Home Sellers: Here's What the NAR Settlement Means for You

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The National Association of REALTORS has published the following on its website concerning what the NAR settlement means for all home sellers.  It is also fully expected that California will sign into law in 2025 that all licensed agents (not just REALTORS) will be required to form written agreements with their buyers before viewing properties with them, physically or online.  Note that August 17 is the practice change date for  all REALTORS nationally:
 

What Does the NAR Settlement Mean for Homebuyers Starting August 17th?

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The National Association of REALTORS has published the following on its website concerning what the NAR settlement means for all homebuyers.  In addition, it is fully expected that California will sign into law in 2025 that all licensed agents (not just REALTORS) will be required to form written agreements with their buyers.  Note that August 17 is the practice change date for  all REALTORS nationally.

                                                                                                   

Buying a home is one of the largest financial transactions most people will ever undertake. Agents who are REALTORS® are a trusted source of advice and stand ready to help you navigate your homebuying journey and make the choices that work best for you. NAR’s recent settlement has led to several changes that benefit homebuyers, and we wanted to clearly lay them out for you.

Here is what the settlement means for homebuyers:

• 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:

1. 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.
2. 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”).
3. 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,
4. A conspicuous statement that broker fees and commissions are fully negotiable and not set by law.

• Written agreements apply to both in-person and live virtual home tours.
• You do not need a written agreement if you are just speaking to an agent at an open house or asking them about their services.
• The seller may agree to offer compensation to your agent. 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.

These practice changes will go into effect August 17.

Here is what the settlement doesn’t change:

• Agents who are REALTORS® are here to help you navigate the homebuying process and are ethically obligated to work in your best interest.
• Compensation for your agent remains fully negotiable, and if your agent is a REALTOR®, they must abide by the REALTOR® Code of Ethics and have clear and transparent discussions with you about compensation. When finding an agent to work with, ask questions about compensation and understand what services you are receiving.
• You have choices. Work with your agent to understand the full range of these choices when buying a home, which will help you make the best possible decision for your needs.

If you are an unrepresented buyer and would like to discuss working with an agent or find out more information about a buyer broker agreement, please feel free to contact me without obligation.

Julia Huntsman, REALTOR, Broker | http://www.abodes.realestate | 562-896-2609 | California Lic. #01188996

Rules About Broker Compensation Are Changing -- Everywhere

Broker compensation is not going away, but it will be handled in a different way than has been the previous long-established practice.  

As of August 13, 2024, revised California REALTOR forms for residential real estate are going into effect, as well as the way listings are entered into CRMLS.  These changes are the result of a nationwide settlement entered into between the National Association of REALTORS and the Department of Justice as the result to lawsuits which were filed in other states.  "To remain compliant with the settlement, CRMLS must remove all compensation fields from the MLS. Compensation negotiations will not be allowed in the MLS in any way, shape or form." - CRMLS.   Because compensation is being removed from the MLS, it is handled separately in one of the following ways, or a combination thereof:

     a) when the buyer includes a term in the offer stating the Seller will pay the Buyer Broker fee. Assuming the seller agrees, the Buyer Broker fee becomes part of the complete purchase agreement. Additionally, if using the C.A.R. Residential Purchase Agreement and Joint Escrow Instructions (RPA), the payment would also become part of the Escrow instructions.

    b) when the buyer directly compensates the buyer agent, i.e., per terms in the C.A.R. buyer/broker agreement required to be in place prior to an agent showing property to a buyer, a requirement as of August 13, 2024.

    c) or compensation from the listing agent (not made through the MLS).

This is not a practice change only in California, it is nationwide for all REALTORS that entered into the settlement, which is more than one million National Association of REALTORS members, MLS members and other qualifying brokers.

REALTORS in California have always used a listing contract which explained how compensation occurred, and will continue to do so. A seller should expect to get a clear understanding as well under the new practices when they are contemplating selling their property and going over a listing contract. 

The same holds for buyers who are now required to enter into an agreement with their brokers -- additionally, it's anticipated that this will become a California state law in 2025.

Julia Huntsman, REALTOR, Broker | http://www.abodes.realestate | 562-896-2609 | California Lic. #01188996