Phoenix Agent exclusive: NAR chief legal officer discusses legal settlement and what’s next for Realtors

by Agent Publishing

The $418 million litigation settlement by the National Association of REALTORS® (NAR) removes commissions from the MLS and mandates agent agreements with buyers. It also continues to generate questions and discussion across the real estate industry.

NAR’s Chief Legal Officer and Chief Member Experience Officer Katie Johnson addressed some of those questions in an exclusive exchange with Agent Publishing. She delves deeper into what is and is not allowed under the settlement agreement and what exactly is going to change for Realtors going forward.

Will individual brokers be able to post their commissions, including co-op commissions, on their websites? In advertising? On social media? On billboards? What restrictions are there, if any, outside of the MLS?

Brokers will be able to display (off-MLS) offers of compensation on listings from their own brokerage to buyer brokers or other buyer representatives.

Can commissions be posted on third-party apps that use MLS data? Technically not the MLS but also not public.

No. The settlement agreement requires released parties – including REALTOR® association-owned MLSs and independent MLSs that opt into the settlement – to “agree not to create, facilitate, or support any non-MLS mechanism (including by providing listing information to an internet aggregators’ website for such purpose) for listing brokers or sellers to make offers of compensation to buyer brokers or other buyer representatives (either directly or through buyers).”

Will brokerages, including discount brokerages, be able to advertise a set fee?

Yes. 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.

Typically, the MLS has been a way to legally promise payment to a co-op broker. How does NAR see this happening in the future? Has NAR considered a uniform agreement where brokerages promise to pay the co-op commissions?

NAR provides many legal resources, and we will continue to provide guidance and training in line with industry best practice, including as it relates to written agreements. However, it is important to remember that state law dictates contractual arrangements related to the sale of real estate, so to a large extent contracts must be created locally.

Offers of compensation could continue to be an option consumers can pursue off-MLS through negotiation and consultation with real estate professionals.

Compensation would continue to be negotiable and should always be negotiated between agents and the consumers they serve.

How would penalties be enforced? Would this be done at the state level? Will buyer agents and seller agents need their own contract agreements to ensure commission payments are made after each transaction?

Commission disputes among REALTORS® and/or MLS participants can continue to be resolved through arbitration as part of the REALTOR® Code of Ethics and MLS policy.

Ultimately, other than perhaps some additional paperwork and more clear conversations with customers, will this settlement change anything for the typical real estate agent?

The new rules are likely to change the way real estate professionals do business. Right now, it’s too soon to know exactly what those changes will look like in practice.

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.

NAR will continue to provide guidance and training in line with industry best practice to help members adapt to the change to come.

Will NAR be working with Freddie Mac, Fannie Mae and lenders to find ways to finance a buyer’s agent commission?

Financing commissions is not feasible under the current structure of the residential mortgage finance system, and there is no clear short-term legislative or regulatory fix.

NAR is working with our partners in the lending community to gain greater clarity on guidance from the agencies and to maintain the steady flow of funding for closing home purchases.

NAR also continues to advocate for policies that could benefit potential homebuyers and expand opportunities for Americans to achieve homeownership.   

What about VA loans and the prohibition on buyers paying commissions directly?

The VA has not addressed whether it will change its requirement prohibiting VA buyers from paying the commission.

NAR has engaged with the VA on this issue, and we remain committed to working with the VA so that veterans are not left out of the market or forced to consider alternative loan products.

Do you anticipate any problems with this settlement being approved by the court?

There are strong grounds for the court to approve this settlement because it is in the best interests of all parties and class members.

Is the current language in the most-recent contract updates acceptable to meet the terms of this settlement?

The settlement agreement requires that buyer agreements contain the following terms:

  • The amount or rate of compensation the buyer broker will receive or how this amount will be determined.
  • The amount of compensation reflected must be objectively ascertainable and may not be open-ended.
  • The buyer broker may not receive compensation for brokerage services from any source that exceeds the amount or rate agreed to in the agreement with the buyer.
  • Buyer broker agreements must also comply with state law.

Read More Related to This Post

Join the conversation

New Subscribe(3)

  • This field is for validation purposes and should be left unchanged.