by Ken Baris | Aug 20, 2024 | Industry, News Feed
A version of this story was originally published on May 1, 2024, under the headline, “NAR clarifies when a buyer contract will be required under settlement.” Inman has republished it in an effort to assist agents as commission rules change.
The National Association of Realtors’ proposed nationwide settlement agreement for antitrust commission cases requires brokers and agents to sign contracts with buyers they are “working with” before a buyer “tours any home.”
But what exactly does that mean?
NAR Chief Legal Officer Katie Johnson answered that question and others in May, offering some clarity about rules around the contracts. In her email, Johnson pointed members to NAR’s facts.realtor site and an updated FAQ page.
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‘Working with’ a buyer
Under the proposed settlement, just marketing services to a buyer or just talking to a buyer on the seller’s behalf — for instance, at an open house or showing a client’s listing to an unrepresented buyer — does not mean you are “working with” a buyer, according to NAR’s FAQ.
Therefore, buyers who attend open houses or who arrange to see a property through the listing agent do not have to sign anything to do so, under the NAR rule changes. The changes do not require that listing agents and buyers sign any agreements together so long as the listing agent remains solely a representative of the seller.
But providing actual brokerage services to a buyer, i.e. identifying potential homes, arranging a showing with the listing agent, negotiating for the buyer, presenting the buyer’s offers, or performing other services for the buyer, are “working with” a buyer, the trade group said.
“If the MLS participant is working only as an agent or subagent of the seller, then the participant is not ‘working with the buyer,’” the FAQ says.
“In that scenario, an agreement is not required because the participant is performing work for the seller and not the buyer.”
Alternatively, in a situation where the agent is an authorized dual agent and/or in a designated agency situation where the broker represents both the buyer and the seller but has different agents work with both, he or she is working with the buyer, as well as the seller, so a contract would be required before a home tour.
Asked when dual agency is created, a NAR spokesperson told Inman, “Agency is a matter of state law, including how dual agency is defined, what disclosures are required, and whether it is a lawful choice for consumers.
“Typically, dual agency requires a brokerage seeking to provide brokerage services to the seller and buyer in the same transaction to obtain consent and enter into a written agreement with both the seller and buyer. Dual agency is not typically created when a listing broker answers a buyer’s questions or shows a home to an unrepresented buyer.”
According to NAR, a written buyer agreement is required when an MLS participant performs “ministerial acts,” but not if the participant doesn’t expect to be paid for those acts and hasn’t taken the buyer to tour a home.
“Like dual agency, ministerial acts are generally defined by state law,” NAR’s spokesperson said.
“Typically, ministerial acts are acts performed by a brokerage that are purely informative or clerical and do not involve providing brokerage services or active representation.”
‘Touring’ a home
First things first: A home is a residential property of between one and four dwelling units, according to the FAQ.
“Touring a home means when the buyer and/or the MLS participant, or other agent, at the direction of the MLS participant working with the buyer, enter(s) the house,” the FAQ says.
“This includes when the MLS participant or other agent, at the direction of the MLS participant, working with the buyer enters the home to provide a live, virtual tour to a buyer not physically present.”
A written agreement doesn’t necessarily mean a written agency agreement
On Aug. 6, NAR updated its FAQ to specify that an MLS participant working with a buyer can enter into the written agreement with the buyer “at any point but must do so by no later than prior to the buyer ‘touring a home,’ unless state law requires a written buyer agreement earlier in time.”
While many interpreted the requirement for a buyer agreement to mandate an agency agreement, that is not the case, according to NAR.
“MLS participants and buyers will still be able to enter into any type of professional relationship permitted by state law,” the FAQ says.
“NAR policy does not dictate:
- What type of relationship the professional has with the potential buyer (e.g., agency, non-agency, subagency, transactional, customer).
- The term of the agreement (e.g., one day, one month, one house, one ZIP code).
- The services to be provided (e.g., ministerial acts, a certain number of showings, negotiations, presenting offers).
- The compensation charged (e.g., $0, X flat fee, X percent, X hourly rate).”
But the agreement must specify the compensation charged
According to the proposed settlement, if an agent or broker will receive compensation from any source, the written agreement with the buyer has to specify the amount or rate of compensation to be received or how that amount will be determined, but the amount has to be “objectively ascertainable” and can’t be “open-ended.” For example, the contract can’t say “buyer broker compensation shall be whatever amount the seller is offering to the buyer,” the settlement says.
In addition, the deal specifies that the compensation an agent or broker receives for brokerage services can’t exceed the amount or rate to agreed to in the agreement with the buyer.
But that does not mean that brokerages can only have one agreement with a buyer, the FAQ says, once again referring to the components of a contract that NAR policy does not dictate.
“Compensation continues to be negotiable and should always be negotiated between MLS participants and the buyers with whom they work,” the FAQ adds.
Active agreements should be amended before the MLS policy change
While the policy changes in the proposed settlement were enacted over the weekend, if an agent or broker will be working with a buyer after the policy goes into effect, then he or she “should take steps to ensure that the buyer has agreed to the necessary terms required by the settlement agreement,” the FAQ says. This includes terms where compensation is currently not “objectively ascertainable” or is “open-ended” or where the buyer broker is allowed to keep any offers of compensation exceeding the amount agreed to with the buyer.
MLS participants are required to disclose that compensation is not set by law and is fully negotiable, but they can disclose that separately and therefore don’t have to amend active agreements to add that disclosure, according to the FAQ.
Regarding active listing agreements, if the agreement tells the listing broker to offer compensation to the buyer broker without referring to the MLS, the agreement doesn’t need to 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,” the FAQ says.
Michael Ketchmark of Ketchmark & McCreight, lead plaintiffs’ counsel in the Sitzer | Burnett case, declined to comment on NAR’s reading of the agreement.
“Under the law, once the settlement is finally approved, anyone covered by the agreement is required to abide by it,” Ketchmark said. “If we believe, as class counsel, that somebody is not abiding by the agreement, we can take appropriate steps.”
Email Andrea V. Brambila.
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by Jimmy Burgess | Aug 20, 2024 | Industry, News Feed
Whether it’s refining your business model, mastering new technologies, or discovering strategies to capitalize on the next market surge, Inman Connect New York will prepare you to take bold steps forward. The Next Chapter is about to begin. Be part of it. Join us and thousands of real estate leaders Jan. 22-24, 2025.
There’s a lot of confusion around the particulars of the National Association of Realtors (NAR) commission lawsuit settlement and the resulting business practice changes.
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Inman contributor Cara Ameer has been asking good questions since the settlement was announced. Compliance expert Summer Goralik has the answers to some of Ameer’s questions from “13 more questions agents should ask about commission settlements” as we head into the post-settlement transition phase as an industry.
1. How exactly will Buyer Agency 2.0 be monitored and enforced, if there will be such a thing?
Before diving into enforcement, it’s important to clarify the changes and how “buyer agency” fits into the new framework. According to the National Association of Realtors’ (NAR) frequently asked questions (FAQs), published on their website, the proposed settlement agreement in response to the nationwide antitrust commission litigation does not dictate the type of agency relationship between a buyer and their agent.
Instead, it requires that agents have a representation agreement in place before touring a property with a buyer. This agreement should outline the real estate services to be performed, the compensation structure and relevant disclosures.
Specifically, NAR has clarified that the written agreement must clearly state the amount or rate of compensation the licensee will receive, or how it will be determined, including any compensation from third parties. The compensation must be objectively ascertainable and not open-ended.
Additionally, the agreement must prohibit the licensee from receiving any compensation beyond what is agreed upon with the buyer as well as include a conspicuous statement that broker fees and commissions are negotiable and not set by law.
It’s important to note that agency relationships between principals and their agents are usually governed by state laws. This means there are state requirements covering when and how agency relationships are established, when client disclosures are required, and the scope of those relationships and duties. As such, enforcement of these laws can come from various sources, including state departments of real estate and private legal actions.
Returning to the question of how buyer representation agreements will be enforced, NAR has stated that local Multiple Listing Services (MLSs) will be responsible for ensuring compliance with these rules, along with other regulations within their authority. Based on my experience in California, licensees typically submit required documents to the MLS only when requested or after an issue has been identified and an investigation into a potential violation has been initiated.
Therefore, in this case, licensed real estate professionals may not need to submit buyer representation agreements to their local MLSs unless a problem arises. However, agents and brokers should consult with their local MLSs to understand specific rules, requirements, and procedures, including how enforcement will be handled in this area.
Beyond MLS oversight, real estate brokers who supervise agents will need to establish policies and procedures to ensure their salesforce is entering into representation agreements as required by the NAR proposed settlement. Brokers will be responsible for making sure their agents comply with these new rules in a timely and accurate manner. In other words, compliance with the new rules will fall directly under their purview and supervision.
Apart from oversight by MLSs and responsible brokers, it’s important to recognize the role of peer enforcement in maintaining industry standards. During my time at the California Department of Real Estate, I frequently encountered complaints filed by agents against their colleagues for unethical, negligent and/or unlawful conduct. I expect that in this new real estate environment, we will continue to see agents holding each other accountable in similar ways.
Finally, multiple parties will be closely monitoring these activities, including whistleblowers and watchdog groups, consumers, private attorneys, and even the United States Department of Justice. Also, depending on where you practice and whether representation agreements are required by law, complaints may be filed with state regulators for failure to comply with the new rules.
To avoid any potential issues from regulatory sources, it’s essential to fully understand the new requirements and implement comprehensive checklists, protocols, policies, procedures and systems to ensure these practices are prioritized and executed correctly.
2. What will the protocol be for buyers who refuse to sign any kind of buyer agency agreement, whether it is exclusive, non-exclusive, or even limited to one property or one day?
This is an important question because, even when a licensee follows all the correct procedures to adapt to industry changes, compliance issues can still arise. It’s not uncommon for some home buyers to feel uncomfortable signing a representation agreement with their agent upfront.
Historically, some real estate professionals have encountered situations where clients were hesitant to commit to agent services and terms of compensation before entering into a purchase contract. The difference now is that agents cannot proceed without an agreement in place without violating the new rules.
In these less favorable situations, where buyers are unwilling to sign any agreement, real estate professionals must be clear on how to proceed. From a compliance standpoint, agents should not tour properties with buyers unless a representation agreement is in place, as required by the new practice changes mandated by the National Association of Realtors’ proposed settlement. Responsible brokers overseeing their sales force must establish clear policies and procedures to guide agents on handling these situations.
Part of this supervision should include training and providing agents with effective talking points to use when they encounter buyers who are hesitant or uncomfortable with signing an agreement. Ideally, if agents properly educate their clients about the industry changes, new rules and agreement requirements, buyers will understand that while refusing to commit is their choice, it could result in the same situation with any other agent they approach.
On the other hand, if agents proceed with touring properties without the proper agreements, they not only put themselves at risk but also potentially expose their responsible brokers to liability. The risks include possible discipline for violating Multiple Listing Service rules and increased scrutiny from the United States Department of Justice and private attorneys who are closely monitoring these situations.
As a compliance consultant and former California Department of Real Estate investigator, I can tell you that there are always individuals who refuse to follow the rules. Unfortunately, not all of them are caught. However, the stakes are higher this time around, and the safer and easier solution is to simply comply with the new regulations.
Another possible situation to consider is that agents must be vigilant when dealing with buyers who might have entered into multiple agreements or committed to more than one brokerage for the same property. Such scenarios could lead to an increase in commission disputes and possible litigation.
Therefore, it’s critical for licensees to thoroughly vet their clients, be aware of any existing representation agreements, and clearly explain the potential repercussions of entering into multiple agreements.
3. Will dual agency, transaction brokerage, or similar practices where one agent represents both buyer and seller in the same transaction no longer be permitted in states where they are currently allowed?
Dual agency is undoubtedly a controversial topic. Some licensees firmly support the practice, while others find it difficult to imagine representing two clients with potentially conflicting interests simultaneously. With upcoming changes in real estate practices, there’s been considerable speculation about the future of dual agency. Will it become more common, less utilized, or potentially prohibited under state law?
While we can’t predict the future with certainty, the landscape of dual agency may evolve. When the National Association of Realtors’ proposed settlement was first announced, many speculated that dual agency might become more prevalent due to the new requirements for securing representation agreements and compensation terms with buyers upfront. This led some to believe that the role of the buyer’s agent might diminish in importance.
Conversely, others argue that buyer agency will become even more critical. In this scenario, buyer’s agents would emphasize their value, secure representation agreements upfront, and foster more transparent and beneficial relationships with their clients.
In my view, and drawing from my experience as a former California Department of Real Estate investigator, the prohibition of dual agency would likely only arise if there’s a significant increase in public harm. If we see a rise in complaints to state regulators about breaches of fiduciary duty in dual agency situations, coupled with more lawsuits alleging negligence and unlawful conduct, legislators might be motivated to consider banning the practice. However, such a change wouldn’t come easily. Lobbying groups, industry stakeholders and others who support dual agency will undoubtedly advocate to keep the option available.
If this issue were ever to reach the federal level, it would indeed be a significant development. For dual agency to be regulated or eliminated by the federal government, the practice would need to demonstrate substantial risks to consumers. Until such a scenario unfolds, the future of dual agency remains uncertain and will largely depend on how these industry changes play out in practice.
4. Will buyer representation eventually become required and administered at the federal level?
Given my background with the California Department of Real Estate and familiarity with state governance, I find it unlikely that buyer representation will be regulated and enforced at the federal level. While this possibility cannot be entirely ruled out, the more immediate and pressing question is whether buyer representation agreements will become mandated by state laws, aligning with recent practice changes affecting members of the National Association of Realtors (NAR), local and state associations, and Multiple Listing Service (MLS) participants. Notably, some states already require such agreements.
State regulation might actually simplify compliance. If buyer representation requirements were established at the state level, state regulators — rather than MLSs — would be responsible for enforcement. State agencies are equipped with investigative and prosecutorial resources to review and enforce regulations, handling a broad range of legal matters, including potential license discipline. In contrast, MLSs lack the authority to impose formal disciplinary actions against an agent’s real estate license.
Furthermore, if buyer representation were regulated by state law, it would transition from a practice requirement to a formal license requirement that all real estate professionals must adhere to.
In California, there is currently legislative momentum toward mandating buyer representation agreements. If these rules become state law, it would streamline compliance by consolidating requirements into a single regulatory framework. This would allow licensees to follow one comprehensive checklist rather than navigating multiple sets of rules from different entities, including MLSs, local and state associations, NAR, and the United States Department of Justice.
In summary, while federal regulation remains a possibility, the trend appears to be toward state-level mandates, which could provide clearer, more unified rules for real estate professionals.
5. Where do we go from here as far as pre-licensing, post-licensing, continuing education and license renewal?
This is an essential question, and the answer should reflect our commitment to maintaining high standards. There is clearly a need to revamp pre-licensing and continuing education to better prepare new agents and to refresh the knowledge of existing licensees. This education is crucial for ensuring both regulatory compliance and financial success in the real estate industry.
From my experience as a real estate compliance consultant, I have frequently encountered complaints about the lack of knowledge and professionalism among some agents. Even before high-profile cases like Sitzer | Burnett, concerns about inadequate training and experience were not uncommon. Given the evolving climate of real estate, it is evident that there is significant room for improvement and many ways to achieve it.
When we talk about “improvement,” it’s not just about avoiding lawsuits or regulatory investigations. It’s also about striving for excellence, prioritizing best practices and mastering risk management. A licensee’s journey toward improvement should begin with comprehensive knowledge and robust education.
Future coursework should focus more intensively on critical areas such as buyer agency, the fundamentals of buyer representation agreements, commission negotiability, disclosure of compensation, dual agency, advertising and general real estate practice. Specialized classes for buyer representatives are particularly valuable. Although such training may have been available in the past, it was not always a standard practice. Role-play scenarios can be especially beneficial, as they allow agents to apply their knowledge in practical situations.
If states mandate buyer representation agreements, we can expect new educational requirements tailored to buyer agency. Even if such mandates do not come to pass, real estate educators are already adapting to the new business norms, offering extensive training to help agents and brokers refine their skills, mitigate risks, and navigate the changing landscape.
It’s important to distinguish between theoretical knowledge and practical experience. Understanding dual agency from a textbook perspective is quite different from effectively managing dual agency situations in practice. Similarly, knowing how to present a buyer representation agreement is not the same as demonstrating its value to clients. Practical experience and mentorship are indispensable, and this is where supervising brokers play a vital role.
Responsible brokers have a vested interest in the competence and success of their agents. They want their salesforce to excel not only for the benefit of the brokerage but also to minimize liability and enhance the brokerage’s reputation.
In summary, the future of real estate education will involve a combination of new coursework, enhanced training, mentorship and possibly stricter licensing requirements. By leveraging these resources and opportunities, the industry can improve overall performance and better serve consumers. It’s a multifaceted approach, and utilizing all available assets will be key to achieving success.
Editor’s note: Licensed real estate agents should always check with their responsible brokers for guidance, direction, and policy regarding the new practice changes, and licensed real estate brokers would be wise to consult with a licensed attorney for legal clarification and support.
The opinions, suggestions or recommendations contained in this discussion are based on Summer Goralik’s experience working for, and knowledge of the laws enforced by, the California Department of Real Estate, and must not be considered legal advice or relied upon as legal advice. You should consult with your brokerage, and/or appropriate legal counsel in your jurisdiction, for further clarification.
Summer Goralik is a real estate compliance consultant and former CA DRE Investigator in Huntington Beach, California. Connect with her on LinkedIn.
by Inman | Aug 20, 2024 | Industry, News Feed
Continue to raise the bar on client service, writes Huntington & Ellis CEO Craig Tann, and show clients why having a buyer’s agent isn’t just a good idea — it’s a necessity.
Whether it’s refining your business model, mastering new technologies, or discovering strategies to capitalize on the next market surge, Inman Connect New York will prepare you to take bold steps forward. The Next Chapter is about to begin. Be part of it. Join us and thousands of real estate leaders Jan. 22-24, 2025.
I want to take a moment to focus on something that lies at the heart of what we do every day. In a constantly changing market, it’s more important than ever to remind ourselves of our unique role as buyer’s agents and how to ensure our clients see the difference we make in their homebuying journey.
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Showcasing your value: It’s about connection and trust
When clients choose to work with us, they’re not just looking for someone to open doors and write offers — they’re looking for a trusted advisor who’s going to guide them through one of the biggest decisions of their lives. They need to feel that we’re in their corner, ready to fight for their best interests every step of the way.
One way we can do this is by being proactive in understanding their needs. Let’s make sure we’re asking the right questions from the start — what are their hopes, their concerns, their must-haves? By showing them that we’re not just listening, but truly hearing them, we build the foundation for a strong, trusting relationship.
Be the advocate they can rely on
We all know that the real estate process can be overwhelming for our clients, especially in today’s market. That’s why it’s our job to be their advocate — to take on the stress, the negotiations and the complexities so they don’t have to.
Think about the last time you helped a client navigate a tricky situation — maybe it was a first-time buyer unsure about the market or a family trying to decide between multiple offers. Remember how you used your expertise to guide them to the right decision?
That’s the kind of value we need to highlight every time we work with a client. It’s not just about finding the right home; it’s about ensuring they feel confident and secure in their choices because they know they have a skilled professional by their side.
Communication: The key to a memorable experience
One thing I’ve always believed in is the power of communication. Our clients should never feel like they’re in the dark. Whether it’s a quick text to update them on a new listing or a phone call to discuss the next steps in the process, those little touches go a long way in making them feel valued.
I remember working with a couple who were nervous about buying their first home. By staying in constant communication — explaining each step, answering their questions and just being there when they needed reassurance — I was able to turn their anxiety into excitement. That’s the kind of experience that keeps clients coming back and referring their friends and family.
Looking ahead to adapt and thrive
As we look to the future, let’s keep in mind that our role as buyer’s agents is evolving. With changing laws, more technology and self-represented buyers in the market, it’s easy to feel like our value might be diminished. But I truly believe the opposite. Our expertise, our ability to negotiate and our commitment to our clients’ best interests are what set us apart — and those are things that technology can’t replicate.
Let’s continue to educate ourselves, stay ahead of market trends and always look for ways to improve the client experience. By doing so, we not only help our clients but also reinforce our position as leaders in this industry.
We make the difference
At the end of the day, what we do matters. We have the privilege of helping people find their homes, their sanctuaries, the places where they’ll build their lives. Let’s never lose sight of the impact we have and the value we bring.
Keep showing up for your clients with the passion, dedication and expertise that make you the best in the business. Together, we’ll continue to raise the bar and show our clients why having a buyer’s agent is not just a good idea — it’s essential.
Let’s make this market ours.
Craig Tann is the CEO of huntington & ellis, a full-service real estate agency based in Las Vegas. Connect with Craig on LinkedIn and Instagram.
by Jeff Richmond | Aug 20, 2024 | Industry, News Feed
We all want to grow and improve our services, The Agency’s Rainy Hake Austin writes, and getting feedback is the first step in doing that.
Whether it’s refining your business model, mastering new technologies, or discovering strategies to capitalize on the next market surge, Inman Connect New York will prepare you to take bold steps forward. The Next Chapter is about to begin. Be part of it. Join us and thousands of real estate leaders Jan. 22-24, 2025.
You really never know how you’re doing until you ask for feedback. As a leader in the real estate industry, I’m always hyper-aware that our perception of our client service experience can only be verified by soliciting feedback — and in the right way. This applies to how agents assess their client experience and, also, how we assess our service to our agents.
However, asking for feedback in the right way matters if you want the information to be honest. We all know surveys are a useful tool for this process, but how else can you solicit feedback? Here are five ways to gather client feedback in a way that feels authentic and organic.
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Communicate throughout the process
Here’s something I like to remind our agents: Feedback doesn’t (and shouldn’t) have to happen only at closing. In fact, you’re missing out on an opportunity to tailor your client’s experience along the way, which will hopefully lead to better results.
Take moments throughout the process to ask for feedback. This can be a quick text (Hi, I wanted to check in on your experience so far and see if I can make the process any better for you. Is there anything working or not working for you that you’d like to share?), a conversation after a property tour, a phone call or an automated survey.
Figure out what stages of the transaction journey make the most sense for you to get feedback at, and work those into your overall client experience strategy.
Make a moment right after closing
One of The Agency’s New York agents, John Antretter, recently shared how he strategically builds rapport with clients. One method that I thought was brilliant was inviting clients to a closing dinner. It’s mostly focused on celebrating his clients’ recent purchases or sales, but he also makes space for sharing his services moving forward and asking for candid feedback. This feels like an authentic, casual way to glean some important insights from your clients right when their experience is fresh.
Ask for story-focused feedback
Asking clients to describe their experiences in their own words often brings out authentic feedback that structured surveys might miss. At the end of the transaction, send a text or email asking your client to share a story or testimonial.
Whether through a dedicated section on your website, a newsletter or social media, these narratives can reveal valuable insights into what clients value most. If you plan to share it in any of these ways, remember to ask permission.
Host client appreciation events
Host client appreciation events, such as a casual open house or a community gathering, where clients can share their feedback in a relaxed, social setting. During these events, have informal conversations with attendees, asking about their recent experiences and suggestions for improvement. This face-to-face interaction fosters a sense of community and provides honest, spontaneous feedback.
Engage through social media
Use social media platforms to engage with clients and gather feedback in a more casual setting. Posting open-ended questions or polls on platforms like Instagram or Facebook can encourage clients to share their thoughts and experiences. This method allows clients to provide input at their own pace and in a comfortable environment. You can also share client testimonials, which may inspire other clients to share their own stories with you.
We all want to grow and improve our services — and getting feedback is the first step in doing that. Be proactive, create safe opportunities and be consistent in your efforts to solicit feedback. From there, take the insights you find and make changes in your service and offerings to meet the needs of every future client in the most effective way possible.
