The National Association of Realtors agreed late last week to pay $418 million in damages, to settle the commission lawsuits. Additionally, NAR agreed to abolish the ‘Participation Rule’, which required listing agents to make an offer of compensation to buyer’s agents.
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The settlement and rule changes will potentially change how future sellers and buyers transact with each other, and how agents will be compensated.
Today we’ll discuss how these changes could change standard practices, and we’ll talk about how to have effective conversations with your buyer and seller clients in this new environment. By the end of this podcast, you’ll understand the facts of the settlement agreement and become immune to the dramatic (and incorrect) headlines flashing across your screens this week.
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1. What are the terms of the lawsuit settlement? Let’s get the facts down. NAR’s attorneys approved the settlement agreement a few days ago. It will get filed in court and will be subject to court approval in the next couple of weeks. According to the National Association of Realtors, this settlement ends ALL of the litigation claims brought by home SELLERS, over one million NAR members, all state or territorial and local Realtor associations, all association-owned MLSs and brokerages with a NAR member as a principal having transaction volume of $2 billion or lower in 2022.
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It does NOT end the lawsuits filed by BUYERS. Those suits are known as Batton 1 (filed back in 2021), and Batton 2 (filed in Nov 2023).
By settling, the plaintiffs in the Sitzer/Burnett case in Missouri are releasing NAR from the jury verdict in that case. That’s the one that you heard about back on Halloween last year. In exchange, NAR will not appeal the case.
2. Seriously, $418 million? The $418 doesn’t get paid all at once. It will be paid over four years, and deposited into a trust account that the courts control.
3. What rules change for real estate agents and brokers as a result of this settlement agreement?
The settlement calls for NAR to be banned from creating or enforcing any rules that allow a listing agent to set the compensation for a buyer’s agent. All fields that you’re used to seeing list the broker compensation will be eliminated.
NAR has been specific in stating that just because they’re settling, it is NOT an admission of guilt, and that cooperative compensation is still ‘allowed’ as long as it is ‘off the MLS’.
Also, there is a new ban stating agents are no longer required to subscribe to MLS to offer or accept commissions.
Here’s the most important part: All MLS members working with buyers MUST enter into a written buyer/broker agreement. According to the National Association of Realtors, these changes go into effect sometime in July 2024.
As a coaching organization, we have always, for years and years, over thousands of podcasts, and tens of thousands of coaching sessions, and our real estate career advocated for, coached, and taught agents and brokers to use a buyer-broker agreement.
In Premier and Elite Coaching, our coaching members have a turn-key, buyer presentation which results in a signed exclusive buyer representation agreement. Together with your state-promulgated legal forms, you have honest, ethical, and transparent agreements with the buyer clients you represent.
4. How do you comply with the new rules and still receive compensation for your hard work on the buyer side of the transaction? NAR states that buyer brokers have several ways of receiving compensation: a fixed-fee commission paid directly by the buyer, -home seller concessions, -or part of the listing broker’s commission.
Remember that asking for the buyer-side commission to be paid has long been a standard practice when working with For Sale By Owners and Builders. Most boards of Realtors already have forms for these types of agreements. Now it is normalizing for the standard transactions.
Fact: Agents should all have been presenting and educating buyers in the same fashion as sellers for years. Many of our listeners and certainly our coaching clients have little or no trepidation regarding these changes in practice. It comes down to knowing and being able to articulate your VALUE to your prospects and being willing to CLOSE for a signature on the buyer-broker agreement. The definition of ‘close’, is the logical ending to a great presentation. Are you presenting to your buyers what your value is?
