Since 2019, the National Association of Realtors® (NAR) and various brokerages, state and local Realtor® associations, and MLSes throughout the country have been defending against numerous antitrust lawsuits regarding NAR’s Cooperative Compensation Rule, which required listing brokers to make a blanket, unilateral offer of compensation to all buyer’s brokers via the MLS. These lawsuits were brought by classes of homesellers and homebuyers. On March 15, 2024, NAR reached a tentative settlement (full terms can be found here) on nearly all of the pending cases brought by home sellers, likely releasing NAR and many of their co-defendants from further liability in exchange for certain practice changes and a payment of $418 million.
Realtors® should expect to see the practice changes go into effect around mid-July 2024 and will be required to abide by them. However, the settlement agreement is still subject to final court approval, so it is possible that the deadlines and specific practices outlined below may be modified in the coming months. Keep an eye on Competition in Real Estate (nvar.com) and The Facts for REALTORS® (nar.realtor) for updates, and read on below to prepare for the following practice changes.
For purposes of this article, “Cooperative Compensation” refers to the practice of a listing agent offering a portion of their commission to an agent or representative of the Buyer.
Cooperative Compensation can no longer be advertised on the MLS.
This practice change will likely be the most impactful for the majority of Realtors®. MLSes will be required to remove any fields delineating Cooperative Compensation from all listings. Thus, Realtors® will be prohibited from using the MLS to advertise Cooperative Compensation, including in the “Agent Remarks” section.
Additionally, participating MLSes cannot disclose the listing broker compensation or the total broker compensation (i.e., the combined compensation between both the listing broker and the buyer’s broker).
Cooperative Compensation is no longer required at all.
Members of NVAR are already aware that Cooperative Compensation can be any amount, including zero. However, this practice change has made it explicitly clear that compensation from the listing agent to the buyer’s agent is no longer required to be offered at all, and a listing agent no longer needs to make a ‘blanket, unconditional, and unilateral’ offer to anyone representing a buyer in order to advertise a listing.
Cooperative Compensation can still be advertised off-MLS.
Agents may still communicate Cooperative Compensation, should the Seller authorize their listing agents to offer it, off the MLS. Advertising off the MLS may include methods such as:
Conversations between the listing agent and buyer’s agent, including: meetings, phone calls, texts, and emails (we recommend always having it in writing!)
Brokerage websites
Individual agent websites
Social media
Video platforms
Printed flyers and brochures
Sign riders
Sellers may offer concessions or subsidies towards a Buyer’s closing costs, which can be advertised on the MLS.
Sellers are still free to offer concessions or subsidies towards a Buyer’s closing costs. Buyers can allocate these subsidies towards any closing cost they wish to have covered, which can include the Buyer’s agent’s commission. Listing agents are allowed to advertise the Seller’s subsidies on the MLS.
Important: If a listing is advertising Seller subsidies on the MLS, then the subsidies are prohibited from being limited to or conditioned on the Buyer having or paying an agent. This means the subsidies must be offered to every type of Buyer, regardless of whether they have an agent. Seller subsidies advertised off-MLS are not subject to this same requirement.
Realtors® are prohibited from filtering or restricting MLS listings shown to their clients based on broker compensation.
NVAR has already been advising our members against doing this. It is the client’s choice whether they want to see a listing. Broker compensation must not be a factor in finding your client the best home for them.
Written Buyer-Broker agreements are required before touring a property.
The NAR Settlement additionally requires certain language be in written buyer-broker agreements conspicuously specifying Buyer’s broker’s compensation and how it is to be earned and received. NVAR’s standard forms already include all of this language. NVAR’s forms will likely be updated again by July 2024 to further adhere to these requirements. Please ensure you are always using the latest version of the forms.
Realtors® are prohibited from leaving compensation open-ended in their buyer-broker agreements.
When filling out a buyer-broker agreement, you are PROHIBITED from writing anything ambiguous, vague, or open-ended in the paragraphs relating to broker compensation. NVAR’s standard forms already adhere to this. For example, in the excerpt below from NVAR’s K1338, Exclusive Right to Represent Buyer Agreement, you MUST enter a number into the blank. Realtors® will be prohibited from writing “per MLS” or “whatever the Seller offers.” The goal is to make it very clear to both the Buyer and their agent what will be paid.
Realtors® are not allowed to say their services are free.
This is already a requirement under the NAR Code of Ethics. Article 12, SOP 12-1 states, “REALTORS® must not represent that their brokerage services to a client or customer are free or available at no cost to their clients, unless the REALTOR® will receive no financial compensation from any source for those services.” The language of this Standard of Procedure has now been included verbatim in the NAR Settlement.
Cooperative Compensation must be conspicuously disclosed to Sellers in writing. Seller approval is also needed before making an offer of Cooperative Compensation.
NVAR forms have our members covered! This practice change is already accounted for in our Form K1336, Exclusive Right to Represent Seller Listing Agreement.
Realtors® must conspicuously disclose to prospective Sellers and Buyers that broker commissions are not set by law and are fully negotiable.
Once again, NVAR already has this disclosure in all brokerage representation agreements. Continue informing your clients that commissions are fully negotiable, and if you want to use the disclaimer in your advertising, this is the precise language from our forms:
Broker’s compensation and the sharing of compensation between brokers are fully negotiable and are not fixed, controlled, recommended, or suggested by law or any multiple listing service or association of REALTORS®.
If you have any further questions about the upcoming practices changes or anything regarding the NAR Settlement, please contact the NVAR Legal Hotline.