The National Association of Realtors (“NAR”) and seller plaintiffs have reached a proposed settlement agreement that would end litigation of claims brought on behalf of home sellers related to broker commissions. The agreement would resolve claims against NAR, over one million NAR members, all state/territorial and local REALTOR® associations, all association-owned Multiple Listing Services (“MLSs”), and all brokerages with an NAR member as principal that had a residential transaction volume in 2022 of $2 billion or below. The settlement is subject to court approval.

NAR has agreed to put in place a new rule prohibiting offers of compensation to buyer brokers on the MLS. The settlement also provides that MLS participants working with buyers must enter into written representation agreements with those buyers. These changes will go into effect in mid-July 2024.

As a result of this settlement, real estate professionals representing buyers will now need to (a) determine commissions offered by a seller of a home off-MLS through negotiation and consultation with the seller’s agent and (b) sign a Buyer Representation Agreement with buyers they represent (which may include the total compensation due to the buyer’s broker) prior to showing a property to a buyer.

Compensation to buyer brokers will continue to be negotiable and should always be negotiated between agents and the consumers they serve. Listing agents and sellers are still able to make an offer of compensation to the buyer’s broker at the seller’s discretion, however, the offer must be off MLS.

The types of compensation available for buyer brokers will continue to take multiple forms, depending on broker-consumer negotiations. Some methods of compensation to the buyer broker include:

• A fixed fee for the buyer broker’s services paid directly by the buyer.
• A payment from the buyer to the buyer broker to make up the difference, if any, between the amount of commission offered by the seller to the buyer broker and the amount of the buyer broker’s compensation, as negotiated between the buyer and the buyer’s broker.
• A concession from the seller.
• A re-allocation of a portion of the listing broker’s compensation to the buyer’s broker.

It’s possible this will lead to more brokerages leaning into dual agency models in order to represent both the buyer and seller in a transaction. Dual agency remains legal. Dual agency within the same brokerage is also common and legal, however, it can be fraught when the agent representing the buyer is merely an employee of the listing broker. Employees are not independent from their employers and are required to perform their jobs to their employer’s satisfaction. Some buyers may not be comfortable with the services of a real estate agent who is an employee of the listing broker if they are concerned about a potential conflict of interest.

Buyers should carefully evaluate the importance of representation by a real estate professional who will act as their fiduciary, zealously advocate for their interests and preserve their confidentiality.

Now, more than ever, it is critical that buyers evaluate the dedication, services and negotiating strength of buyer agents.

My goal is always to act as a trusted consultant and fiduciary in a partnership with my clients in their journey to find the perfect home, or sell their property.