The recent National Association of Realtors (NAR) settlement has sparked a lot of discussions and questions among home buyers, sellers, and real estate professionals. These changes are critical for real estate agents to understand and implement. Here, we address some frequently asked questions to help navigate these changes. Frequently Asked Questions
When Will the NAR Settlement Practice Changes Take Effect?
According to NAR, the practice changes will be enforced starting on August 17, 2024. Please note that Seller MLS will begin enforcing the practice changes starting August 6, 2024. Brokers and Agents should be fully prepared for these changes to ensure compliance and avoid any operational disruptions.
Will Listing Agreement Forms Be Updated?
Yes, the listing agreement forms will be updated and are expected to be released soon. Agents should familiarize themselves with these new forms and integrate them into their business practices promptly.
What Happens with Outstanding Listings?
Effective August 6th, 2024, compensation fields will no longer be visible on the MLS. Brokers and Agents must review all active, pending, and temporarily off-market (TOM) listings to ensure that any references to compensation are removed from attachments and text fields, including Realtor Remarks, Private Remarks, ShowingTime instructions, and any other applicable text fields. If, however, a fully executed purchase agreement is in place prior to August 6, 2024, the offer of compensation will remain valid and enforceable.
Can Offers of Compensation Be Listed on Brokerage Websites and Other Platforms? Frequently Asked Questions
Yes, offers of compensation can be listed on brokerage websites and other platforms, such as Zillow, but they cannot be displayed on the Multiple Listing Service (MLS). This distinction is important for compliance with the new regulations.
When Do You Need to Use a Buyer Brokerage Agreement (“BBA”)?
A Buyer Brokerage Agreement (BBA) becomes necessary when a REALTOR® provides brokerage services to a Buyer, including, but not limited to, touring a home. If the REALTOR® is merely holding an open house or granting an unrepresented Buyer access to a listed house, a BBA is not needed. However, if brokerage services commence, a BBA is required.
What Constitutes “Brokerage Services”?
Brokerage services include:
- Identifying potential properties for the Buyer
- Arranging property tours
- Facilitating negotiations on behalf of the Buyer
- Presenting offers by the Buyer
- Other similar services performed on the Buyer’s behalf
Can the BBA Provide a Percentage Range for Commission?
No, the compensation amount must be specific and ascertainable. It cannot be presented as a range.
Does the Listing Agent Need to Receive a Copy of the BBA?
The Listing Agent does not need a copy of the BBA. However, the BBA should be provided to the Closing Agent to ensure the commission is included on the settlement statement at closing.
Can the BBA Be Revised/Updated to Reflect a New/Higher Percentage? Frequently Asked Questions
Yes, BBAs can be modified to reflect a new or higher percentage of compensation to the Buyer’s Broker. A Modification to Exclusive Buyer Brokerage Agreement/Showing Agreement was just released on July 23, 2024.
Real World Examples:
- If a Buyer signs a BBA stating they will pay a 1% commission to the Buyer’s Broker while the Seller offers 3%, the Buyer’s Broker can only receive 1% unless the BBA is revised to show the Buyer’s Broker may receive 3%.
- In the example above, if the Buyer’s Broker receives only the 1% agreed upon in the BBA, the handling of the additional 2% depends on the terms of the Listing Agreement. If the Listing Agreement provides that the total commission offered by Seller is 6% and does not limit what the Listing Broker is entitled to, the Listing Broker would receive the additional 2% for a total of 5% commission. However, if the Listing Agreement provides that the total commission offered by the Seller is 6% but limits the Listing Broker to receiving 3% when there is a Buyer’s Broker involved, then the Listing Broker would receive 3%, and the Buyer’s Broker would receive 1%. In this instance, the Seller does not have to pay the additional 2% commission.
- If the Buyer signs a BBA stating they will pay a 3% commission, but the Seller offers 1%, the Buyer must cover the difference of 2% or revise the BBA to reduce it to 1%.
Adapting to regulatory changes is crucial for real estate agents to maintain compliance and continue providing excellent service. By understanding these new rules and integrating them into your business, you can ensure a smooth transition and avoid potential pitfalls. Stay informed, be prepared, and reach out to your trusted real estate attorney to navigate these changes effectively.
