchase their property, offering compensation to buyers’ brokers will still benefit them. This will simply have to be communicated outside of the MLS via phone, text, or email, for example. It’s worth having professional representation by an experienced REALTOR®, and buyers and/or sellers can pay their fees.
Let’s be very clear about how this will work come mid-August. If a buyer and REALTOR® sign a Buyer Broker Agreement stating that the buyer broker fee is $10,000, for example, and a seller is willing to pay $7,000 of that fee, the buyer will be responsible for the other $3,000 at closing. The seller could agree to pay the entire $10,000, or they might not be willing to pay the buyer’s broker anything. Everything will still be negotiable, and REALTORS® will still be an invaluable partner in buying and selling real estate.