On August 17, 2024, new requirements governing the relationship between residential buyers, sellers, and real estate agents went into effect. These new rules are a result of the National Association of Realtors (NAR) settlement agreement which resolved a number of lawsuits against NAR. Real estate practitioners should be aware of two significant changes:
- Prohibition of Compensation Offers in MLS Listings: Previously, Multiple Listing Service (MLS) listings would often include information about the commission a seller was willing to pay the buyer's real estate agent. Under the new rules, sellers are prohibited from including this information in their MLS listings, however, buyers and sellers may continue to negotiate buyer agent compensation off-MLS. Notably, sellers are still permitted to offer other buyer concessions (e.g., offers to pay buyer closing costs) on MLS.
- Agent/Buyer Written Agreement: Real estate agents working with buyers are now required to enter into written agreements prior to showing a property. The written agreement must conspicuously disclose an objectively ascertainable amount or rate of commission that the agent will receive or the manner in which the commission will be calculated. The written agreement must also state that commissions are not set by law and are fully negotiable. Importantly, the buyer agent may not receive more compensation than what was originally provided for in the written agreement, even in instances where a seller is willing to offer more.
These new rules are intended to promote transparency and protect all parties, but they also add a layer of complexity to facilitating residential real estate transactions. The elimination of buyer agent compensation offers in MLS listings may lead to increased out-of-pocket costs for buyers, who may now need to negotiate directly with sellers to cover their agent's commission. Conversely, sellers may now need to offer other concessions or incentives in their MLS listings to attract buyers. The requirement for written agreements between agents and their buyer clients adds an important formality and underscores the importance of clear and enforceable contracts in every transaction. Real estate professionals should review their practices and update their agreements to ensure compliance with these new rules.
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