NAR Settlement Implementation: All* Your Questions** Answered***

* Not really “all” — but several!

** Broad categories of certain types of questions

*** Let’s say “responded to” instead of “answered”

The PAR Legal Hotline has seen our call volume ramp up over the past few weeks as the new forms and MLS rules changes have been implemented. Just in these first few weeks, we’ve seen some clear trends in your questions and concerns.

Each of the questions below represents some concepts that have been asked in dozens of different ways. If you can find your own questions or concerns in these concepts then congratulations, you’ve just saved yourself a call to the Legal Hotline!

Q: This settlement stuff seems complicated and I’m awfully busy. Can you just summarize it for me so I don’t have to read all those articles, FAQs and training resources that are out there?

A: Honestly, no. You will receive an email with links to numerous resources or we will stop the call to email you with the links to those resources.

The PAR Legal Hotline can answer specific questions about things like how to use our forms, what certain rules mean and how the NAR Code of Ethics may apply to transactions under these new rules, but we cannot start from scratch and explain the entirety of the settlement changes to each member individually.

Read the FAQs. Watch the videos. Talk with your broker/manager. Do All The Things. And after that, when you have additional questions that might not have been answered, please give us a call.

Similarly, if someone looks at you with a blank stare and asks you why you’re using a form they’ve never seen before, feel free to refer them to the PAR resource page so they can start that voyage of discovery for themselves.

Q: I read/watched/listened to an article/webinar/podcast from a columnist/guru/trainer who said, “YOU SHOULD NEVER/ALWAYS DO .” So… what should I do?

A: The Hotline lives in a world of Can & Can’t, not in a world of Should & Shouldn’t.

We’ll help you understand what the various rules allow and what they prohibit: what you can and can’t do. But where you have choices, what we won’t do is tell you which of those possible choices you should make as a business decision.

For example:

• Lots of expert types believe that brokers should stop offering broker-to-broker cooperating compensation. PAR will help you understand that listing brokers can still offer cooperating compensation if they feel it’s in the seller’s best interests and that our forms accommodate either practice. But whether you should offer cooperating compensation as a brokerage policy (because remember, cooperating compensation is offered by brokers, not by individual agents) is an individual business decision at the brokerage level, and PAR won’t provide an opinion on that. Similarly, if brokerage policy allows it, whether and/or how you should offer cooperating compensation in specific transactions will be left to discussions and negotiations with those individual clients.
• There are gurus out there selling all sorts of ideas about how agents should and/or should not be advertising the possibility of seller concessions. We’ll help you understand certain ways that you can’t advertise those concessions, and perhaps other ways that you can, but decisions on whether a specific method makes sense for a certain transaction are outside the scope of what we can help with.

Q: Is it true that I’m not allowed to talk to anyone about cooperating compensation and/or seller concessions?

A: The MLS rules are clear that buyer broker compensation paid by the seller side of the transaction — whether as broker-to-broker compensation or as a seller concession — cannot be advertised via the MLS in any manner. You also can’t directly or indirectly use MLS data to collect compensation information from different brokers in one place. But other than that, the options to advertise, discuss and negotiate are limited only by what’s otherwise legal and ethical. There is clearly no limitation on discussing compensation options via phone, text or email (or even face-to-face!), but be sure to discuss these options with clients. Whether the broker should be advertising certain things, however, is up to a conversation between the broker and the client to determine what’s in the client’s interests.

Q: Is paragraph 3(A) in the revised Agreement of Sale the place where we negotiate cooperating compensation?

A: NO! Just focusing on words of this subparagraph clearly state its intent.

Clause 1: “In addition to any cooperating compensation negotiated between the brokers using the Cooperating Broker Compensation Agreement…”

Interpretation: If the buyer broker wants to negotiate broker-to-broker cooperating compensation, it should be done before submitting an offer from the buyer, and any compensation should be agreed to in writing. Whatever number comes next (if any) will be in addition to the number that’s already been agreed to. Or as some of our callers say, “I guess ‘in addition to’ really means ‘in addition to,’ right?”

Clause 2: “Seller will pay the following fee…”

Interpretation: Whatever number comes next, if any, is a number to be paid BY THE SELLER. Since, by definition, the seller doesn’t pay the broker-to-broker cooperating compensation, this is clearly not the spot for broker-to-broker compensation to be listed if it’s been negotiated as part of the transaction.

The Math: At most, if any number that gets filled in here it would be the difference between the negotiated cooperating compensation (if any) and the negotiated buyer-broker fee. If the buyer broker fee is 20 and the listing broker is offering cooperating compensation of 0, then the number would be somewhere between 0 (buyer will pay the whole fee to the buyer broker directly) and 20 (buyer is asking for a concession for their full buyer broker fee). If the buyer broker fee is 20 and the negotiated cooperating compensation is 12, then number could be somewhere between 0 and 8. And so on. It’s always the amount the buyer is asking the seller to pay, never what the listing broker may have agreed to.

Q: There’s this unrepresented buyer… what do I need in a written agreement?

A: There are TONS of questions about unrepresented buyers (usually regarding open houses and showing requests), and they all come down to the same explanation. You’ll find the basis for the explanation in the NAR FAQ (questions 61 & 62 at the time of publication, though the numbers change from time to time), which explain the two “triggers” for needing a written agreement and the definition of a “tour.” This is a great example of how the NAR FAQs can answer many questions, but then if you have a specific nuance you can call the Hotline on that after getting the basic answer from NAR.

Q: I think I have a workaround…

A: Please don’t. The words “workaround” and “loophole” are why we can’t have nice things. Across the country there are already changes being made to various standardized forms and MLS policies, not because the policies/forms were non-compliant but because certain brokers and agents were already abusing the rules and forms with “workarounds.” Remember that the protections you gain from the settlement only apply to those who actually follow the rules. If brokers play fast and loose with the rules, not only could they find themselves in a new lawsuit, but they could expose the MLS, the association, and other brokers in the market to lawsuits and other compliance actions as well.

Q: How do I know exactly what I can do in the MLS? Who is going to track compliance here?

A: If you have any question about what local rules are being implemented and/or how they will be enforced you’ll need to contact the MLS directly. Many of our calls end with this instruction and we mean it — PAR can only explain the general terms of the settlement and the model rules NAR is requiring, but implementation and enforcement are up to each local MLS individually.

And since the bulk of the settlement terms are technically being implemented via MLS rules, each MLS will be responsible for monitoring compliance just as they are do for the rest of their rules and policies. An MLS that is lax with enforcement and allows regular non-compliance isn’t just going to annoy the members who are following the rules, they’re quite likely to be targeted in a future lawsuit based on that lack of enforcement. Many MLSs are setting up various methods to monitor compliance and have implemented substantial fines for non-compliance. They’re not trying to get rich off of fines — they’re trying to avoid being the next defendant. Please do your part to understand and follow those rules to avoid that fate.