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After the National Association of Realtors came to a proposed settlement of multiple antitrust commission lawsuits in March, NAR President Kevin Sears was blunt about the changes the deal required.
“Some of this stuff, it sucks,” Sears told a roomful of real estate brokers at NAR’s midyear conference in May. “I get it.”
He went on to say that he did not think it was a good idea to remove buyer broker compensation from multiple listing services, which is one of the settlement’s mandates. “It sucks that it has to change,” he said.
Now, as NAR’s Aug. 17 deadline for MLSs to implement the deal’s changes approaches, the 1.5 million-member trade group has released buyer and seller guides last week that tout the changes as a “benefit” to consumers.
“NAR’s recent settlement has led to several changes that benefit homebuyers, and we wanted to clearly lay them out for you,” NAR said in a guide titled, “Homebuyers: Here’s What the NAR Settlement Means for You.”
A guide titled “Home Sellers: Here’s What the NAR Settlement Means for You,” contains nearly identical wording: “NAR’s recent settlement has led to several changes related to broker commissions that benefit sellers, and we wanted to clearly lay them out for you.”
NAR released the guides the same day Sears appeared at Inman Connect Las Vegas and received a mixed reception from attendees, whose views differed on how beneficial NAR has been for its dues-paying members.
In the wake of a multibillion-dollar jury verdict against NAR and major real estate franchisors in October, the trade group has struggled with its messaging to consumers and its members and has repeatedly cast the media as a villain in its efforts to defend the practice of cooperative compensation.
None of NAR’s hostility toward the settlement changes comes across in its new buyer and seller guides. The buyer guide lists several items on what the deal means for homebuyers, including:
You will sign a written agreement with your agent before touring a home.
Before signing this agreement, you should ensure it reflects the terms you have negotiated with your agent and that you understand exactly what services and value will be provided, and for how much.
The buyer agreement must include four components concerning compensation:
- A specific and conspicuous disclosure of the amount or rate of compensation the real estate agent will receive or how this amount will be determined.
- Compensation that is objective (e.g., $0, X flat fee, X percent, X hourly rate)—and not open-ended (e.g., cannot be “buyer broker compensation shall be whatever the amount the seller is offering to the buyer”).
- A term that prohibits the agent from receiving compensation for brokerage services from any source that exceeds the amount or rate agreed to in the agreement with the buyer; and,
- A conspicuous statement that broker fees and commissions are fully negotiable and not set by law.
The guides do, however, make sure to let both buyers and sellers know that sellers may still offer to pay buyer agents.
“The seller may agree to offer compensation to your agent,” the buyer guide reads. “This practice is permitted but the offer cannot be shared on a Multiple Listing Service (MLS)— MLSs are local marketplaces used by both buyer brokers and listing brokers to share information about properties for sale.
“You can still accept concessions from the seller, such as offers to pay your closing costs.”
At Inman Connect last week, clashing interpretations of the NAR settlement changes were clear, particularly in regard to cooperative compensation, also known as commission-sharing. At NAR’s midyear conference, the trade group’s legal team promoted the practice, detailed ways that listing brokers could advertise offers of compensation to buyer brokers outside of the MLS, and encouraged buyer agents to contact listing agents prior to showing a property to inquire about offers of compensation.
But panelists at Inman Connect discouraged the practice, which would also seem to go against what the U.S. Department of Justice has indicated they want to see happen: no offers of compensation from listing brokers to buyer brokers made anywhere so that the seller and listing agent have no influence on the amount buyers pay their agents.
The panelists favored having listing agents concern themselves solely with their own fee, buyer agents negotiate their compensation with buyers before showings, and buyers asking, if needed, for their agent’s compensation in a purchase offer, which the DOJ has specifically said would be permissible. The California Association of Realtors recently released new transaction forms that no longer support broker-to-broker offers of compensation, following an inquiry from the DOJ.
In contrast, NAR’s seller guide doubles down on the practice of pre-emptive offers of compensation to buyer brokers, telling sellers it’s a way to market their home and make their listing more attractive to buyers.
The guide states:
- You still have the choice of offering compensation to buyer brokers. You may consider doing this as a way of marketing your home or making your listing more attractive to buyers.
- Your agent must conspicuously disclose to you and obtain your approval for any payment or offer of payment that a listing broker will make to another broker acting for buyers.
- This disclosure must be made to you in writing in advance of any payment or agreement to pay another broker acting for buyers, and must specify the amount or rate of such payment.
- If you choose to approve an offer of compensation, there are changes to how this can happen.
- You as the seller can still make an offer compensation, but your agent cannot include it on a Multiple Listing Service (MLS)—MLSs are local marketplaces used by both buyer brokers and listing brokers to share information about properties for sale.
- Your agent can advertise your listing via off-MLS platforms such as social media, flyers and websites.
- You as the seller can still offer buyer concessions on an MLS (for example, concessions for buyer closing costs).
Neither guide named alternative ways that buyer agents could be paid, other than through offers made by the seller, or the possible implications of those alternative ways.
As the real estate industry goes through a major change after Aug. 17, it remains to be seen which rule interpretations and practices will prevail, whether they will pass muster for antitrust regulators such as the DOJ, and what consumers will make of the contrasting messages being lobbed at them.
NAR did not respond to multiple requests for comment for this story.
