BROKER RISK MANAGEMENT
WEEKLY PRACTICE TIP
The most current issue affecting Realtors is the outcome of the NAR settlement. That settlement is expected to go into effect in July 2024. However, last week the Department of Justice received court approval to intervene in the lawsuit. Therefore, it is possible that the DOJ could either object to the settlement or request additional changes.
Nevertheless, it is recommended that Realtors operate under the assumption that the NAR settlement will go into effect this summer and should start preparing.
BRM hosted a webinar on April 1, 2024, regarding the NAR settlement agreement, its terms, recommended practices, and a deep dive into the buyer representation agreement. If any clients of BRM did not see that webinar, it can be made available upon request.
BRM is continuing to receive questions regarding the settlement. The following are additional questions and answers BRM has received:
Question: Could you put in the private remarks of the Multiple Listing Service, “please go to my website for buyer compensation information?” Can we put offers of compensation in the disclosure link on the MLS?
Answer: The NAR settlement prohibits agents from disclosing or noting offers of compensation in the MLS to buyer’s agents. This means that listing agents may not post the compensation being offered to a buyer’s agent in the MLS, or on any disclosure link connected to the MLS. On the other hand, agents may post the offer of compensation on any other website or independent publication.
Question: I am a listing agent. Can I post an offer of compensation to the buyer’s agent on Facebook or Zillow?
Answer: Yes. As indicated above, you can post an offer of compensation to buyer’s agents on any independent website, so long as it is not on the Multiple Listing Service or connected to the MLS.
Question: Who is going to police/ensure that a BRBC is signed prior to a showing?
Answer: The NAR settlement agreement states that all MLS members must have a buyer representation agreement prior to showing property. But, MLS’s have no separate means to enforce the requirement. Therefore, it is listing agents who will likely enforce the the provision. As with any other violation of NAR’s Code of Ethics, agents may file grievance complaints against other agents. Those grievance complaints will be heard before the local Associations. While it is unlikely, it is possible that plaintiffs in the NAR litigation could file a further suit for enforcement of the settlement agreement if non-compliance becomes widespread.
Question: What would be the implications of the listing agent sharing their commission with the buyer’s broker versus seller compensating the buyer’s broker directly at closing?
Answer: The listing agent may not pay the buyer’s broker without prior written approval by the seller. Therefore, it will be permissible for a listing agent to pay a buyer’s agent, so long as the seller has previously approved it in writing. For example, this can be done through escrow using the CAR RPA Paragraph 3G(3) using the Seller Payment to Buyer’s Broker Form (“SPBB”).
Question: What do we do if a buyer says they have not signed a broker agreement and they actually did?
Answer: In the BRBC, the buyer represents that they have not signed any other buyer representation agreement with any other broker. In spite of that, we have recently seen this occur on several occasions. For example, buyer broker #1 had a signed BRBC with the buyer. Buyer broker #2 asked the buyer whether they were represented by another agent and, if so, whether there was a written agreement. In these instances, the buyers either lied and claimed that they were not working with any other agent and had not signed an agreement, or the buyer did not understand what they were signing.
It is recommended that when you inquire of a buyer as to whether they have signed a BRBC, you have written documentation confirming that fact. At a minimum, an agent should write notes to themselves or the file confirming they made the inquiry and the response. Ideally, that agent will send an email or text to that buyer with this written confirmation.
While the primary remedy for buyer broker #1 would be a claim alleging breach of contract against the buyer, often that broker will assert the claim against buyer broker #2 alleging failure to properly determine if the buyer was subject to a prior exclusive BRBC with another broker. If the buyer broker #1 asserts such a claim after the fact against buyer agent #2, it is unlikely that the arbitration panel will award damages against buyer agent #2. We recently defended a broker where a buyer lied to the broker about having a buyer representation agreement. The arbitration panel found in favor of our client, buyer’s agent #2. However, the panel believed the agent and in that instance, the buyer signed a declaration confirming that no such agreement existed.
Question: I understand that a buyer may not “tour” a home with an agent without signing a BRBC. What does “tour” mean?
Answer: Tour has not been defined in the settlement agreement. NAR is currently seeking clarification of the meaning of tour. Tour should be perceived to include a showing. Arguably, tour can also include providing a video tour of a property.
Question: May a buyer tour an open house by themselves without a buyer representation agreement?
Answer: Yes. A buyer is not required to have a BRBC to tour a house without an agreement.
Question: Can a buyer cancel a BRBC?
Answer: A buyer can cancel a BRBC in accordance with the terms of that BRBC. The CAR BRBC provides that, for a nonexclusive BRBC agreement, cancellation is effective upon written notice to the other. An exclusive BRBC agreement can be cancelled 30 days after receipt of the notice from the other party.
Question: Will our listing agreements signed prior to the effective date of the NAR settlement be effective or will we need to execute new listing agreements?
Answer: According to CAR, the listing agreement will need to be amended to reflect the fact that beginning in late-July (or sooner, if an MLS removes its broker compensation field earlier), offers of compensation cannot be communicated through the MLS. CAR is currently working on an amendment to listing agreements to comply with the NAR settlement.
ADDITIONAL RESOURCE: NAR Settlement: Top Questions @ NAR_Top_Questions.pdf (car.org)
WEEKLY PRACTICE TIP: DO NOT FORWARD TO CLIENTS. This Weekly Practice Tip is an attorney-client privileged communication for the exclusive use of clients of Broker Risk Management and their agents. It may not be reproduced or distributed without the express written consent of Broker Risk Management LLP. The advice and recommendations contained herein are not necessarily indicative of standards of care in the industry, but rather are intended to suggest good risk management practices