donald j. moore

Coming mid-August 2024, new rules go into effect that will completely change the way we buy and sell real estate in this country.  This is because the National Association of Realtors and many large real estate brokerages were found guilty of antitrust violations in federal court.  In order to get out from under a crushing $5 Billion damages award, they settled for around $2 Billion in damages (total amount is still being calculated) but most importantly rule changes to make home buying and selling more transparent and less corrupt.  The changes are big and somewhat confusing.  I am a 35-year veteran of the real estate industry and NOT a Realtor. I have studied the settlement and have the right answers you need without the spin you'll get from Realtors.

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When did all this happen and when do the new rules take effect?

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On October 31, 2023, a Missouri federal court jury returned a guilty verdict in Sitzer/Burnett v. National Association of Realtors (NAR) et al.  At issue is NAR's policy of the "Mandatory Offer of Cooperation and Compensation" (otherwise known as the Participation Rule) in their MLS systems which was found to be a Sherman antitrust violation by this Kansas City jury.  On March 15, 2024, the NAR and several of the brokerages settled with plaintiffs and agreed to large fines and rules changes.  The rule changes go into effect nationwide no later than August 17, 2024.  In Southeast Wisconsin, the rule changes will take effect August 14th, 2024.

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What are the rule changes?

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There are several but the two most important changes are:

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1.) NAR has agreed to prohibit offers of compensation on the multiple listing services.  This means that there is no longer an automatic offer of compensation from the seller to agents working with buyers.  Agents working with buyers will likely need to have their compensation paid by the buyer. Essentially it means that everyone is responsible for paying for their own representation.  Sellers are no longer required to pay the buyers' agent or broker.

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2.) MLS Participants working with buyers must enter into written agreements with their buyers before touring a home. The written agreement must include: 

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1. A specific and conspicuous disclosure of the amount or rate of compensation the agent/broker will receive or how this amount will be determined, to the extent that the agent/broker will receive compensation from any source. 

2. The amount of compensation in a manner that is objectively ascertainable and not open-ended.

3. A term that prohibits the agent/broker from receiving compensation for brokerage services from any source that exceeds the amount or rate agreed to in the agreement with the buyer; and 

4. A conspicuous statement that broker fees and commissions are not set by law and are fully negotiable.

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What does Item 1 mean in practical terms?

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Listing agents can still offer compensation to agents working with buyers but it must not be on the MLS or a web site populated with MLS data.  Listing agents can use their own web sites or their own social media platforms but cannot show compensation offered by other firms on their listings.  Sellers must approve any offer of compensation and there can be no blanket offers of cooperation and compensation between brokerages. There will be a move to allow sellers to offer "concessions" at closing that can be used to pay for buyer agency services but the concessions are not limited to or conditioned upon the retention of or payment to a cooperating broker, buyer broker, or other buyer representative.  This means that the buyer can use the concession for anything they want: closing cost, repairs or buyer agency services.

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What does Item 2 mean in practical terms?

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This change is particularly meaningful.  "Working with buyers" is a phrase that means brokers and agents who provide brokerage services to a buyer—such as identifying potential properties, arranging for the buyer to tour a property, performing or facilitating negotiations on behalf of the buyer, presenting offers by the buyer, or other services for the buyer —from agents and brokers who simply market their services or just talk to a buyer—like at an open house or by providing an unrepresented buyer access to a house they have listed.  

 

If the agent or broker is working only as an agent or subagent of the seller (a listing agent), then the agent or broker is not “working with the buyer.” In that scenario, an agreement is not required because the agent or broker is performing work for the seller and not the buyer. Authorized dual agents, on the other hand, work with the buyer and the seller.  (Note: it is highly recommended that buyers avoid dual agency at all costs.)  A written buyer agreement is required prior to a buyer “touring a home.” An agent or broker “working with” a buyer can enter into the written buyer agreement 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 

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If you are not comfortable with signing an agency agreement with a buyer agent/broker, tour the house with the listing agent.  They are working for the seller and should not pretend to represent you.  You have no obligation to listing agents.  If you want to write an offer.  Contact Houses100, LLC and we'll write the offer for you for a low $1,000 and it includes a Certified Appraisal.

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