Navigating the New NAR Settlement: How Exclusive Buyer Agreements Benefit REALTORS® and Clients

The real estate landscape is evolving, and recent changes by the National Association of REALTORS® (NAR) aim to benefit both agents and clients. Starting August 17, new guidelines will require a written agreement between REALTORS® and their buyers before any property tours. This approach fosters professionalism and clarity in transactions.

Key Changes Under the NAR Settlement

The NAR settlement introduces several important changes to promote transparency and fairness in real estate dealings:

  1. Elimination of Mandatory Offers of Compensation: Compensation terms will be clearly agreed upon directly between parties, eliminating mandatory offers in MLS listings.

  2. Mandatory Written Agreements: Buyers must now sign a written agreement with their REALTOR® before viewing properties, setting clear expectations and formalizing the relationship.

  3. Prohibition of Non-MLS Compensation Mechanisms: The use of MLS data to create compensation platforms is prohibited, ensuring all arrangements are transparent.

  4. Disclosure Requirements: REALTORS® must disclose compensation details to all involved parties, promoting transparency in financial aspects.

  5. Implementation Timeline: MLSs must adopt these changes by September 16, 2024, with REALTOR®-owned MLSs required to comply by August 17, 2024.

Frequently Asked Questions

Does this mean buyers won’t have to use a buyer broker to purchase a property?

Consumers will always have the choice of whether to use a real estate professional. Research shows that consumers find great value in the services provided by buyer brokers. It remains essential for buyer brokers to clearly communicate the services and value they offer.

Does this mean buyer brokers may have to work for free?

No. While the MLS will no longer communicate offers of compensation, various compensation options remain, such as:

  • Fixed-fee commission paid directly by consumers
  • Seller concessions
  • A portion of the listing broker’s compensation

How will buyer brokers get paid now?

Compensation will continue to be negotiated directly between agents and their clients. Offers of compensation can still be made off-MLS through consultation with real estate professionals.

Why was prohibiting the publication of compensation offers in the MLS part of the settlement?

While NAR believes that cooperative compensation benefits buyers and sellers, continuing litigation would harm members and their businesses. This settlement provides a path forward, maintaining that compensation negotiations should always occur directly between agents and consumers.

Does this prohibition affect the compensation amount paid to the listing broker?

No, compensation should always be negotiated between agents and their clients.

What should listing brokers advise their clients about the prohibition of offers of compensation on an MLS?

Listing brokers should inform their clients that offers of compensation will no longer be an option on an MLS. However, this change does not prevent offers of cooperative compensation off-MLS or sellers from offering buyer concessions (e.g., for closing costs). Compensation will remain negotiable and should be discussed between agents and their clients.

How will offers of compensation be communicated if brokers can’t use MLSs?

Offers of compensation can still be made through direct negotiation and consultation with real estate professionals. Sellers can also offer buyer concessions on an MLS. The settlement does not change REALTORS®’ ethical duties to protect and promote their clients' interests and to treat all parties honestly.

Won't prohibiting offers of compensation on the MLS raise fair housing issues?

This settlement allows compensation to remain a consumer choice when buying or selling a home. NAR believes that offers of compensation help make professional representation more accessible, decrease costs for homebuyers, increase fair housing opportunities, and expand the potential buyer pool for sellers.

If the seller or the listing broker offers a bonus or financial incentive in addition to the broker compensation, can the buyer broker accept it?

The buyer broker may not receive compensation exceeding the amount agreed upon in the agreement with the buyer.

Does Standard of Practice 16-16 prohibit the negotiation of buyer broker compensation in a buyer’s purchase offer?

No. Buyers can always ask their broker to include compensation terms in an offer. Standard of Practice 16-16 prohibits modifying a listing agreement's terms through an offer, but sellers and brokers can amend the agreement independently.

What provisions must be included in written buyer agreements?

Written agreements must include:

  • A specific disclosure of the compensation amount or rate the broker will receive or how it will be determined.
  • Compensation amount that is objectively ascertainable and not open-ended.
  • A prohibition on receiving compensation exceeding the agreed amount.
  • A statement that broker fees and commissions are not set by law and are negotiable.

The Benefits of Exclusive Buyer Agreements

Mandatory Exclusive Buyer Agreements (EBAs) offer several advantages for both REALTORS® and clients:

  1. Enhanced Commitment: EBAs ensure mutual commitment, encouraging a more dedicated and personalized service from your REALTOR®.

  2. Professionalism and Trust: A written agreement builds trust and professionalism, clarifying obligations and duties, which enhances the overall experience.

  3. Protection and Clarity: EBAs outline roles and responsibilities clearly, preventing misunderstandings and ensuring a smoother transaction process.

  4. Non-Refundable Retainers (Optional): REALTORS® can collect non-refundable retainer fees for their services, ensuring they are compensated for their time and effort even if the transaction doesn't close. Note that these retainers are optional and not required.

  5. Legal and Ethical Standards: EBAs reinforce adherence to legal and ethical standards, including fair housing practices, boosting the REALTOR®'s reputation and trustworthiness.

How Buyers Benefit from Exclusive Buyer Agreements

  1. Clear Expectations: Buyers know exactly what to expect from their REALTOR®, leading to a more efficient and satisfying home-buying experience.

  2. Dedicated Service: With an EBA, buyers receive focused attention and tailored service from their REALTOR®, enhancing their chances of finding the perfect home.

  3. Transparency: The agreement ensures that all compensation details are disclosed upfront, eliminating surprises and fostering trust.

  4. Protection: The EBA protects buyers by clearly outlining the duties and responsibilities of the REALTOR®, ensuring they receive the highest standard of service.

Implementing the New Guidelines

To make the most of these changes, REALTORS® should:

  1. Educate Clients: Explain the benefits and importance of signing an Exclusive Buyer Agreement to protect their interests and ensure dedicated service.

  2. Use Standard Forms: Utilize standardized forms provided by NAR or local associations to ensure compliance with new regulations.

  3. Collect Retainer Fees (Optional): Clearly communicate the purpose of non-refundable retainer fees, ensuring clients understand their value.

  4. Maintain Transparency: Disclose all compensation details and potential conflicts of interest to build trust and ensure a smooth transaction process.

  5. Stay Informed: Keep up-to-date with NAR communications and training regarding these changes to ensure compliance and best practices.

The new NAR settlement marks a significant shift in the real estate industry, promoting transparency, fairness, and professionalism. By leveraging Exclusive Buyer Agreements, REALTORS® can enhance their service offerings, build stronger client relationships, and navigate the evolving market with confidence.