NAR Settlement Updates - East Valley Association of Realtors

As you may be aware, the National Association of REALTORS® (NAR) recently announced an agreement that would end litigation of claims brought on behalf of home sellers related to broker commissions. What you might not know is everything related to what this settlement means. We’ve created this page, which we will update with resources and information as it becomes available. Please make sure to check this page regularly, and we thank you for your continued support.

For information from NAR directly, including resources and other material and relevant items, please visit one of the following sites:

• FACTS.REALTOR • COMPETITION.REALTOR

NAR Updates Guide to Written Buyer Agreements and New FAQs

NAR has created a new resource for one of the key practice changes required by the settlement and updated the FAQ on facts.realtor with helpful new information. The relevant changes are highlighted below:

Guide on Written Buyer Agreements: Beginning August 17, 2024, a buyer representative “working with” a buyer will be required to enter into a written agreement with the buyer prior to touring a home, including both in-person and live virtual tours. This resource provides information about what provisions must be included in the written agreement pursuant to the NAR settlement. The guide is available here on NAR’s centralized website for information on the settlement, facts.realtor.

FAQ Updates: NAR has added new material and made updates to the FAQ on facts.realtor. The new material provides further clarity on issues including steering (questions 46-49) and written listing agreements (questions 50-53). The format of the FAQ has also been updated to better display the timing of the latest updates

NAR Settlement: Preliminary Approval and Timeline

On Tuesday, April 23rd, the U.S. District Court for the Western District of Missouri granted preliminary approval of the National Association of REALTORS®’ proposed settlement agreement that would end litigation of claims brought on behalf of home sellers related to broker commissions.

The judge who presided over the Sitzer Burnett class action lawsuit granted preliminary approval to the proposed settlement reached last month by NAR. The judge ruled that the changes proposed within the settlement agreement were “fair, reasonable and adequate” and set a November hearing for final approval.

The settlement is still subject to final court approval, and plaintiffs have requested a hearing on final approval of the settlement to be held on November 26, 2024.

For an estimated timeline of key upcoming milestones related to the settlement, please click here. (Timeline created as of April 23, 2024.)

NAR Settlement: Written Buyer Agreements FAQ

NAR has updated their FAQ to include additional information and clarity about written buyer agreements. The relevant FAQ is below:

The practice change requiring written agreements with buyers is triggered by two conditions: it only applies to MLS participants “working with” buyers and is triggered by “touring a home.” What does it mean to be “working with” a buyer?
The “working with” language is intended to distinguish MLS participants who provide brokerage services to a buyer — such as identifying potential properties, arranging for the buyer to tour a property, performing or facilitating negotiations on behalf of the buyer, presenting offers by the buyer, or other services for the buyer —from MLS participants who simply market their services or just talk to a buyer — like at an open house or by providing an unrepresented buyer access to a house they have listed.

If the MLS participant is working only as an agent or subagent of the seller, then the participant is not “working with the buyer.” In that scenario, an agreement is not required because the participant is performing work for the seller and not the buyer.

Authorized dual agents, on the other hand, work with the buyer (and the seller).

How will state laws affect the implementation of the practice change requiring written agreements with buyers?
Written buyer agreements will be required of all MLS participants working with buyers prior to touring a home, unless state law requires a written buyer agreement earlier in time.

What does it mean to tour a home?

Written buyer agreements are required before a buyer tours a home for sale listed on the MLS.
Touring a home means when the buyer and/or the MLS participant, or other agent, at the direction of the MLS participant working with the buyer, enter(s) the house. This includes when the MLS participant or other agent, at the direction of the MLS participant, working with the buyer enters the home to provide a live, virtual tour to a buyer not physically present.
A “home” means a residential property consisting of not less than one nor more than four residential dwelling units.

Does the requirement for a written agreement with buyers mean that MLS participants and buyers must enter into a written agency agreement?
No. MLS participants and buyers will still be able to enter into any type of professional relationship permitted by state law.

NAR policy does not dictate:

What type of relationship the professional has with the potential buyer (e.g., agency, non-agency, subagency, transactional, customer).
The term of the agreement (e.g., one day, one month, one house, one zip code).
The services to be provided (e.g., ministerial acts, a certain number of showings, negotiations, presenting offers).
The compensation charged (e.g., $0, X flat fee, X percent, X hourly rate).

If an MLS participant hosts an open house or provides access to a property, on behalf of the seller only, to an unrepresented buyer, will they be required to enter into a written agreement with those buyers touring the home?
No. The new rule will cover every type of relationship where an MLS participant is working with a buyer.

Are written buyer agreements required when listing agents talk with a buyer on behalf of a seller only or as subagents of the seller?
No. If the MLS participant is working only as an agent or subagent of the seller, then the participant is not working for the buyer. In that scenario, an agreement is not required because the participant is performing work for the seller and not the buyer.

Are written buyer agreements required when MLS participants perform ministerial acts?
Yes. The obligation is triggered once the MLS participant is working with that buyer and has taken them to tour a home, regardless of what other acts the MLS participant performs. But an MLS participant performing only ministerial acts — without the expectation of being paid for those acts and who has not taken the buyer to tour a home — is not working for the buyer.

Are written buyer agreements required in a dual agency scenario, when a single agent works both for the seller and for the buyer?
Yes. If an MLS participant is working as an agent for a buyer, a written agreement is required.

Are written buyer agreements required in a designated agency scenario, when a single broker works both for the seller and for the buyer, and designates an agent to represent the buyer?
Yes. If an MLS participant is working as an agent for a buyer, a written agreement is required.

MLS participants may not receive compensation for services from any source that exceeds the amount or rate agreed to in the buyer agreement. Does this mean that brokerages can only have one agreement with the buyer?
No. NAR policy does not dictate:

What type of relationship the professional has with the potential buyer (e.g., agency, non-agency, subagency, transactional, customer).
The term of the agreement (e.g., one day, one month, one house, one zip code).
The services to be provided (e.g., ministerial acts, a certain number of showings, negotiations, presenting offers).
The compensation charged (e.g., $0, X flat fee, X percent, X hourly rate).

Compensation continues to be negotiable and should always be negotiated between MLS participants and the buyers with whom they work.

In the buyer agreement, can buyers and buyer brokers agree to a range of compensation?
NAR policy will not dictate the compensation agreed between buyers and buyer brokers (e.g., $0, X flat fee, X percent, X hourly rate).

Under the settlement, any compensation agreed to must be objectively ascertainable and not open-ended. For example, the range cannot be “buyer broker compensation shall be whatever amount the seller is offering to the buyer.”

Should active buyer agreements entered into before the MLS policy change be amended to make sure any compensation is not open-ended and is objectively ascertainable?
Yes. MLS participants working with a buyer after the effective date of the policy should take steps to ensure that the buyer has agreed to the necessary terms required by the settlement agreement.

Should active buyer agreements entered into before the MLS policy change be amended to remove any provision that authorizes the buyer broker to keep any offers of compensation exceeding the amount of compensation agreed with the buyer?
Yes. MLS participants working with a buyer after the effective date of the policy should take steps to ensure that the buyer has agreed to the necessary terms required by the settlement agreement.

Should active listing or buyer agreements entered into before the MLS policy change be amended to include a conspicuous disclosure that compensation is not set by law and is fully negotiable?
MLS participants must make this disclosure, but active agreements do not need to be amended to accomplish this. MLS participants can do a separate disclosure to satisfy the requirement.

Can buyers and buyer brokers rely on an offer of compensation that was on the MLS prior to the effective date of the MLS policy changes?
If the sales contract is signed before the MLS policy change, the buyer broker should be able to rely upon the offer of compensation even if closing occurs after the date of the policy change.

But if the sales contract is not signed before the date the participant’s MLS implements the policy changes, the offer on the MLS will not be valid and buyers and buyer brokers may wish to protect themselves in writing with the listing broker or seller through a broker agreement or by including the offer of compensation in the sales contract.

Does the settlement agreement’s requirement of “objectively ascertainable” and “not open-ended” apply to listing agreements or the compensation sellers pay listing brokers?
No. Unlike the settlement agreement’s requirements that compensation in buyer agreements be objectively ascertainable and not open-ended, listing agreements can be structured however the seller and listing broker agree, so long as the listing agreement complies with the law, pre-existing MLS policy, and “specifies the amount or rate of any payment” from the seller to the listing broker.

Should active listing agreements entered into before the MLS policy change be amended to address the settlement agreement’s prohibition on offers of compensation being communicated on the MLS?
If the listing agreement instructs the listing broker to make an offer of compensation without reference to the MLS, no change to the listing agreement is needed, as the listing broker can comply with that instruction without violating the MLS policy change.

But if the listing agreement specifies that offers of compensation be made “on the MLS,” then the listing broker should work with the seller to amend the listing agreement before the MLS policy change is implemented, to make it clear the listing broker will not make an offer of compensation on the MLS and will not be violating the listing agreement by failing to make an offer of compensation on the MLS.

NAR Settlement: Top Questions

C.A.R. has received many questions about NAR’s proposed settlement of the antitrust class action lawsuits brought on behalf of home sellers related to broker compensation. The settlement is subject to final court approval; however, because the release of claims extends through the date of class notice, NAR will be putting practices changes in place in late July to avoid any gap in the release of liability. C.A.R. has provided answers to some of the most commonly asked questions.

1. What are the most important practice changes that will be implemented as part of the NAR settlement?

Offers of cooperative compensation will be prohibited on REALTOR®-owned MLSs.
All MLS participants working with a buyer must enter into a written agreement before the buyer tours any home, which must specify the amount or rate of compensation the buyer’s broker will receive from any source or how this amount will be determined. The amount of the buyer broker’s compensation may not be open-ended.

2. How will buyer agents get paid?

Buyer agents can continue to get paid in a variety of ways, including but not limited to:

Directly from the buyer.
Directly from the seller.
An offer of compensation from the listing agent, as long as the offer is not made through the MLS.

3. What should I do if I currently have a listing that will run past late-July?

The listing agreement will need to be amended to reflect the fact that beginning in late-July (or sooner, if an MLS removes its broker compensation field earlier), offers of compensation cannot be communicated through the MLS.

4. If I am a listing agent and communicating with an unrepresented buyer, how can I establish that I’m not representing the buyer?

Clearly communicate to the buyer that you are not representing them. The Buyer non-Agency Agreement (C.A.R. Form BNA) can be used to document that there is no agency relationship between you and the buyer. It is also recommended that you continue to remind the buyer in written communications that you do not represent them and cannot advise them, and that communications and documents provided by you to the buyer are for the benefit of your client.

5. Is C.A.R. planning to take any action to prohibit dual agency in California?

C.A.R. has historically supported the ability of brokers and salespersons to act as dual agents. Any change to the laws permitting dual agency would need to be considered at the relevant policy committee and done at the legislative level.

6. Can listing agents offer compensation to the buyer’s broker on the listing agent’s own website or flyers?

Yes. Listing agents can communicate their own offers of compensation on the listing broker’s or listing agent’s own websites or flyers.

7. Can buyers finance commissions?

No. Under the current residential mortgage finance system, financing commissions is not possible. Banks would treat a loan to finance commissions as a personal loan, which would have higher rates. Fannie Mae, Freddie Mac, and the FHA do not allow commissions to be added to the balance of a mortgage. The Department of Veterans Affairs similarly does not allow veterans to pay commissions using their VA home loan benefit.

NAR Settlement Supplemental Issue of REALTOR® Magazine

NAR has released a special digital supplement of REALTOR® Magazine with 16 pages of important content that will dispel misinformation about the proposed settlement. It also includes valuable resources that help separate litigation facts from fiction, debunk myths, and help explain the importance of a written buyer agreement.

To read this supplemental issue, click on the image below.

Accredited Buyer’s Representative (ABR®) Courses Free for REALTORS®

Throughout 2024, NAR is making the popular Accredited Buyer’s Representative (ABR®) designation course, typically $295, available to REALTORS® at no cost. Take the first step toward earning your ABR® designation at become.abr.realtor.

NAR Settlement & Settlement Financing FAQs

NAR has recently updated the NAR Settlement and Settlement Financing FAQs.

For the NAR Settlement FAQ, talking points include:

Settlement Overview and Key Terms
Who is Covered by the Settlement
Practice Changes
NAR Operations

Download the NAR Settlement FAQ here.

For the NAR Facts Financing FAQ, talking points include:

Interested Party Contributions
If Settlement Changes Access to Mortgages for Buyers
If Real Estate Commissions Can Be Financed
What NAR is Doing to Promote Access to Financing for Home Buyers

Download the NAR Facts Financing FAQ here.

A Message from President Teresa Carter

Greetings, my fellow EVAR members,

I wanted to address the recent news regarding the settlement reached by the National Association of REALTORS® to end the litigation brought on behalf of home sellers relating to broker commissions.

To start, I want to state that the National Association of REALTORS® does not dictate the setting of commissions. Instead, commissions remain subject to negotiation between brokers or agents and their respective clients. Recent litigation centered around the requirement for listing brokers to communicate an offer of compensation was deemed to violate federal antitrust laws by a federal court in Missouri. This ruling resulted in significant financial repercussions, with numerous similar lawsuits emerging nationwide.

It’s important to note that there is not a universally accepted “standard” commission rate, and both MLS and Association regulations expressly forbid any attempts to fix, control, recommend, or influence the commissions or fees charged for real estate brokerage services.

In response to ongoing litigation, the National Association of REALTORS® recently reached an agreement aimed at resolving claims related to the MLS rule mandating an offer of compensation. This agreement involves a payment of $418 million over four years by the National Association of REALTORS®, along with the creation of rules to prohibit the offer of compensation in the MLS and requiring MLS participants working with buyers to enter into written agreements with their buyers.

The East Valley Association of REALTORS® is taking proactive steps to prepare its members for these upcoming changes in business practices. We plan to organize training sessions and provide resources in the coming months. For the latest updates on the lawsuit, members can visit https://facts.realtor. This informational page is for REALTOR® members only.

Additionally, the National Association of REALTORS® is offering its Accredited Buyer’s Representative (ABR®) designation course, typically priced at $295, at no cost to REALTORS®. Members can enroll at https://become.abr.realtor and take steps towards their ABR® designation.

The East Valley Association of REALTORS® assures its members that they will receive ample training, education, and resources to navigate the forthcoming changes. Together, we will navigate these changes and move forward prepared to succeed. For detailed information and frequently asked questions about the settlement agreement, visit https://facts.realtor.

Thank you,

Teresa Carter
2024 President
East Valley Association of REALTORS®

Resources on the Settlement Provided by NAR

The National Association of REALTORS® have made multiple FAQs and other relevant explaining documents available to membership via the facts.realtor website. You can also access these documents via the links below:

- Settlement Factsheet
- Who is Covered by the Settlement?
- Settlement Agreement Facts Toolkit
- Settlement Agreement (Legal Doc)
- Settlement Overview
- Settlement Timeline
- Litigation FAQ (3-26-24)
- Financing FAQ (3-20-24)

The Truth About the NAR Settlement Agreement

Misinformation has been pervasive in the media over real estate commissions. Here are the facts you should know.

The national conversation around real estate commissions reached a crescendo since the National Association of REALTORS® announced a settlement agreement that would resolve litigation brought on behalf of home sellers related to broker commissions. Brokers and agents have their own questions about what comes next for their businesses, while at the same time trying to answer consumer inquiries. And many headlines aren’t separating fact from fiction, feeding misinformation to you and your clients.

Let’s clear the air: There’s no doubt the litigation—including copycat lawsuits that were filed after the Sitzer-Burnett verdict—caused considerable uncertainty in an industry already dealing with the effects of low inventory and interest rate increases. The settlement, which must be approved by a judge, provides a path forward for real estate professionals, REALTOR® associations, brokerages, MLSs and other industry stakeholders. Most importantly, it gives NAR members the chance to refocus on their core mission to support buyers and sellers.

Facts First

There’s much the media has gotten wrong about NAR’s settlement, which would require the association to pay $418 million over four years. Some outlets have suggested that NAR previously set or guided commissions to a standard rate of 6%. Even President Joe Biden, in recent comments, misspoke in suggesting that the settlement makes commissions negotiable for the first time.

You know that is false. NAR does not set commissions, and commissions were negotiable long before this settlement. They are and will remain entirely negotiable between brokers and their clients. And housing prices are dictated by market forces beyond members’ control.

Getting the facts right is important, especially because the settlement agreement is complex. NAR is continuing to engage with media to correct inaccurate reporting about the settlement. Members are also encouraged to refer to official NAR sources, like facts.realtor, for the most accurate and up-to-date information about the settlement and what it means for consumers.

The settlement achieves two important goals: protecting members to the greatest extent possible and preserving consumer choice. The proposed settlement:

Resolves claims against NAR and nearly every member; all state, territorial and local REALTOR® associations; all association-owned MLSs; and all brokerages with an NAR member as principal whose residential transaction volume in 2022 was $2 billion or below.
Preserves cooperative compensation as an option for consumers looking to buy or sell a home—as long as such offers of compensation occur off of the MLS.

NAR fought for a release that covered all industry players, but large settlements reached by other corporate defendants shaped the negotiations. Throughout the settlement process, NAR also engaged with a diverse range of members to consider their perspectives and interests.

“Ultimately, continuing to litigate would have hurt members and their small businesses,” NAR Interim CEO Nykia Wright said in a statement. “While there could be no perfect outcome, this agreement is the best outcome we could achieve in the circumstances. It provides a path forward for our industry, which makes up nearly one-fifth of the American economy, and NAR. For over a century, NAR has protected and advanced the right to real property ownership in this country, and we remain focused on delivering on that core mission.”

How To Know If You’re Covered

Nearly every member is covered by the release NAR negotiated in the settlement. The members not covered are those affiliated with HomeServices of America, the last co-defendant in the Sitzer-Burnett litigation, and the employees of the co-defendants in the Gibson and Umpa cases.

If you are affiliated with any of the following brokerage groups and are an independent contractor licensee, you are covered by the proposed settlement, even if your brokerage may not be covered:

At World Properties LLC
Compass Inc.
Douglas Elliman Inc.
Douglas Elliman Realty LLC
eXp Realty LLC
eXp World Holdings Inc.
Hanna Holdings Inc.
HomeSmart International LLC
Howard Hanna Real Estate Services
Real Broker LLC
The Real Brokerage Inc.
Realty ONE Group Inc.
Redfin Corporation
United Real Estate
Weichert, REALTORS®

All other REALTORS® who are members of NAR on the date of class notice are covered by the release. The date of class notice is anticipated to be in mid-July.

Members on the date of class notice and state/territorial and local REALTOR® associations must abide by the practice changes set forth in the agreement, but they do not need to take any other action in order to benefit from the negotiated release.

The release does not cover brokerage firms with residential transaction volume above $2 billion in 2022, despite NAR’s effort to include them. For those companies, the settlement provides an avenue to pursue inclusion in the release but does not obligate them to do so.

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.

NAR continues to deny any wrongdoing and maintains that cooperative compensation is in the best interest of consumers. NAR members can use these changes as an opportunity to explain their clients’ options. Both changes would go into effect in mid-July under the terms of the proposed settlement.

NAR considered a range of legal options throughout the litigation process, including reaching a settlement or continuing to appeal the Sitzer-Burnett verdict and litigate the related copycat cases. The latter could have forced the association to file for Chapter 11 bankruptcy protection, leaving members, associations, MLSs and brokerages exposed.

Resources for Members

NAR is committed to supporting members through these changes. Members can get the facts about the settlement at facts.realtor, which is regularly updated with new information and resources, including FAQs.

For those who want to prepare for the new MLS rule requiring buyer representation agreements, consider taking the Accredited Buyer’s Representative (ABR®) designation course, which NAR is offering to members at no cost through the end of the year.

“This will be a time of adjustment, but the fundamentals remain: Buyers and sellers will continue to have many choices when deciding to buy or sell a home, and NAR members will continue to use their skill, care and diligence to protect the interests of their clients.”

NAR Reaches Agreement to Resolve Nationwide Claims Brought by Home Sellers

The National Association of REALTORS® (NAR) today announced an agreement that would 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 MLSs, and all brokerages with an NAR member as principal that had a residential transaction volume in 2022 of $2 billion or below.

The settlement, which is subject to court approval, makes clear that NAR continues to deny any wrongdoing in connection with the Multiple Listing Service (MLS) cooperative compensation model rule (MLS Model Rule) that was introduced in the 1990s in response to calls from consumer protection advocates for buyer representation. Under the terms of the agreement, NAR would pay $418 million over approximately four years.

“NAR has worked hard for years to resolve this litigation in a manner that benefits our members and American consumers. It has always been our goal to preserve consumer choice and protect our members to the greatest extent possible. This settlement achieves both of those goals,” said Nykia Wright, Interim CEO of NAR.

Two critical achievements of this resolution are the release of most NAR members and many industry stakeholders from liability in these matters and the fact that cooperative compensation remains a choice for consumers when buying or selling a home. NAR also secured in the agreement 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.

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.

In addition to the financial payment, NAR has agreed to put in place a new MLS rule prohibiting offers of broker compensation on the MLS. This would mean that offers of broker compensation could not be communicated via the MLS, but they could continue to be an option consumers can pursue off-MLS through negotiation and consultation with real estate professionals. 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. They are also consistent with the real estate laws in the many states that expressly authorize them.

Further, NAR has agreed to enact a new rule that would require MLS participants working with buyers to enter into written agreements with their buyers. NAR continues, as it has done for years, to encourage its members to use buyer brokerage agreements that help consumers understand exactly what services and value will be provided, and for how much. These changes will go into effect in mid-July 2024.

“Ultimately, continuing to litigate would have hurt members and their small businesses,” said Ms. Wright. “While there could be no perfect outcome, this agreement is the best outcome we could achieve in the circumstances. It provides a path forward for our industry, which makes up nearly one fifth of the American economy, and NAR. For over a century, NAR has protected and advanced the right to real property ownership in this country, and we remain focused on delivering on that core mission.”

“NAR exists to serve our members and American consumers, and while the settlement comes at a significant cost, we believe the benefits it will provide to our industry are worth that cost,” said Kevin Sears, NAR President. “NAR is focused firmly on the future and on leading this industry forward. We are committed to innovation and defining the next steps that will allow us to continue providing unmatched value to members and American consumers. This will be a time of adjustment, but the fundamentals will remain: buyers and sellers will continue to have many choices when deciding to buy or sell a home, and NAR members will continue to use their skill, care, and diligence to protect the interests of their clients.”

The National Association of REALTORS® is America’s largest trade association, representing more than 1.5 million members involved in all aspects of the residential and commercial real estate industries. The term REALTOR® is a registered collective membership mark that identifies a real estate professional who is a member of the National Association of REALTORS® and subscribes to its strict Code of Ethics.