On March 15, 2024, the National Association of REALTORS® (NAR) entered into a proposed settlement agreement in the antitrust lawsuit. The following questions and answers address what licensees should do in light of the proposed settlement agreement.
Commission
With the current NAR proposed settlement agreement, how should licensees handle commission questions?
Commission is negotiated between the firm and the client on a case-by-case basis. To avoid an appearance that there is a set fee or rate in the industry, it is best to focus only on the firm’s own policies. A firm should focus on its individual services, the benefits for a potential client to work with the firm, and the firm’s company policies and fees.
How should commission be addressed in the listing contract and buyer agency agreement?
Licensees should have a discussion with the consumer about the commission amount when negotiating the listing contract or buyer agency agreement. Licensees should ensure that the consumer understands the commission amount and who pays the commission. The consumer should also understand how the firm earns the commission. Licensees should be comfortable explaining the value of the brokerage services provided by the firm and the amount the firm charges for those services.
Although firms may have policies regarding a minimum amount of commission the firm charges for brokerage services, NAR has cautioned against pre-printing the commission amount in the listing contract and buyer agency agreements. NAR has recommended the commission section of the contract be filled in after having the discussion with the consumer. However, firms may make their own business decisions regarding educating the consumer about commission.
Can a firm market what it charges for commission?
A firm may include the firm’s fees in advertising. To avoid an appearance that there is a set fee or rate in the industry, it is best to focus only on the firm’s own policies and not what other firms may charge for commission. Firms should avoid indicating or implying that there is a set commission rate on any advertising, including social media. Each commission is negotiable on a case-by-case basis. It is advantageous to limit advertising to what the firm will do, what the firm will charge, and the firm’s own business model and services.
Can a firm draft language or create an addendum that addresses commissions?
The firm should consult private legal counsel before making any changes to forms, such as addenda.
Compensation to others in the listing contract
How should listing firms explain the Compensation to Others section of the listing contract to consumers?
The amount of cooperative commission is determined on a case-by-case basis and is documented in the Compensation to Others section of the listing contract entered into between the seller and listing firm. The firm and seller may negotiate a range of compensation offered to cooperating firms.
NAR has cautioned against pre-printing the Compensation to Others amount in the listing contract to avoid the perception of a fixed amount of cooperative compensation. NAR has recommended licensees discuss and explain the Compensation to Others section of the listing contract and then complete the Compensation to Others amount. Firms may make their own decisions regarding educating the consumer about offers of compensation. However, caution must be taken as a conversation with a seller could have antitrust implications to say competitors are setting fixed amounts of cooperative commission.
Can firms post the offer of compensation in the broker remarks on the MLS or on a different internet platform?
Firms should not post the offer of compensation on the MLS at all. Firms should also refrain from discussing ways to work around the proposed new rule prohibiting offers of compensation on the MLS.
Steering
Can a buyer’s firm disclose to a buyer client the amount of cooperative commission that is being offered by the listing firm? How should the buyer’s firm discuss this with the buyer client without a potential steering violation?
The concern with steering as it relates to commissions is agents steering buyers away from listings where there is a lower offer of compensation. If a firm has a buyer client, this may be less of a concern due to the nature of the WB-36 Buyer Agency Agreement, which states that any amount received from the seller or the listing firm reduces what the buyer client owes to the buyer’s firm. A buyer’s agent should, however, be wary of filtering properties for a buyer’s consideration based on whether the offer of compensation will cover the entire buyer agency fee. Rather, the agent should have a discussion with the buyer regarding the buyer’s responsibility to pay the buyer agency fee even if the property the buyer chooses does not have an offer of compensation large enough to eliminate the buyer agency fee.
An agent working with a buyer client may disclose to the buyer client what is being offered on a listing in which the buyer has an interest. Knowing the buyer’s final expense for their firm’s commission after receipt of any offer of compensation by the listing firm may play into the buyer’s overall financial analysis of the transaction.
Should the buyer client direct the firm to not provide or show properties where the buyer agency fee would not be paid in full by the offer of compensation from the listing firm, then the firm may comply with the client’s directive. In other words, it is possible the buyer client might indicate that payment of the buyer agency fee is one of the buyer’s property search criteria.
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