Litigation Update from NAR: Filing of Preliminary Approval for Broker Commission Settlement
Introduction
In a significant development in the ongoing legal battle concerning broker commissions, plaintiffs’ counsel has officially filed a Motion for Preliminary Approval of a settlement agreement. This step marks a pivotal moment in a lawsuit that has captured the real estate industry’s attention nationwide.
Details of the Motion
The motion, filed on April 19, 2024, with the federal court in the Western District of Missouri, seeks to advance the settlement process that was first announced on March 15, 2024. This legal action pertains to claims made by home sellers against real estate brokerages over commission structures. The filing sets into motion a 60-day period during which stakeholders, including REALTOR® MLSs (Multiple Listing Services), major brokerages, and non-REALTOR® MLSs, need to take specific actions to be covered under the terms of the proposed settlement.
Stakeholder Actions Required
Entities impacted by this settlement have been provided clear guidelines on how to proceed:
- REALTOR® MLSs: These organizations must sign and submit the “REALTOR® MLS ‘Opt In’ Agreement” (Appendix B).
- Brokerages: Those with a transaction volume exceeding $2 billion in 2022 are required to execute and return the “Brokerage ‘Opt In’ Agreement” (Appendix C).
- Non-REALTOR® MLSs: Must agree to and return the “Non-REALTOR® MLS ‘Opt In’ Agreement” (Appendix D).
These documents, along with additional required information, must be submitted to specified email addresses by June 18, 2024.
Legal and Procedural Updates
The plaintiffs have also addressed minor scrivener’s errors in the agreement, ensuring that the document filed is accurate and reflects the agreed terms without substantive changes. The corrected version of the settlement agreement and the related appendices are accessible on the platform facts.realtor.
Anticipated Outcomes
The court is expected to rule on the motion for preliminary approval soon, with the settlement’s practice changes anticipated to come into effect by late July 2024. Further, a class notice is scheduled for no earlier than August 17, 2024, with a final approval hearing proposed for November 22, 2024.
Conclusion
As the real estate industry watches closely, this settlement could represent a transformative change in how broker commissions are handled. Katie Johnson, NAR’s Chief Legal Officer, assures stakeholders that updates will be provided as the process unfolds and implementation nears. Resources and support are readily available for those with questions or in need of assistance during the opt-in process.
Source: NAR@info.nar.realtor
UPDATE as of 4-29-24
Understanding the Updated NAR Broker Commission Settlement: Implications and Next Steps
As part of an ongoing commitment to transparency and compliance, the National Association of Realtors (NAR) has recently updated its FAQ section to address significant changes concerning written buyer agreements. This update follows the preliminary approval of a settlement that mandates MLS participants to secure written agreements with buyers before engaging in property tours.
Key Updates to the NAR FAQs
The NAR has expanded its FAQ section to include questions 46 through 62, which provide comprehensive details on the implementation and nuances of the new requirements. These updates, available for review on NAR’s resource hub at www.facts.realtor, outline the following critical elements:
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Written Buyer Agreements: All MLS participants working with buyers must now enter into written agreements before touring homes. This change is designed to clarify professional obligations and enhance the transparency of real estate transactions.
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Scope of Application: The requirement applies to any MLS participant who actively works with a buyer. This includes activities such as identifying potential properties, arranging tours, and facilitating negotiations.
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State Law Compliance: While the new policy mandates written agreements at the national level, it also respects state laws that may require such agreements at earlier stages of buyer interaction.
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Definition of Touring a Home: Touring a home involves any situation where a buyer physically or virtually enters a property listed on the MLS, guided by an MLS participant.
Implications for Practice
The updated FAQs also delve into practical scenarios where the written agreement rule would or would not apply:
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Dual and Designated Agency: Written agreements are essential in both dual agency scenarios, where an agent represents both buyer and seller, and designated agency scenarios, where different agents within the same brokerage represent each party.
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Exemptions: If an MLS participant acts solely on behalf of the seller, such as in open houses or discussions with unrepresented buyers, written agreements with buyers are not required.
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Compensation Structures: The settlement does not dictate specific compensation structures but emphasizes that any agreed compensation must be objectively ascertainable and not open-ended.
Timeline for Implementation
NAR has received preliminary approval for the settlement as of April 24, but final court approval is pending, with a hearing scheduled for November 26, 2024. In the interim, NAR will release further guidance on the timing of the required practice changes.
Conclusion
The updates to the NAR FAQ section represent a significant shift in how real estate professionals will interact with buyers. MLS participants are advised to familiarize themselves with the new requirements and prepare for their implementation. As always, NAR remains available to answer any questions and provide support during this transition.
For additional details or specific inquiries, members are encouraged to contact Katie Johnson, NAR Chief Legal Officer, directly or refer to the comprehensive resource hub provided by NAR.
