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A nationwide settlement proposed by the National Association of Realtors in multiple antitrust commission cases would require brokers and agents to sign contracts with buyers they “work with” before they “visit any home.” But what does this mean?
Katie Johnson
NAR Chief Legal Officer Katie Johnson responded to this and several other questions in an email to NAR members on Monday and spelled out how the deal will impact its local members. In the email, Johnson introduced members to NAR’s facts.realtor website and updated FAQ page, noting that answers to questions about buyer representation agreements are listed in questions 46 through 62 on that page.
“We will issue additional guidance in the coming days regarding the timing of practice changes required in the settlement agreement,” Johnson added.
“As a reminder, we received preliminary approval of the settlement agreement on April 24, which remains subject to final court approval. A final approval hearing is scheduled for November 26, 2024.
Michael Kagemak
Michael Ketchmark of Ketchmark & McCreight, lead plaintiffs’ attorney for Sitzer | Burnett Case, declined to comment on NAR’s interpretation of the settlement agreement.
“By law, once a settlement is ultimately approved, anyone covered by the agreement must comply,” Kechmark said. “As class counsel, if we believe someone is not complying with the agreement, we can take appropriate action.”
“Collaborate” with buyers
Under the proposed settlement, merely marketing your services to a buyer or merely speaking to a buyer on behalf of a seller (e.g., showing a client’s listing at an open house or to an unrepresented buyer) does not mean you are “working with the buyer” ”, according to NAR’s FAQ.
But the trade group said providing actual brokerage services to buyers – identifying potential homes, arranging showings, negotiating for buyers, presenting buyers’ offers or providing other services to buyers – counts as “working with buyers.” .
“If an MLS participant works solely as an agent or subagent for the seller, then the participant is not ‘working with the buyer,'” the FAQ states.
“In this case, no agreement is required because the participants work for the seller, not the buyer.”
Alternatively, in the case where the agent is an authorized dual agent and/or in the case of a designated agent, the agent represents both the buyer and the seller but has a different agent working with both parties and he or she also works with the buyer as the seller , so a contract needs to be signed before family travel.
According to the NAR, a written buyer’s agreement is required when an MLS participant performs “ministerial acts,” but is not required if the participant does not expect to be compensated for those actions and does not show the buyer the home. Inman has asked NAR about the “ministerial bill” it refers to and will update this story when we hear back.
“Tour” a home
First, according to the FAQ, a home is a residential property with one to four dwelling units.
“A home tour is when a buyer and/or MLS participant or other agent enters the home under the direction of the MLS participant working with the buyer,” the FAQ reads.
“This includes an MLS participant or other agent entering the home with the buyer under the direction of the MLS participant to provide an on-site virtual tour for buyers who are not on site.”
A written agreement does not necessarily mean a written mechanism protocol
Although many interpret the requirements of the buyer’s agreement as mandatory mechanism According to NAR, this is not the case.
“MLS participants and buyers will still be able to enter into any type of professional relationship permitted by state law,” the FAQ states.
“NAR policy does not provide for:
- The type of relationship the Professional has with the potential buyer (e.g., agency, non-agency, subagency, transactional, client).
- The length of the agreement (e.g., one day, one month, one house, one zip code).
- Services provided (e.g. ministerial conduct, presentation of a certain number, negotiation, making an offer).
- Compensation charged (e.g., $0, X flat fee, X percentage, X hourly rate).
However, the compensation fee charged must be clearly stated in the agreement.
Under the proposed settlement, if the agent or broker will receive compensation from any source, the written agreement with the buyer must specify the amount or rate of compensation to be received or how the amount will be determined, but the amount must be “objectively ascertainable.” And it cannot be “open”. For example, the settlement says the contract cannot provide that “the buyer’s agent’s compensation shall be any amount provided by the seller to the buyer.”
Additionally, the transaction provides that the agent or broker may not receive compensation for brokerage services in excess of the amount or rate agreed upon in the agreement with the buyer.
But this does not mean that the brokerage firm can only enter into an agreement with the buyer, and again the FAQ mentions that there are no contractual components specified in the NAR policy.
The FAQ adds: “Salary remains negotiable and should always be negotiated between the MLS participant and the buyer they are working with.”
Effective agreements should be modified before MLS policy changes
While the policy changes in the proposed settlement are expected to be enacted in late July, if an agent or broker will be working with a buyer after the policy takes effect, he or she “should take steps to ensure that the buyer agrees to what the settlement agreement requires.” necessary terms,” the FAQ says. This includes clauses where compensation is not currently “objectively determinable” or is “indefinite”, or which allows the buyer’s agent to withhold any compensation offer in excess of the amount agreed with the buyer.
According to the FAQ, MLS participants will be required to disclose that compensation is not required by law and is fully negotiable, but they can disclose this individually and therefore do not have to amend the valid agreement to add that disclosure.
For active listing agreements, if the agreement tells the listing broker to provide compensation to the buyer’s agent without reference to the MLS, the agreement does not need to be changed.
“However, if the listing agreement provides for a compensation offer to be made ‘on the MLS,’ then the listing broker should work with the seller before the MLS policy change is implemented to amend the listing agreement to make it clear that the listing broker will not make a compensation offer on the MLS , and will not breach the listing agreement by failing to make a compensating offer on the MLS,” the FAQ reads.
Send an email to Andrea V. Brambila.
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