NAR FAQ's on the Offer of Compensation - Platinum Realty
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NAR FAQ’s on the Offer of Compensation

May 31, 2024

We know you have a lot of questions regarding the NAR Settlement. Here are some great points regarding the Offer of Compensation. All of the FAQs can be found HERE . Download the below FAQs HERE.

Why was prohibiting the publication of compensation offers in the MLS part of the settlement?

While 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, we also acknowledge that continuing to litigate would have hurt members and their small businesses, so have agreed to put in place a new rule prohibiting offers of compensation on the MLS.

This is consistent with NAR’s long-maintained position that prohibiting all offers of cooperative compensation entirely would harm consumers and be inconsistent with real estate laws in the many states that authorize them. We believe this agreement provides a path forward for our industry and NAR.

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.

Does this mean buyer brokers may have to work for free?

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

  • The types of compensation available for buyer brokers would continue to take multiple forms, 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 represent

How will buyer brokers get paid now?

Offers of compensation will 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, 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 represent

Does this prohibition affect the compensation amount paid to the listing broker?

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

What should listing brokers advise their clients about the prohibition of offers of compensation on an MLS?

Listing brokers should inform their clients that offers of compensation will no longer be an option on an MLS.  This change will not prevent offers of cooperative compensation off an MLS. And it will not prevent sellers from offering buyer concessions on an MLS (ex. concessions for buyer closing costs). Compensation would continue to be negotiable and should always be negotiated between agents and the consumers they serve.

Does this prohibition affect the compensation amount paid to the listing broker?

No. Compensation would continue to be negotiable and should always be negotiated between agents and the consumers they represent, as NAR’s policy has required for decades.

How will offers of compensation be communicated if brokers can’t use MLSs? Doesn’t this just make broker compensation less transparent?

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 that can be used for buyer closing costs).

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. NAR remains dedicated to promoting transparency in the marketplace and working to ensure that consumers have access to comprehensive, equitable, transparent, and reliable property information, as well as the ability to have affordable professional representation in their real estate transactions.

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.

Should active listing or buyer agreements entered into before the MLS policy change be amended to include a conspicuous disclosure that compensation is not set by law and is fully negotiable?

MLS Participants must make this disclosure, but active agreements do not need to be amended to accomplish this. MLS Participants can do a separate disclosure to satisfy the requirement.

Should active listing agreements entered into before the MLS policy change be amended to address the settlement agreement’s prohibition on offers of compensation being communicated on the MLS?

If the listing agreement instructs the listing broker to make an offer of compensation without reference to the MLS, no change to the listing agreement is needed, as the listing broker can comply with that instruction without violating the MLS policy change.

But if the listing agreement specifies that offers of compensation be made “on the MLS,” then the listing broker should work with the seller to amend the listing agreement before the MLS policy change is implemented, to make it clear the listing broker will not make an offer of compensation on the MLS and will not be violating the listing agreement by failing to make an offer of compensation on the MLS.

Can buyers and buyer brokers rely on an offer of compensation that was on the MLS prior to the effective date of the MLS policy changes?

If the sales contract is executed before the MLS policy change, the buyer broker should be able to rely upon the offer of compensation even if closing occurs after the date of the policy change.

But if a sales contract is not executed before the date the participant’s MLS implements the policy changes, the offer on the MLS will not be valid and buyers and buyer brokers may wish to protect themselves in writing with the listing broker or seller through a broker agreement or by including the offer of compensation in the sales contract.

How does this affect the existing listing agreements that require an offer of compensation to be made in the MLS?

After the new rule goes into effect, listing agreements should be amended to reflect that offers of compensation cannot be communicated via the MLS.

The settlement expressly provides that sellers may communicate seller concessions—such as buyer closing costs—via the MLS provided that such concessions are not conditioned on the use of or payment to a buyer broker.

Are non-REALTOR® MLSs affected by the prohibition of publishing compensation offers on the MLS?

Only if they choose to opt into the proposed settlement.

If the seller or the listing broker offers a bonus or financial incentive in addition to the offer of broker compensation, can the buyer broker accept the extra compensation?

The buyer broker may not receive compensation for brokerage services from any source that exceeds the amount or rate agreed to in the agreement with the buyer.

Does Standard of Practice 16-16 prohibit the negotiation of buyer broker compensation in a buyer’s purchase offer?

No. A buyer can always ask their buyer broker to make it a term of an offer to purchase that the seller pay certain compensation to the buyer broker.

Standard of Practice 16-16 prohibits a REALTOR® from attempting to modify the terms of a listing agreement through the terms of an offer because the listing agreement is a contractual matter between the seller and the listing broker. However, the seller and the listing broker may independently choose to amend the listing agreement or take any other action they deem appropriate based on the seller’s negotiations with the buyer. Standard of Practice 16-16 also prohibits a REALTOR® from delaying or withholding delivery of a buyer’s offer while attempting to negotiate a buyer broker compensation. 44. Can a buyer request the listing broker to pay compensation to the buyer broker?

Can an MLS have a Yes/No Compensation Field?

No. The new MLS policies prohibits any information about compensation in the MLS.

Can a listing broker communicate offers of compensation on a broker website which has an IDX or VOW feed?

Yes, MLS Participants may augment MLS data or data feeds with offers of compensation to buyer brokers or other buyer representatives for only listings of their own brokerage.

Can an MLS Participant use or share their MLS data or data feeds to establish or maintain a platform for offers of compensation from multiple brokers and buyer brokers or other buyer representatives?

No, use of MLS data or data feeds to directly or indirectly establish or maintain a platform of offers of compensation from multiple brokers to buyer brokers or other buyer representatives is prohibited.

Can an MLS allow MLS listings to link to a listing broker’s contact information (e.g., telephone number, broker’s preferred communication method)?

Yes.

Can disputes about an offer of compensation still be arbitrated or mediated?

NAR FAQ’s – Offers of Compensation 5-30-24

Yes, REALTORS® are bound to arbitrate or mediate pursuant to Article 17 of the Code of Ethics, and for MLS Participants who are non-REALTORS® they are bound to arbitrate or mediate pursuant to their MLS’s local rules.

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