August 17, 2024 was a date of unprecedented and monumental change in America’s real estate industry. On that date, many practices that were standard operating procedure for decades among real estate professionals were forever discarded and replaced as part of a landmark settlement that resolved a high-profile antitrust lawsuit.
For real estate agents and brokers of record, understanding and complying with the National Association of Realtors’ (NAR) new mandatory national Multiple Listing Services (MLS) policies as to disclosure, commission, incentive, documentation, and training is non-negotiable. Failure to follow the new protocols can have dire consequences and put licenses and livelihoods at risk.
The NAR posted extensive information and FAQs on its website that dive deep into the nuances and details of what is now required of agents and brokers of record. The three most significant changes, however, relate to compensation structures and transparency about broker compensation. Here is the NAR’s description of its new policies in this regard:
Offers of Compensation Prohibited on Multiple Listing Services
Multiple Listing Service participants, subscribers, and sellers are prohibited from making any offers of compensation on an MLS to buyer brokers or other buyer representatives. Additionally, an MLS must eliminate all broker compensation fields and compensation information, and it may not create, facilitate, or support any non-MLS mechanism for participants, subscribers, or sellers to make offers of compensation to buyer brokers or other buyer representatives.
Disclosure of Compensation
MLS participants and subscribers must:
- Disclose to prospective sellers and buyers that broker compensation is not set by law and is fully negotiable. This must be included in conspicuous language as part of any listing agreement, buyer written agreement, and pre-closing disclosure documents.
- Conspicuously disclose in writing to sellers and obtain the seller’s authority for any payments or offer of payment that the listing participant or seller will make to another broker, agent, or other representative (e.g., real estate attorney) acting for buyers. This disclosure must include the amount or rate of any such payment and be made in writing in advance of any payment or agreement to pay.
Written Buyer Agreement Required Before Touring a Home
Agents working with a buyer must enter into a written buyer agreement before touring a home in person or through a live virtual tour. To comply with the terms of the settlement, a buyer agreement must:
- Specify and conspicuously disclose the amount or rate of any compensation the MLS Participant will receive from any source or how this amount will be determined.
- Set forth an amount of compensation that is objectively ascertainable and not be open-ended.
- Include a statement that MLS Participants may not receive compensation from any source that exceeds the agreed-upon rate with the buyer.
- Disclose in conspicuous language that broker commissions are not set by law and are fully negotiable.
What Realtors and Brokers of Record Need To Do Now
Failure to follow the new requirements can lead to a host of negative consequences, from hefty fines to NAR sanctions to losing professional licenses. Broadly speaking, industry professionals should take several steps to modify their practices and institute training and education programs to ensure they comply with the new requirements:
- Training and Compliance: The settlement mandates that the NAR and its affiliates implement training programs to educate agents and brokers about the new rules and compliance requirements.
- Monitoring and Enforcement: The settlement requires regular audits and the establishment of a compliance committee to oversee adherence to the new rules.
- Adjustment of Commission Structures: The prohibition against setting minimum commission amounts for buyer’s agents may require brokers of record to reevaluate their commission structures and policies.
If you are a New Jersey real estate professional and have questions about the new requirements brought about by the NAR settlement, please contact Ansell.Law Partner Seth M. Rosenstein. Our team of experienced attorneys often address issues facing the industry and counsel real estate professionals, on an issue-raised basis and as part of ongoing training, compliance and Q&A sessions.
