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There’s a lot of confusion around the particulars of the National Association of Realtors (NAR) commission lawsuit settlement and the resulting business practice changes. Compliance expert Summer Goralik is here to help clear up some of the looming questions so that we can move forward together as an industry.
This week’s question
How is hiding an offer of compensation from the seller in the MLS supposed to make things more transparent?
Compliance expert answer
Before diving into how removing compensation offers from the multiple listing service (MLS) relates to transparency, I want to share an analogy that I can’t seem to shake.
With the new practice rules, changing guidance, and diverse opinions on how agents should comply or proceed, it reminds me of an early computer game called “The Oregon Trail.” This educational game required players to make decisions that impacted their journey westward. Choices like which supplies to take or how to cross a river determined whether you survived, leading to a variety of outcomes.
Similarly, in the post-National Association of Realtors (NAR) era, today’s Realtors face a complex time in the industry, filled with critical decisions on how best to implement the new practice changes. But unlike a game, these choices directly impact their careers and livelihoods. With this in mind, let me address this week’s question from the beginning.
Communication, transparency and disclosure are the cornerstones of real estate compliance, grounded in the fiduciary duty that requires agents to put their clients’ interests above their own. These principles are key for maintaining client trust and professional integrity within the industry.
Good agents embrace these fundamentals not just because they’re required by law, but because they are committed to fulfilling their duties to their clients.
Given these standards, it’s understandable why recent changes stemming from the NAR settlement, particularly the removal of offers of compensation from the MLS, have sparked confusion and concern.
The NAR settlement, effective Aug. 17, 2024, mandates that listings in the MLS no longer include or display offers of compensation from listing brokers or sellers to buyer brokers or other buyer representatives.
As a result, MLSs have eliminated all broker compensation fields and related information from their platforms.
Many practitioners have questioned how this aligns with the goal of transparency about real estate commissions.
At first glance, it seems contradictory: How does removing compensation details from the MLS enhance transparency?
Some agents and brokers argue that this change directly undermines open communication and disclosure rather than prioritizing them. Others have raised concerns that replacing public offers of compensation on the MLS with private communications about commissions between agents could potentially lead to unethical conduct and fair housing issues.
Interestingly, Realtors may recall a prior lawsuit filed by the United States Department of Justice (DOJ) against NAR in 2020, which partially addressed the lack of disclosure of offers of compensation on the MLS.
Although the DOJ has since reneged on that agreement, the details of the complaint remain noteworthy. The Antitrust Division of the DOJ filed a civil lawsuit and proposed a settlement that required NAR to repeal or modify certain rules to provide greater transparency to homebuyers about the commissions offered to their brokers.
Notably, NAR could no longer recommend that their affiliated MLSs prohibit the disclosure of commissions offered to buyer brokers.
Fast forward to 2024, and as a result of the NAR settlement, we see a complete reversal with the demand to remove offers of compensation from the MLS entirely, along with new rules requiring buyer representation agreements before home tours and changes to existing commission structures.
Naturally, these changes have elicited a wide range of reactions from Realtors, and this week’s question is just one example of how licensees are trying to make sense of the new rules of engagement regarding real estate commissions.
But the dust has yet to settle, and it seems that the industry dialogue about these new practice rules — and how agents apply them — is continuing to evolve.
Initially, many Realtors questioned where offers of compensation could be made if they were no longer displayed in the MLS. Now, some are debating whether listing brokers and sellers should offer compensation to buyers’ agents in advance of receiving purchase offers.
The federal government’s push toward decoupling commissions is driving this conversation and reshaping the landscape of real estate transactions.
One revealing moment in this topic of discussion, previously reported by Inman, was a legal brief filed by DOJ attorney Jessica Leal in the Nosalek case in February.
Leal wrote, “The critical issue is not how much a seller should offer a buyer broker, but whether a seller should set buyer-broker compensation at all.”
Months later, and after the NAR settlement was proposed, Leal publicly commented that the DOJ would neither support nor oppose the agreement. She also stated that the DOJ did not want to see offers of compensation being made on the MLS or anywhere else.
Collectively, these remarks reinforce the DOJ’s position on the decoupling of commissions, where sellers negotiate their commissions with listing brokers, while buyers negotiate separately with their brokers. This standard of practice aims to support the competition the DOJ wants to see and believes has been historically absent in the real estate industry.
Considering this perspective, the removal of offers of compensation from the MLS isn’t about obscuring information or finding alternative ways to display commission splits; it’s about adhering to a more consumer-centric model where commission arrangements are negotiated independently by each party.
Under this dynamic, buyer-broker commissions are no longer predetermined by sellers or listing brokers.
Even if some agents and brokers don’t fully agree with this course of action, or choose to implement changes differently, they would be remiss not to consider this government guidance.
Speaking of regulators, there is one thing I know for sure: From my experience working as an investigator for the California Department of Real Estate, when a governmental entity tells real estate licensees what they believe is right and wrong or what compliance should look like, they are essentially giving stakeholders a preview of how they intend to enforce the law and regulate licensed activity.
Returning to the “Oregon Trail” analogy, Some real estate professionals might focus on preserving traditional practices, such as determining where to display cooperative compensation or how best to communicate buyer-broker commissions before submitting purchase offers.
Some may even devise workarounds that, if they’re fortunate, align with the NAR settlement; if not, they could put themselves and their brokers at risk.
In contrast, those adopting a more consumer-driven approach are figuring out how to communicate compensation and concessions with sellers and buyers in a way that complies with the decoupling of commissions.
Transparency about commissions in real estate will now stem from direct negotiations with clients, especially between buyer agents and their homebuying clients, rather than from historical arrangements that relied on offering cooperative compensation in the MLS.
It’s worth noting that, despite these two opposing strategies, the outcome could sometimes be the same — for example, the seller ends up paying the buyer broker’s compensation.
What sets them apart, however, is the path taken to achieve that result, which may involve different market forces, client needs and instructions, agent-client communications, advertising methods, brokerage policy, party negotiations and real estate documents executed by the buyer and seller.
Each method also carries its own set of risks, with potential implications for compliance, client satisfaction and legal outcomes.
Whatever changes licensees are advocating for in this evolving real estate environment, and considering that the best solution may not be as simple as choosing between two extremes, it’s crucial to identify the central compliance issues involved. Only then can they ask the right questions, analyze different solutions and make informed decisions.
Listen, if this were easy, all the noise about the commission litigation, the NAR settlement and practice changes would have surely died down by now. But it persists because the situation is neither entirely clear nor straightforward, and in my opinion, competing arguments about the path forward don’t help.
Even still, agents who thoughtfully consider the challenges at hand and understand the potential risks will be better equipped to identify opportunities, make smarter choices, and thrive.
Although it hardly needs reminding at this point, this is not a game — it’s a journey through significant changes in the industry, and agents’ choices will dictate their outcomes and success.
Editor’s note: Licensed real estate agents should always check with their responsible brokers for guidance, direction and policy regarding the new practice changes, and licensed real estate brokers would be wise to consult with a licensed attorney for legal clarification and support.
The opinions, suggestions or recommendations contained in this discussion are based on Summer Goralik’s experience working for, and knowledge of the laws enforced by, the California Department of Real Estate and must not be considered legal advice or relied upon as legal advice. You should consult with your brokerage, and/or appropriate legal counsel in your jurisdiction, for further clarification.
Summer Goralik is a real estate compliance consultant and former CA DRE Investigator in Huntington Beach, California. Connect with her on LinkedIn.