Fact, Fiction + FAQ’s: The Truth About the NAR Settlement Agreement

Written By Jackie McLaughlin

The NAR lawsuit and settlement agreement has been a hot topic of conversation in the media lately. It’s pretty complicated overall, and there have been a lot of misconceptions stemming from inflammatory headlines – so we’re here to save you some time and spell out what’s fact + fiction about the case. If you still have questions after reading this, don’t hesitate to shoot us text!

Facts + Fiction:

Fiction: The 6% commission on buying or selling a home is gone.

Fact: Commissions have always been negotiable in real estate transactions. Listing agents and sellers can continue to offer compensation outside of the NAR affiliated MLSs.

Fiction: Sellers no longer need to compensate buyer’s agents.

Fact: Offering buyer agent compensation or concessions is a choice made by a seller in consultation with their listing agent. The commissions have always been negotiable.

Fiction: Buyers no longer need a buyer’s agent.

Fact: Buyers are best protected by professional real estate agents. When making one of the most significant financial transactions of their lifetime, buyers deserve a trusted advisor to guide them through the process and represent their interests.

Fiction: The settlement will change the way Americans buy and sell homes.

Fact: Real estate professionals will continue to help buyers and sellers navigate one of the most costly and complex transactions of their lives.

Fiction: Sellers are now prohibited from offering buyer’s compensation.

Fact: Offering a buyer’s agent commission has always been up to the seller. Sellers can continue to offer compensation to buyer’s agents if they believe it will lead to the best outcome for the sale of their property.

FAQ’s from NAR:

1. Why did NAR enter into this settlement?

  • Since the litigation began, we have worked consistently to reach a resolution with the plaintiffs.

  • We have always wanted to reduce the significant strain on our members and provide a path forward for the industry and, from the beginning of this litigation, we had two goals:

    • Secure a release of liability for as many of our members, associations, and MLSs as we could; and

    • Preservethechoicesconsumershaveregardingrealestateservicesand compensation.

  • This proposed settlement achieves both of those goals and provides a path for us to move forward and continue our work to preserve, protect, and advance the right to real property for all.

2. What are the key terms of the agreement?

  • Compensation offers moved off the MLS: NAR has agreed to put in place a new rule prohibiting offers of compensation on the MLS. Offers of compensation could continue to be an option consumers can pursue off-MLS through negotiation and consultation with real estate professionals. And sellers can offer buyer concessions on an MLS (for example—concessions for buyer closing costs). This change will go into effect in mid-July 2024.

  • Written agreements for MLS participants acting for buyers: While NAR has been advocating for the use of written agreements for years, in this settlement we have agreed to require MLS participants working with buyers to enter into written agreements with their buyers. This change will go into effect in mid-July 2024.

  • Settlement payment: NAR would pay $418 million over approximately four years. This is a substantial sum, and it will be incumbent on NAR to use our remaining resources in the most effective way possible to continue delivering on our core mission. NAR will not change membership dues for 2024 or 2025 because of this payment.

  • NAR continues to deny any wrongdoing: NAR has long maintained — and we continue to believe — that cooperative compensation and NAR’s current policies are good things that benefit buyers and sellers. They promote access to property ownership, particularly for lower- and middle-income buyers who can have a difficult-enough time saving for a down payment. With this settlement, NAR is confident it and its members can still achieve all those goals.

3. How does the settlement affect home sellers and home buyers?

  • This settlement would preserve the choices consumers have regarding real estate services and compensation.

    • After the new rule goes into effect, listing brokers and sellers could continue to offer compensation for buyer broker services, but such offers could not be communicated via the MLS.

    • MLS participants acting for buyers would be required to enter into written agreements with their buyers before touring a home. These agreements can help consumers understand exactly what services and value will be provided, and for how much.

4. How will buyer brokers get paid now?

  • We have long believed that it is in the interests of the sellers, buyers, and their brokers to make offers of compensation — but using the MLS to communicate offers of compensation would no longer be an option.

  • Offers of compensation could continue to be an option consumers can pursue off- MLS through negotiation and consultation with real estate professionals.

  • The types of compensation available for buyer brokers would continue to take multiple forms, depending on broker-consumer negotiations, including but not limited to:

    • Fixed-fee commission paid directly by consumers

    • Concession from the seller

    • Portion of the listing broker’s compensation

  • Compensation would continue to be negotiable and should always be negotiated between agents and the consumers they serve.

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

  • As always, the consumer chooses whether to use a real estate professional. Research has confirmed that consumers find great value in the services provided by a buyer broker, and we continue to believe it is imperative for buyer brokers to clearly articulate what services and value they are providing to consumers.

6. Can a buyer request the listing broker to pay compensation to the buyer broker?

  • Offers of compensation could continue to be an option consumers can pursue off- MLS through negotiation and consultation with real estate professionals. And sellers can offer buyer concessions on an MLS (for example—concessions for buyer closing costs).

  • Compensation would continue to be negotiable and should always be negotiated between agents and the consumers they serve.

7. How would the prohibition of offers of compensation on the MLS affect pending transactions/current deals?

  • The practice changes will go into effect in mid-July 2024.

  • Until the practices changes go into effect, offers of compensation are still permitted on the MLS.

8. Won’t prohibiting offers of compensation on the MLS raise fair housing issues?

  • This settlement allows compensation to remain a choice for consumers when buying or selling a home.

  • NAR continues to believe that offers of compensation help make professional representation more accessible, decrease costs for home buyers to secure these services, increase fair housing opportunities, and increase the potential buyer pool for sellers.

  • The settlement does not change the ethical duties that NAR members owe their clients.

  • REALTORS® are always required to protect and promote the interests of their clients and treat all parties in a transaction honestly (Article 1, COE).

  • NAR members will continue to use their skill, care, and diligence to protect the interests of their clients.

Jackie McLaughlin