On March 15, 2024, the National Association of Realtors® announced 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.

It’s important to note that practices won’t change today. The deadline for REALTOR® MLSs to implement policy changes is August 17, 2024, pursuant to mandatory NAR policy.

Tour Agreements & Residential Forms

We are aware that national entities are creating and providing Buyer Agreements. Please know that Tennessee REALTORS® does not endorse these forms and strongly discourages the use of such forms without consulting with your broker and/or your attorney. We do not believe the forms have been vetted by individual states and are being distributed as a generic national product.   As such, these forms may not comply with individual state legal requirements. The Tennessee REALTORS® Residential Forms Committee is working on necessary changes pursuant to the NAR settlement. We are committed to making the amended forms available for review by August 2nd along with an informational video.

Why did NAR settle?

NAR has always wanted to reduce the significant strain on its members and provide a path forward for the industry and, from the beginning of this litigation, NAR had two goals:

• Secure a release of liability for as many of our members, associations, and MLSs as we could;
• Preserve the choices consumers have regarding real estate services and compensation.

This proposed settlement achieves both of those goals and provides a path for the industry to move forward and continue NAR’s work to preserve, protect and advance the right to real property for all.

Ultimately, NAR leadership believes this was the best outcome they could achieve in the circumstances.

What did NAR agree to?

Two critical achievements of this resolution are the release of most NAR members and many industry stakeholders from liability in these matters and the fact that cooperative compensation remains a choice for consumers when buying or selling a home.

The settlement, which is subject to court approval, makes clear that NAR continues to deny any wrongdoing in connection with the Multiple Listing Service (MLS) cooperative compensation model rule (MLS Model Rule).

A few key details of the settlement agreement are as follows:

• The agreement would resolve claims against NAR, over one million NAR members, all state/territorial and local REALTOR® associations, all association-owned MLSs, and all brokerages with an NAR member as principal that had a residential transaction volume in 2022 of $2 billion or below.
• For nearly all brokerage entities that had a residential transaction volume in 2022 that exceeded $2 billion, and for MLSs not wholly owned by Realtor® associations, NAR also secured in the agreement a mechanism to obtain releases efficiently if they choose to use it.
• NAR fought to include all members in the release and was able to ensure more than one million members are included.
• Despite NAR’s efforts, agents affiliated with HomeServices of America and its related companies — the last corporate defendant still litigating the Sitzer-Burnett case — are not released under the settlement, nor are employees of the remaining corporate defendants named in the cases covered by this settlement.

Under the terms of the agreement, NAR would pay $418 million over approximately four years.

• In addition to the financial payment, NAR has agreed to put in place a new MLS rule prohibiting offers of broker compensation on the MLS.
• Offers of compensation could continue to be an option consumers can pursue off-MLS through negotiation and consultation with real estate professionals. And sellers can offer buyer concessions on an MLS (for example—concessions for buyer closing costs) via the MLS provided that such concessions are not conditioned on the use of, or payment to, a buyer broker.
• New NAR MLS Policy takes effect to implement practice changes on August 17, 2024.

When do these new rules go into effect?

• On August 17, NAR’s mandatory MLS policy changes, which implement the settlement’s required practice changes, will take effect. This coincides with the earliest date plaintiffs can issue a notice of class settlement (“class notice”). As a reminder, release of liability under the settlement only extends through the date of class notice.
• Additionally, to comply with NAR’s mandatory national MLS policies, REALTOR® MLSs must implement the practice changes by August 17.
• Mindful of the urgency and importance of the practice changes and the impact of those changes on NAR members and MLSs, NAR shared the policy changes in early May to provide a three-month window for MLSs to prepare to implement changes.

Please pay special attention to the information distributed through your associations and MLS to ensure you’re up to date on the most current rules.

What does the settlement mean for Realtors®?

There will continue to be many ways in which buyer brokers could be compensated, including through offers of compensation communicated off of the MLS. NAR has long believed that it is in the interests of the sellers, buyers, and their brokers to make offers of compensation — but using the MLS to communicate offers of compensation would no longer be an option.

The types of compensation available for buyer brokers would continue to take multiple forms, depending on broker-consumer negotiations, including but not limited to:

• Fixed-fee commission paid directly by consumers
• Concession from the seller
• Portion of the listing broker’s compensation

Compensation would continue to be negotiable and should always be negotiated between agents and the consumers they serve.

What does the settlement mean for consumers?

NAR’s proposed settlement would preserve the choices consumers have regarding real estate services and compensation.

After the new rules go into effect, listing brokers could continue to offer cooperating compensation for buyer broker services, but such offers could not be communicated via the multiple listing service.

The settlement expressly provides that sellers may communicate seller concessions — such as buyer closing costs — via the MLS provided that such concessions are not conditioned on the use of or payment to a buyer broker.

These changes, however, could have an impact on buyers, especially first-time homebuyers. Adding additional agent compensation to the buyer side of the transaction may make it more challenging for them to afford to purchase a home.

The new rules would also require that agents acting for buyers would be required to enter into a written agreement with their buyers before touring a home.

What does this mean for the real estate industry?

The real estate market is continually evolving, and this is just one more evolution.

Any required rule changes are expected to be effective in mid-July 2024. Tennessee REALTORS will be working with the Forms Committee as well as other internal groups over the next few months to review our forms and practice advice to ensure they reflect the new NAR rules as they are made available.

At this point, it’s far too early to predict exactly what will happen in the housing market. For starters, the settlement hasn’t been finalized, and Tennessee REALTORS has not yet seen the specific rules that will need to be implemented by the MLS. And there’s really no way to predict whether and how fee negotiations will change until the market has time to work itself out.

Will brokerage fees drop? Will people still pay buyer brokers?

At this point, it’s far too early to predict exactly what will happen. Tennessee REALTORS advice has been and continues to be that brokers working in any part of the transaction should focus on explaining the value that they bring to the transaction, which can then lead to a discussion about how the broker might collect a fair fee that represents their value. Those conversations will clearly be changing in some way, but Tennessee REALTORS believes that brokers would still be able to charge a fair fee for their efforts.

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