Q: What is the proposed NAR Settlement and how does it affect the MLS and my “practices” as someone who lists and sells real estate?
A: The proposed NAR Settlement is a legal agreement that brings protection to REALTORS, MLSs, Associations, and others, from major Class Action Litigation and Judgements and changes how buyer agent commissions are offered. Under the proposed Settlement, MLSs will no longer be defined as “Unilateral Offers of Compensation.” SDMLS will be making the changes on August 12 to make sure that we are in compliance with the Settlement on the deadline date of August 17.
As of August 12th, 2024, SDMLS will remove all input and display fields related to Compensation to Buyers Broker (CBB) from the MLS. Buyer agent compensation will now be negotiated directly between the buyer and their agent, through a buyer broker agreement, and not displayed or offered through the MLS.
Additionally, it will now be a requirement that before an MLS Subscriber or Participant can show a property to a buyer, there must be a contract in place between the buyer and the buyer agent, which states in a “readily ascertainable” way, how and how much the buyer agent is to be compensated.
Check with your broker for details.
Q: Why is it called a “Proposed Settlement?”
A: It is called a proposed Settlement because it is not scheduled to become final until November 26, 2024, and only if the judge in the case agrees with the terms of the proposed Settlement.
Q: Why do I keep hearing about the Department of Justice (DOJ)? Is the DOJ a party to this settlement?
A: No. The DOJ is not a party to this settlement or to the cases themselves, which were Class Action, Civil law suits. However, the subject of these cases were antitrust violations, and the DOJ is always interested in actions deemed to be in violation of U.S. Antitrust law. We have yet to hear from the DOJ on the proposed Settlement and if it decides to weigh in, it could have an impact on the proposed Settlement for which we are all currently preparing.
Q: What is the definition of Compensation and Concessions in the context of MLS and a real estate transaction?
A: In the context of MLS, Compensation refers to commission paid to a buyer broker, from a listing broker. Until August 17, MLS Model Rules, promulgated by NAR, define MLS as a “Unilateral Offer of Compensation.”
Concessions are items such as closing costs, paid for by the seller for the buyer. Sellers often “concede” certain items to buyers through the Purchase Agreement and these concessions are often “credits” to the buyer through escrow. Concessions by sellers to buyers are common and often asked for by the buyer in the offer to purchase.
Q: How will these changes impact my day-to-day business as an agent?
A: The most significant change is that you'll need to discuss buyer agent compensation directly with the buyer, typically through a buyer-broker agreement and in the purchase contract.
The MLS will no longer be used to advertise this information. The MLS will no longer be a platform for an Offer of Compensation. It's essential to update your buyer-broker and listing agreements to reflect these changes.
Q: Can I, as a listing broker, still offer a commission to a buyer's agent?
A: Yes, you can offer compensation to a buyer's agent, but it cannot be done through the MLS.
Q: Can I mention compensation in listing remarks or anywhere else in the MLS?
A: No. Any mention of compensation in listings, remarks, attachments or any other part of the MLS is strictly prohibited. Violations will result in penalties, including fines and removal of the content.
Q: What are the penalties for violating the new rules regarding compensation?
A: SDMLS understands that the transition to the new NAR Settlement rules may present challenges. To support our Subscribers during this adjustment period, effective August 17, 2024 we are implementing a 60-day grace period, on fines for violations related to compensation. During this time, we will actively monitor for any potential violations. If we identify any content that doesn't comply with the new rules, we will remove it and notify the Subscriber, explaining the reason for the removal. Our goal is to work in collaboration with our Subscribers to ensure a smooth and successful transition. Violations can result in severe penalties, including a $1,500 fine per offense and immediate removal of the violating content. Repeat offenses can lead to even higher fines and loss of MLS access.
Q: How can I communicate possible seller concessions to buyers?
A: First, if buyers want to negotiate concessions, they should request them in the offer to purchase.
Seller concessions can be mentioned in Confidential Remarks and Public Remarks sections while the listing is in an active status, and after the listing has closed.
An example of seller concessions would be something a seller concedes to a buyer, such as closing costs, and may or may not include a fee for the buyer’s agent. Make sure that any concessions offered includes more than a fee to the buyer’s broker.
Remember, the most appropriate place to request concessions is within the offer itself.
Q: Why didn't SDMLS add a concessions Y/N field as was done by some other MLS’s?
A: SDMLS prioritizes careful consideration and compliance. We chose not to add a concessions field based on legal counsel's recommendations and the evolving landscape around the settlement. We believe that doing so could invite unnecessary scrutiny from the Department of Justice (DOJ), as a concessions field, added at this moment in time, could be seen as a way to circumvent the NAR Settlement's prohibition on displaying buyer agent compensation on the MLS.
Furthermore, the decision not to include a concessions field aligns with our commitment to protecting our users. It's important to note that some MLS’s that initially added these fields, had to later modify or remove them due to conflicts with updated California Association of Realtors (CAR) forms, highlighting the complexities and potential risks involved.
We believe that the most transparent and compliant way to handle seller concessions is to discuss them directly with the buyer's agent or include them within the offer itself. This approach aligns with the spirit of the NAR Settlement and minimizes the risk of any regulatory challenges.
Q: What is the difference between Compensation and Concessions?
A: In the context of MLS, compensation is a broker to broker or seller to broker payment and concessions are something a seller concedes to a buyer.
Q: How can I communicate potential seller concessions to buyers if there's no dedicated field in the MLS?
A: You can mention potential seller concessions in the Confidential and Public Remarks section of the MLS during the pre-sale period and after the sale has closed. Avoid any language that ties concessions directly to buyer agent compensation.
Q: Can SDMLS provide specific guidance on how to communicate seller concessions in the MLS?
A: The potential fine of $1,500 for violations related to compensation information is not intended to be punitive. It underscores the significance of adhering to the new NAR Settlement rules, which are designed to foster transparency and fair practices in the real estate industry. SDMLS is committed to supporting our Subscribers during this transition. Effective August 17, 2024 we are implementing a 60-day grace period on fines, during which we will focus on education and collaboration rather than penalties. We believe that by working together, we can ensure that all members understand and comply with the new regulations.
Q: Why is the fine for including compensation, commission, bonuses, or broker/brokerage fees in an SDMLS listing $1,500?
A: The $1,500 fine for violations related to compensation information is not meant to be punitive, but rather to emphasize the importance of complying with the new NAR Settlement rules. These rules are in place to promote transparency and fair practices in the real estate industry. While we don't intend to fine our members without warning, the severity of the fine reflects the seriousness of non-compliance and serves as a deterrent to ensure all members adhere to the new regulations. We are always open to listening to concerns from our members and providing guidance on compliance. There are antitrust issues, and Realtors have always errored on the side of caution when potential antitrust claims are a possibility.
Q: What is SDMLS’s policy on Post-Sale Concessions?
A: SDMLS allows the inclusion of post-sale concession information within the MLS system. As has always been the case. This information can be added after the close of escrow and should reflect the actual concessions granted during the transaction.
Q: Why has SDMLS removed the arbitration requirement from its rules?
A: The change reflects the decreased necessity for SDMLS to require arbitration since the MLS’s no longer advertise an offer of compensation.
Q: What are the specific data fields being removed from the MLS?
A: The following data input fields will be removed from ALL SDMLS property classes:
- CBB% (Comp. to Buyers Broker %)
- CBB$ (Comp. to Buyers Broker $)
- CVR (Variable Commission)
- CBB% Contract Length
- CBB Paid
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