Upcoming NAR Practice Changes Due to Commission Lawsuit Settlements

The National Association of REALTORS® (NAR) has mandated significant practice changes, effective by August 17, 2024, as a result of the recent commission lawsuit settlements.

These changes are designed to enhance transparency in real estate transactions and redefine compensation structures between brokers and consumers. However, it's important to note that some REALTOR® Boards are requiring these changes to be implemented even earlier. For example, Canopy MLS in Charlotte is requiring these changes to be implemented by 8/1. Brokers should check with their local boards to confirm specific deadlines.

Key Changes in Compensation Practices

Starting August 17, 2024, all compensation fields will be removed from REALTOR® MLS systems. This includes fields such as Buyer Agent/Sub Agent Compensation, Compensation Remarks, and Bonus fields. Furthermore, any references to "compensation" or "commission" in any remarks field are strictly prohibited. Brokers are also not allowed to upload documents offering compensation into the MLS.

Once compensation disclosures are no longer allowed in the MLS, you will need to contact listing brokers directly to find out if their sellers are offering co-broker compensation for their listings and, if so, how much.

Pending Transactions

For pending transactions as of August 17, brokers may rely on the compensation details listed in the MLS prior to its removal. However, to avoid any confusion, it is recommended to execute the NC Form 220 (Confirmation of Compensation) or SC Form 120 (Compensation Agreement) before this date.

NC Form 220: This form, titled "Appointment Confirmation & Compensation Agreement," establishes an agreement for cooperating compensation between the listing firm and the selling firm. It specifies the fee to be paid, how it will be earned, and when it is due. It also outlines the terms for the effectiveness, expiration, and enforcement of the agreement. You can get a copy of this form from your local REALTOR board.

Buyer Agreements and Required Disclosures

As of August 17, a written buyer agreement must be established with a potential buyer before touring a home. REALTORS® should familiarize themselves with the NC REALTORS®’ Written Buyer Agreements and New MLS Policies to ensure compliance.

NC Form 715: This form, "Agency Agreement Amendment and Disclosure," is used to amend existing agency agreements to comply with the new rules effective August 17, 2024. It includes:

• Compensation Disclosure: Clarifies that the amount, format, or rate of real estate compensation is not fixed by law and is negotiable.

• Additional Compensation: Requires timely disclosure and client consent if any additional compensation is offered that exceeds the agreed amount.

You can get a copy of this form from your local REALTOR board.

Preparing for the Changes

To ensure a smooth transition, REALTORS® are advised to take the following steps:

1. Review Existing Agreements: Amend existing NC agency agreements using NC Form 715 or execute new compliant agency agreements by August 1.

2. Educate Clients: Inform clients about the upcoming changes and how it affects their transactions.

3. Verify Compliance Deadlines: Confirm specific implementation deadlines with local REALTOR® boards that you are a member of.

By proactively addressing these changes, REALTORS® can ensure compliance and continue to provide exceptional service to their clients. Stay informed, stay prepared, and navigate these changes with confidence.

Do you plan to contact listing agents before OR after showing properties to clients to find out if they are offering a co-broker commission? Let us know in the comments or share with a colleague in an upcoming CE class!

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References

Canopy MLS. "NAR Proposed Settlement Resources." Canopy Realtor Association.