The NAR Settlement is a landmark agreement that emerged from a series of high-profile lawsuits targeting the National Association of Realtors (NAR) over broker commissions. These lawsuits claimed that NAR’s rules around how real estate agents are compensated were anti-competitive and unfair to consumers, particularly home sellers.

Faced with these legal challenges, NAR decided to settle rather than continue the lengthy and costly litigation process. The settlement, while not an admission of wrongdoing, represents a significant shift in how real estate transactions will be conducted moving forward. The primary focus of this settlement is on increasing transparency and giving buyers and sellers more control over how commissions are negotiated and paid.

So, why did NAR agree to this settlement? The decision was driven by two main goals: to protect NAR’s members—over a million Realtors nationwide—from potential liability, and to ensure that consumers continue to have choices when it comes to real estate services. By settling, NAR aimed to provide a clear path forward for the industry, allowing everyone to focus on what they do best—helping people buy and sell homes—without the cloud of ongoing litigation hanging over their heads.

At the heart of the settlement are several key changes. One of the most significant is the removal of compensation offers from Multiple Listing Services (MLS). This means that the compensation a buyer’s agent will receive is no longer automatically displayed on an MLS listing. Instead, compensation will be negotiated directly between the buyer and their agent. Additionally, the settlement introduces a requirement for written agreements between buyers and their agents before they even tour a home, ensuring that everyone is on the same page about services and costs from the start.

In essence, the NAR Settlement is about reshaping the real estate landscape to be more consumer-friendly and transparent. Whether you’re a buyer, seller, or real estate professional, understanding these changes is key to navigating the new rules and making informed decisions in the market.

The NAR Settlement introduces several major changes that will directly impact how real estate transactions are conducted across the country. Here’s a breakdown of the most important terms:

1. Release of Liability

One of the primary objectives of the settlement was to protect NAR’s members from the looming threat of liability. The agreement achieves this by releasing over one million NAR members, all state, territorial, and local REALTOR® associations, and most brokerages with an NAR member as principal, from liability related to the lawsuits. This means that if you’re an agent, broker, or association affiliated with NAR, you’re likely covered under this settlement. However, it’s important to note that certain large corporate brokerages, particularly those with a transaction volume exceeding $2 billion in 2022, are not automatically included in this release (NAR Settlement FAQ).

2. Compensation Offers Moved Off MLS

Perhaps the most significant change is the removal of compensation offers from Multiple Listing Services (MLS). Previously, the compensation that a buyer’s agent would receive was displayed on MLS listings, often influencing how properties were shown and sold. Under the new rules, this information will no longer be part of the MLS. Instead, any offers of compensation will be handled off-MLS through direct negotiation between the buyer, the buyer’s agent, and the seller.

3. Written Agreements for MLS Participants Acting for Buyers

In an effort to bring more transparency and clarity to the home-buying process, the settlement requires that all MLS Participants who represent buyers must have a written agreement with their clients before they tour a home. This agreement will clearly outline the services being provided and the compensation terms. This change ensures that both the buyer and the agent are fully aware of their roles and responsibilities from the outset, reducing the potential for misunderstandings down the road.

4. Settlement Payment

NAR has agreed to pay a substantial settlement amount of $418 million over approximately four years. Despite the significant financial commitment, NAR has announced that it will not raise membership dues for 2024 or 2025 as a result of this settlement. This payment is part of NAR’s broader strategy to resolve the litigation while continuing to deliver value to its members without adding to their financial burden​.

5. NAR’s Stance on Wrongdoing

It’s important to note that NAR continues to deny any wrongdoing as part of this settlement. While the organization has agreed to make these changes, it maintains that its previous policies, particularly around cooperative compensation, were beneficial to both buyers and sellers. NAR believes that these policies have historically promoted broader access to property ownership, especially for lower- and middle-income buyers. The settlement is seen as a way to move forward while still upholding the values that NAR stands for​.

The NAR Settlement brings several important changes that buyers need to understand before jumping into their next home search. These changes are designed to give buyers more control and transparency in their transactions, but they also introduce new responsibilities and considerations.

1. Changes to Buyer Representation

One of the most significant impacts of the settlement is the new requirement for written agreements between buyers and their agents. Starting August 17, 2024, before you even tour a home, you’ll need to sign a written agreement with your agent. This agreement will clearly outline the services your agent will provide and how they will be compensated. The goal here is to ensure that everyone is on the same page from the beginning, reducing misunderstandings and making the process more transparent​.

This written agreement also gives you the opportunity to fully understand what you’re getting from your agent. Whether it’s help with negotiations, finding properties, or handling paperwork, you’ll know exactly what to expect. Plus, because compensation is now negotiable between you and your agent, you have more say in how your agent is paid—whether it’s through a fixed fee, a percentage of the purchase price, or another arrangement that works for both parties.

2. How Buyer Brokers Get Paid Now

In the past, the compensation that your buyer’s agent would receive was typically listed on the MLS. With the new settlement, this is no longer the case. Compensation offers will no longer be displayed on the MLS, meaning that how your agent gets paid will be handled off-MLS through direct negotiations. This can happen in a few different ways:

• Fixed-Fee Commission: You might agree to pay your agent a flat fee for their services.
• Seller Concessions: The seller could agree to cover your agent’s commission as part of the closing costs.
• Part of Listing Broker’s Compensation: Sometimes, the listing broker might share their commission with the buyer’s agent.

Whatever the arrangement, it’s important to discuss these details with your agent upfront, so you both know what to expect​.

3. What Buyers Need to Know Before Touring Homes

With these new rules in place, it’s more important than ever to have everything squared away before you start touring homes. Here’s what you need to keep in mind:

• Sign the Agreement: Before you tour any home—whether in-person or virtually—you’ll need to have a written agreement with your agent. This protects both you and your agent by clearly outlining the terms of your relationship.
• Understand Your Costs: Make sure you know how your agent will be compensated and where that money is coming from—whether it’s directly from you, from the seller, or another arrangement.
• Ask Questions: Don’t hesitate to ask your agent about their services, fees, and what you can expect from them. The more you know upfront, the smoother the process will be.

These changes might feel like a lot to take in, but they’re ultimately about giving you, the buyer, more control over your home-buying journey. By requiring written agreements and moving compensation discussions off the MLS, the NAR Settlement aims to make the process more transparent and tailored to your needs.

As you navigate these new rules, remember that your agent is there to help guide you through the process. Don’t be afraid to lean on their expertise, ask questions, and make sure you’re getting the best possible service as you search for your next home.

The NAR Settlement also brings significant changes that sellers need to be aware of when listing their homes. These adjustments, primarily focused on how compensation is handled and communicated, mean sellers will need to be more proactive in understanding their options and making decisions about how their property is marketed. Let’s break down what you need to know.

1. Listing Brokers and Compensation

One of the most impactful changes for sellers is the removal of compensation offers from the MLS. Previously, it was common for a seller’s listing to include an offer of compensation for the buyer’s agent right on the MLS. This allowed agents to see exactly what they would be paid if they brought a buyer to the table.

Under the new rules, this information will no longer be displayed on the MLS. Sellers can still offer compensation to buyer brokers, but it must be done off the MLS through direct negotiations with the agents involved. This means sellers need to have clear discussions with their listing brokers about how compensation will be handled and communicated to potential buyer agents​(NAR Settlement FAQs).

2. Communicating Compensation Off MLS

While compensation offers won’t be listed on the MLS, sellers still have a few options for compensating buyer brokers:

• Buyer Concessions: Sellers can offer buyer concessions through the MLS, such as covering a portion of the buyer’s closing costs. This is a great way to make your listing more attractive without violating the new rules​(NAR Settlement FAQs).
• Negotiating Directly: Compensation to buyer brokers can be negotiated directly between the buyer’s agent and the seller or the listing agent. This requires a more active conversation upfront about how the compensation will work, but it gives sellers and their listing agents more flexibility to tailor the offer based on the transaction.

While this change removes compensation transparency from the MLS, it allows for more personalized negotiation and could give sellers more control over how buyer agents are compensated.

3. Advice for Sellers: Understanding Your Options

In this new landscape, it’s crucial for sellers to take an active role in understanding how these changes affect their listing strategy. Here’s what you should consider:

• Work Closely with Your Listing Agent: Discuss compensation strategies early in the process. Understand how buyer agents will be compensated and how that affects the marketing of your property. Without the automatic display of compensation on the MLS, your agent’s network and direct outreach will play a bigger role in attracting buyer agents.
• Consider Buyer Concessions: Offering buyer concessions on the MLS, such as covering closing costs, is still allowed and can be a valuable tool in making your home more attractive to potential buyers. Make sure to talk to your agent about how to strategically use concessions to boost your listing’s appeal.
• Be Prepared for More Negotiation: With compensation no longer being automatically displayed, be ready for more negotiation between agents. Your agent will need to communicate effectively with buyer brokers and ensure that everyone is on the same page regarding compensation.

4. Protecting Yourself During the Sale

While the new rules bring more flexibility, they also mean that sellers need to be more vigilant about understanding the details of their transaction. Compensation is now a direct negotiation, and it’s essential that your agent explains all the options and implications. Be sure to:

• Review Your Listing Agreement: Ensure that your listing agreement includes clear language about how compensation will be handled. If there’s any ambiguity, work with your agent to revise the agreement so you’re fully protected and informed.
• Stay Transparent with Buyers: As always, honesty is the best policy. Make sure that any compensation agreements are transparent and agreed upon by all parties involved. This will help avoid any potential conflicts later in the process.

By adapting to these new rules, sellers can still market their homes effectively while taking advantage of the added flexibility that the NAR Settlement brings. Stay proactive, work closely with your agent, and be ready to negotiate—it’s a new era in real estate, but one where informed sellers can still thrive.

Navigating the changes brought about by the NAR Settlement can raise a lot of questions, especially for those actively involved in buying or selling real estate. Below are some of the most frequently asked questions to help you better understand the impact of these changes and what they mean for you.

1. What exactly is the NAR Settlement, and why was it necessary?

The NAR Settlement is the result of lawsuits challenging how real estate agents are compensated, specifically through the MLS system. The settlement was designed to address these concerns while protecting over a million NAR members from liability. It also introduces new rules aimed at increasing transparency and consumer choice in real estate transactions.

2. How does the removal of compensation offers from the MLS affect me as a buyer or seller?

For buyers, this change means that compensation for your agent will no longer be visible on the MLS. Instead, you’ll negotiate compensation directly with your agent through a written agreement before touring homes. For sellers, you’ll need to work closely with your listing agent to decide how to handle compensation for buyer brokers, as it will no longer be automatically displayed on the MLS.

3. Will the new rules make it harder for buyers to find homes?

Not necessarily. While compensation offers won’t be on the MLS, your agent will still have access to all the listings and can help you find homes that meet your criteria. The main difference is that compensation details will now be negotiated directly between you and your agent, giving you more control and transparency in the process​.

4. Do I have to sign a written agreement with my agent before touring homes?

Yes, under the new rules, buyers are required to sign a written agreement with their agent before they can tour any homes, whether in person or virtually. This agreement will outline the services your agent will provide and how they will be compensated, ensuring that everything is clear from the start.

5. Can sellers still offer buyer concessions on the MLS?

Yes, sellers can still offer buyer concessions, such as covering closing costs, on the MLS. However, these concessions cannot be tied to the compensation of the buyer’s agent. This allows sellers to make their listings more attractive to buyers without violating the new rules​.

6. What happens if I’m already in a transaction when these rules take effect?

If your transaction is already underway before the new rules take effect on August 17, 2024, the existing agreements and compensation offers should still be honored. However, if your transaction is not yet finalized by that date, it’s essential to ensure that all parties are aware of and comply with the new rules moving forward​.

7. Will these changes increase or decrease my costs as a buyer or seller?

The impact on costs will vary depending on how compensation is negotiated under the new rules. Buyers may have more control over negotiating their agent’s fees, which could lead to different cost structures. Sellers will need to carefully consider how to handle compensation and concessions to remain competitive in the market​.

8. How will these changes affect the role of my real estate agent?

Your agent’s role will become more focused on negotiating compensation and ensuring that all parties are clear on their agreements. For buyers, this means more upfront discussions about services and fees. For sellers, your agent will play a key role in communicating compensation terms to potential buyer brokers and negotiating deals that work for you​.

9. What should I ask my agent to make sure I’m covered under these new rules?

For buyers, ask your agent to explain the written agreement in detail, including what services they will provide and how they will be compensated. For sellers, discuss how your listing will be marketed and how compensation for buyer brokers will be handled. Don’t hesitate to ask for clarification on any points that are unclear—these conversations are crucial for ensuring a smooth transaction under the new rules​.

10. Where can I get more information or legal advice about the NAR Settlement?

If you need more detailed guidance, it’s a good idea to consult with a real estate attorney who understands the specifics of the NAR Settlement and its implications for your transaction. Your real estate agent can also provide additional resources and help you navigate these changes effectively.

These FAQs should help clarify some of the key aspects of the NAR Settlement and how it impacts your real estate transactions. As always, open communication with your real estate agent and other professionals involved in your transaction is the best way to ensure you’re well-prepared and informed as these new rules take effect.

The NAR Settlement introduces several legal and compliance changes that both buyers and sellers need to be aware of. These changes are designed to ensure transparency, protect consumer rights, and keep the real estate industry aligned with current legal standards. Here’s a closer look at what you need to know to stay compliant under the new rules.

1. State and Local Implications

Real estate laws vary significantly from state to state, and the NAR Settlement’s new rules will interact with these local regulations in different ways. While the settlement sets a national standard for certain practices, it’s essential to understand how your state’s laws may influence or require additional compliance measures.

For instance, while the settlement mandates written agreements between buyers and agents before touring homes, some states may have existing laws that require even earlier documentation or additional disclosures. Similarly, state-specific rules around agency relationships, disclosures, and commission structures could affect how you navigate transactions under the new guidelines. It’s crucial to consult with a real estate attorney or your agent to ensure that you’re fully compliant with both the settlement and your local regulations​(NAR Settlement FAQs).

2. Brokerage Compliance

For brokerages, the NAR Settlement introduces several new responsibilities, particularly around how compensation is communicated and negotiated. Brokerages will need to adjust their practices to ensure they are not only following the new national rules but also staying within the boundaries of local laws.

Key compliance points for brokerages include:

• Adapting MLS Practices: Brokerages must ensure that any compensation offers are removed from MLS listings by the August 17, 2024 deadline. This includes not only direct offers of compensation but also any mechanisms that might indirectly communicate such offers.
• Implementing Written Agreements: Brokerages must ensure that all agents are using written agreements with buyers before touring homes. This documentation must clearly outline the services provided and the compensation structure, ensuring full transparency and compliance.
• Educating Agents: It’s the responsibility of brokerages to train their agents on these new requirements. Agents should be fully informed about the settlement’s implications, how to negotiate compensation off-MLS, and how to ensure all agreements are legally binding and compliant​(NAR Settlement FAQs).

3. Ethical Considerations

Beyond the legal requirements, the NAR Settlement underscores the importance of ethical practices in real estate. The changes are designed to protect consumers and ensure that transactions are conducted fairly and transparently. As a buyer, seller, or real estate professional, it’s vital to maintain high ethical standards in all dealings, particularly in light of these new rules.

Key ethical considerations include:

• Transparency in Negotiations: Ensure that all discussions about compensation, services, and responsibilities are conducted openly and honestly. Both buyers and sellers should feel fully informed about the terms of their agreements.
• Honoring Agreements: With written agreements now required, it’s more important than ever to honor the terms of these contracts. Any changes or negotiations should be documented clearly to avoid misunderstandings or disputes.
• Avoiding Conflicts of Interest: Real estate professionals must always prioritize their clients’ interests above their own. The settlement’s new rules are designed to prevent practices like steering clients based on compensation, and it’s essential to adhere strictly to these guidelines to maintain trust and integrity​(NAR Settlement FAQs).

4. Preparing for Audits and Reviews

With these new rules in place, there’s likely to be increased scrutiny on how real estate transactions are conducted. Both individual agents and brokerages should be prepared for potential audits or reviews to ensure compliance. Keeping detailed records of all transactions, written agreements, and communications will be crucial for demonstrating that you’re following the new guidelines.

Brokerages should consider conducting internal audits to identify any areas where current practices might fall short of the new requirements. By proactively addressing these issues, you can avoid potential legal challenges and ensure that your business remains in good standing.

5. Seeking Legal Advice

Given the complexity of the NAR Settlement and the variations in state laws, it’s highly recommended to seek legal advice if you’re unsure about any aspect of the new rules. A real estate attorney can provide guidance tailored to your specific situation, helping you navigate these changes without running afoul of the law.

For buyers and sellers, this might mean reviewing your contracts and agreements to ensure they comply with the new rules. For agents and brokerages, legal advice can help clarify how to implement these changes in your daily operations and avoid any unintended legal pitfalls.

In summary, the legal and compliance aspects of the NAR Settlement are designed to protect all parties involved in real estate transactions, ensuring that the process is transparent, fair, and aligned with current legal standards. By staying informed, adhering to the new rules, and seeking professional guidance when needed, you can navigate these changes confidently and compliantly.

To help you navigate the changes brought about by the NAR Settlement, we’ve compiled a list of valuable resources that can provide additional information, guidance, and support. Whether you’re a buyer, seller, or real estate professional, these tools and contacts will help ensure you’re fully informed and prepared for the new landscape of real estate transactions.

1. Official NAR Communications

Stay up to date with the latest updates and official statements from the National Association of Realtors (NAR). These communications offer direct insights into the settlement, detailed explanations of the new rules, and guidance on how to comply with them.

NAR Official Website

Understanding Real Estate Practice Changes and the Impact on the Consumer

What the NAR Settlement Means for Home Buyers and Sellers

Homebuyers: Here’s What the NAR Settlement Means for You

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

Frequently Asked Questions (FAQs)

2. From the theFrontSteps

Why Signing a Buyer Representation Agreement is a Smart Move: A Buyer’s Guide
What Homebuyers Need to Know About Open Houses and Written Agreements

By leveraging these resources, you’ll be well-equipped to handle the changes brought about by the NAR Settlement. Whether you’re looking for legal advice, educational tools, or simply want to stay informed, these options will help you navigate the new landscape of real estate with confidence.

The NAR Settlement marks a significant shift in the real estate landscape, bringing about changes that will impact how buyers, sellers, and agents conduct transactions. While these new rules may feel like a lot to take in, they are ultimately designed to increase transparency, empower consumers, and protect the interests of all parties involved.

As you navigate these changes, remember that staying informed and proactive is key. Whether you’re a buyer ensuring that your agent’s services are clearly defined in a written agreement, or a seller strategizing how to attract buyers under the new compensation rules, understanding the implications of the settlement will help you make smarter decisions.

This resource hub is here to guide you through every step of the process, providing the information and tools you need to adapt to these new norms confidently. From understanding the key terms of the settlement to seeking legal advice and leveraging the latest resources, you now have a solid foundation to move forward in this evolving market.

Real estate has always been a dynamic industry, and this settlement is just another chapter in its ongoing evolution. By embracing these changes, you can continue to achieve your real estate goals while ensuring that your transactions are handled ethically and transparently.

If you have any further questions or need personalized advice, contact us. Our team is ready to provide expert guidance and help you navigate these changes smoothly. The more you know, the better equipped you’ll be to thrive in this exciting, ever-changing market.

Let’s continue to make informed decisions, protect our interests, and thrive in this exciting, ever-changing market. Happy buying and selling!