Rule 1: Elimination of Compensation Requirements (Paragraph
58.i)
Summary:
• The settlement requires the National Association of REALTORS® (NAR), REALTOR® MLSs, and Member Boards to eliminate and prohibit any requirement that listing brokers or sellers must make offers of compensation to buyer brokers or other buyer representatives.
• Additionally, it eliminates and prohibits any requirement that if such offers are made, they must be blanket, unconditional, or unilateral.
Explanation:
• Impact on Brokers and Agents: Previously, in many MLSs (Multiple Listing Services), there was a requirement that sellers or listing brokers had to offer compensation to the buyer’s agent. This rule changes that, meaning that offering compensation is now optional, and even if offered, it doesn’t have to be a blanket or unconditional offer.
• Implications: This change allows for more flexibility in negotiations. Brokers and agents now have the ability to negotiate compensation directly with their clients without being bound by MLS-imposed requirements.
Rule 2: Prohibition of Compensation Offers on MLS (Paragraph 58.ii)
Summary:
• The settlement prohibits REALTOR® MLS Participants, subscribers, other real estate brokers, agents, and their sellers from making offers of compensation to buyer brokers on the MLS.
• It also prohibits the disclosure of listing broker compensation or total broker compensation on the MLS.
Explanation:
• Impact on Brokers and Agents: This rule means that MLS platforms will no longer display the compensation that a listing broker or seller is offering to a buyer’s broker. This information was previously a key part of how agents structured their deals.
• Implications: Agents and brokers will need to have direct conversations with their clients about compensation rather than relying on MLS disclosures. This could lead to more varied compensation agreements and potentially impact how agents select properties to show to buyers.
Rule 3: Elimination of Broker Compensation Fields on MLS (Paragraph 58.iii)
Summary:
• REALTOR® MLSs are required to eliminate all broker compensation fields on the MLS.
• They are also required to prohibit the sharing of offers of compensation to buyer brokers or other buyer representatives via any other MLS field.
Explanation:
• Impact on Brokers and Agents: This rule reinforces the changes in Rule 2 by removing the ability to share or display compensation details on the MLS altogether.
• Implications: Brokers and agents will have to adjust to a new way of operating where compensation is discussed and negotiated outside of the MLS platform. This might increase the complexity of transactions as all parties will need to ensure they understand the compensation arrangements upfront.
Rule 4: Elimination of MLS Participation Requirements Based on Compensation (Paragraph 58.iv)
Summary:
• The settlement eliminates and prohibits any requirements that condition participation or membership in a REALTOR® MLS on offering or accepting offers of compensation to buyer brokers or other buyer representatives.
Explanation:
• Impact on Brokers and Agents: Previously, in some MLSs, participation was contingent upon a broker’s willingness to offer compensation to buyer’s agents. This rule removes that contingency.
• Implications: This change allows more brokers and agents to participate in MLSs without being forced to comply with compensation requirements. It promotes greater inclusivity and may encourage more brokers to list properties on MLSs without worrying about compensation conditions.
Rule 5: Prohibition on Non-MLS Mechanisms for Compensation Offers
(Paragraph 58.v)
Summary:
• The settlement prohibits REALTOR® MLSs, brokers, and agents from creating or supporting any non-MLS mechanism for listing brokers or sellers to make offers of compensation to buyer brokers or other buyer representatives.
• However, there are exceptions:
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Explanation:
• Impact on Brokers and Agents: This rule prevents the development of alternative platforms or methods outside the MLS to facilitate compensation offers. This ensures that all transactions remain transparent and under the same regulations as those conducted via the MLS.
• Implications: Brokers and agents must be cautious about how they share listing information and compensation details. The intent is to avoid creating separate, unregulated markets where compensation practices could diverge from those overseen by the MLS.
Rule 6: Requirement for Written Buyer Agreements (Paragraph 58.vi)
Summary:
• The settlement requires that all REALTOR® MLS Participants working with a buyer enter into a written agreement with the buyer before the buyer tours any home.
• The agreement must specify:
• The amount or rate of compensation the agent will receive or how it will be determined.
• That the compensation must be objectively ascertainable and not open-ended.
• The agent may not receive compensation exceeding the amount agreed upon in the agreement.
Explanation:
• Impact on Brokers and Agents: This rule introduces a formal requirement for buyer’s agents to clearly disclose their compensation and
ensure it is agreed upon in writing before any home tours begin. It brings transparency to the transaction and protects buyers from unexpected costs.
• Implications: Brokers and agents must adjust their practices to ensure compliance with this rule. They will need to have clear, upfront discussions with buyers about their compensation and secure written agreements, which could involve more detailed client consultations and documentation before showing properties.
Rule 7: Prohibition on Representing Services as Free (Paragraph 58.vii)
Summary:
• The settlement prohibits REALTORS® and REALTOR® MLS Participants from representing to clients or customers that their brokerage services are free or available at no cost unless they will receive no financial compensation from any source for those services.
Explanation:
• Impact on Brokers and Agents: This rule directly addresses the common marketing practice where agents claim their services are “free” to buyers, often because the seller pays the commission. The settlement now requires that unless the agent receives no compensation whatsoever, they cannot advertise their services as free.
• Implications: Brokers and agents must revise their marketing materials and client communications to ensure compliance. This may involve rephrasing how services are presented and being more transparent about compensation, potentially altering how they attract clients.
Rule 8: Disclosure Requirements for Sellers (Paragraph 58.viii)
Summary:
• The settlement requires REALTORS® and REALTOR® MLS Participants acting for sellers to:
• Conspicuously disclose to sellers any payment or offer of payment that the listing broker or seller will make to another broker, agent, or representative acting for buyers.
• Obtain seller approval for such payments in advance.
• Provide these disclosures in writing, specifying the amount or rate of payment.
Explanation:
• Impact on Brokers and Agents: Listing agents must ensure sellers are fully aware of any payments being made to buyer’s agents and must obtain written approval from the seller before proceeding. This adds an extra layer of transparency and consent to the process, preventing any hidden or unexpected costs for the seller.
• Implications: This rule requires brokers and agents to have more detailed and documented conversations with their seller clients regarding all aspects of compensation. The process will need to be more formalized, with explicit documentation and approvals to avoid any legal issues or disputes later on.
Rule 9: Disclosure of Negotiable Broker Commissions (Paragraph 58.ix)
Summary:
• The settlement mandates that REALTORS® and REALTOR® MLS Participants must disclose to prospective sellers and buyers that broker commissions are not set by law and are fully negotiable. This disclosure must be included:
• In the listing agreement (if not a government-specified form).
• In the buyer representation agreement (if not a government-specified form).
• In pre-closing disclosure documents (if they are not government-specified forms).
Explanation:
• Impact on Brokers and Agents: This rule is designed to ensure that all parties involved in a transaction understand that broker commissions are flexible and can be negotiated. It aims to eliminate any misconception that commissions are fixed or standard across the industry.
• Implications: Brokers and agents will need to include this disclosure in multiple documents and be prepared to discuss commission rates openly with clients. This could lead to more negotiations over commission rates and possibly pressure to reduce fees in competitive markets.
Rule 10: Prohibition on Filtering MLS Listings Based on Compensation (Paragraph 58.x)
Summary:
• The settlement requires that REALTORS® and REALTOR® MLS Participants and subscribers must not filter out or restrict MLS listings
communicated to their customers or clients based on the existence or level of compensation offered to the buyer broker or other buyer representative assisting the buyer
Explanation:
• Impact on Brokers and Agents: This rule ensures that clients have access to the full range of available properties, regardless of the compensation offered to the buyer’s agent. It prohibits the practice where agents might filter out listings with lower commissions, ensuring that all listings are treated equally.
• Implications: Agents and brokers will need to adjust how they present listings to clients. This rule promotes transparency and fairness, requiring agents to prioritize the client’s needs and preferences over potential compensation. This could also lead to increased competition among agents, as clients have more comprehensive access to available properties.
Rule 11: Rescinding or Modifying Inconsistent Rules (Paragraph 58.xi)
Summary:
• The settlement requires REALTORS® and REALTOR® MLSs to rescind or modify any existing rules that are inconsistent with the practice changes outlined in the settlement agreement.
Explanation:
• Impact on Brokers and Agents: This rule ensures that all existing policies, procedures, and rules within REALTOR® MLSs and brokerage firms are aligned with the new settlement requirements. Any conflicting rules must be updated or removed to comply with the settlement.
• Implications: Brokers and agents may need to undergo training or legal review to ensure that their current practices and the rules governing their operations are consistent with the new settlement terms. This could involve a significant overhaul of existing policies and MLS rules, requiring coordination with MLS boards and legal teams.
Rule 12: Development of Consistent Educational Materials (Paragraph 58.xii)
Summary:
• The settlement requires the development of educational materials that reflect and are consistent with each provision in the practice changes.
Additionally, any educational materials that contradict these changes must be eliminated.
Explanation:
• Impact on Brokers and Agents: Brokers and agents will have access to updated educational resources that explain the new rules and how to comply with them. These materials will be essential for ensuring that all REALTORS® and MLS Participants are informed about the changes and understand how to implement them in their daily operations.
• Implications: The availability of standardized educational materials will help streamline the transition to the new rules, ensuring consistency across the industry. Agents and brokers will need to engage with these resources to stay compliant, and brokers may need to provide additional training to their teams based on these materials.
Rule 13: Clarification on Off-MLS
Offers of Compensation
(Paragraph 58.xiii)
Summary:
• The settlement clarifies that the practice changes do not prevent (a) offers of compensation to buyer brokers or other buyer representatives off the MLS, or (b) sellers from offering buyer concessions on a REALTOR® MLS (e.g., for buyer closing costs), as long as such concessions are not limited to or conditioned on the retention of or payment to a cooperating broker, buyer broker, or other buyer representative.
Explanation:
• Impact on Brokers and Agents: This rule ensures that while the MLS fields related to broker compensation are eliminated, brokers and agents still have the flexibility to offer compensation off the MLS. Additionally, sellers can still offer concessions to buyers, provided they are not tied to specific conditions related to agent compensation.
• Implications: Agents and brokers will need to navigate these rules carefully, ensuring that any compensation offers or buyer concessions made off the MLS are transparent and compliant with the new regulations. This rule provides some flexibility but requires careful adherence to ensure that such offers are not misleading or discriminatory.
Rule 14: Termination of Obligations (Paragraph 59)
Summary:
• The obligations set forth in the practice changes will terminate 7 years after the Class Notice date. Additionally, if a final judgment is entered by a court requiring NAR to adopt inconsistent practice changes, NAR may comply with that judgment, but must still observe the settlement practices not affected by the judgment.
Explanation:
• Impact on Brokers and Agents: This rule indicates a time-bound nature for the settlement obligations, meaning that after 7 years, the specific requirements may no longer be in effect unless further actions are taken by courts or regulatory bodies.
• Implications: Brokers and agents should be aware that these changes are not necessarily permanent and may evolve based on further legal or regulatory developments. It’s important to stay informed of any updates or changes to these obligations over time.
Rule 15: Material Component of Settlement Agreement (Paragraph 60)
Summary:
• The settlement acknowledges that the practice changes are a material component of the agreement, and NAR agrees to use its best efforts to implement these changes as specified.
Explanation:
• Impact on Brokers and Agents: This underscores the importance of the practice changes as a fundamental part of the settlement. It emphasizes the commitment of NAR to ensuring that these changes are effectively implemented across the industry.
• Implications: For brokers and agents, this rule signals the seriousness of the settlement terms and the need to comply with the practice changes. Failure to adhere to these changes could result in significant legal and operational consequences.
Rule 16: Cooperation in Ongoing Legal Actions (Paragraph 61)
Summary:
• NAR agrees to provide cooperation in ongoing legal actions by authenticating documents, providing factual information to support admissibility of evidence, making employees available for depositions, and not assisting non-settling defendants more than it assists plaintiffs.
Explanation:
• Impact on Brokers and Agents: While this rule primarily concerns NAR’s obligations, brokers and agents should be aware that NAR’s cooperation in ongoing legal actions could lead to more evidence and information being available in lawsuits, potentially affecting the outcome of related cases.
• Implications: Agents and brokers may be indirectly impacted if the increased cooperation by NAR leads to more scrutiny or enforcement actions in other cases. This could result in a broader industry shift toward compliance with the settlement’s requirements.
Rule 17: Privilege and Work Product Protections (Paragraph 62)
Summary:
• NAR’s cooperation does not require the disclosure of information protected by attorney-client privilege, work product doctrine, joint defense privilege, or any other applicable privilege.
Explanation:
• Impact on Brokers and Agents: This rule protects sensitive legal communications and strategy documents from being disclosed, which is important for maintaining the confidentiality of legal defenses and strategies within the industry.
• Implications: Brokers and agents can continue to rely on legal privileges to protect certain communications from being disclosed in legal proceedings. However, they should still be cautious about what is documented and shared, as non-privileged information may still be subject to disclosure.
Rule 18: Continued Cooperation Until Final Judgment (Paragraphs 63-65)
Summary:
• NAR’s obligation to cooperate continues until final judgments are entered in all related actions, and the time for appeal has expired. This cooperation is considered a material component of the settlement.
Explanation:
• Impact on Brokers and Agents: NAR’s ongoing cooperation means that there will be a continuous flow of information and assistance in legal actions related to the settlement. This could result in prolonged legal scrutiny for the industry.
• Implications: Brokers and agents should be prepared for an extended period during which NAR’s actions could influence ongoing and future legal actions. The sustained cooperation indicates that the settlement’s impact will be felt for several years, with potential consequences for compliance and business practices.
Rule 19: Non-Release of Other Entities and Individuals (Paragraph 66-67)
Summary:
• The settlement specifies that MLSs and brokerages not directly involved in the settlement can opt into the settlement by agreeing to the practice changes outlined in the agreement. These entities must agree to certain conditions, including cooperation and the implementation of required changes.
Explanation:
• Impact on Brokers and Agents: MLSs and brokerages that opt into the settlement will be required to adopt the same practice changes as those imposed on NAR. This could lead to industry-wide standardization of these new practices.
• Implications: Brokers and agents affiliated with MLSs or brokerages that opt into the settlement will need to comply with these new standards. This might include changes in how compensation is disclosed and how brokerage services are represented to clients. Non-compliance could lead to legal and reputational risks.
Rule 20: Practice Changes for Opting-In Entities (Paragraph 68)
Summary:
• Entities that opt into the settlement must implement the same practice changes as NAR, including prohibiting offers of compensation on MLSs, requiring written agreements with buyers before home tours, and ensuring that commissions are disclosed as fully negotiable.
Explanation:
• Impact on Brokers and Agents: This rule emphasizes the need for clear, upfront agreements with buyers and transparent communication about commissions. Agents will no longer be able to rely on blanket or unilateral offers of compensation and must ensure that all compensation is clearly documented.
• Implications: The requirement for written agreements before home tours and the prohibition on advertising brokerage services as “free” will necessitate changes in how agents interact with clients. This could involve revising marketing materials, retraining staff, and ensuring that all agreements are in compliance with the new standards.
Rule 21: Cooperation and Data Sharing
Obligations
(Paragraph 69)
Summary:
• Opting-in entities must cooperate with plaintiffs by providing data, authenticating documents, and not offering greater assistance to non-settling defendants.
Explanation:
• Impact on Brokers and Agents: The cooperation clause means that entities opting into the settlement will be actively involved in providing data and evidence for ongoing litigation. This could increase the legal and administrative burden on brokers and agents.
• Implications: Brokers and agents working with opting-in MLSs or brokerages may need to be prepared for more frequent requests for data and documentation. There may also be a need to ensure that all records are accurate, up-to-date, and easily accessible to comply with these obligations.
Rule 22: Disclosure of Compensation and Commission Negotiability (Paragraph 58)
Summary:
• NAR and MLSs must ensure that all compensation arrangements are clearly disclosed to clients and that clients are informed that commissions are not set by law and are fully negotiable.
Explanation:
• Impact on Brokers and Agents: This rule mandates transparency in how commissions are presented to both buyers and sellers. Agents must clearly communicate that commission rates are negotiable and must document all compensation agreements.
• Implications: Brokers and agents will need to revise their listing and buyer representation agreements to include explicit language about commission negotiability Training may be required to ensure that agents can effectively communicate these changes to clients without misrepresenting their services or compensation structures.
Rule 23: Prohibition on Misleading Representations (Paragraph 58(vii))
Summary:
• Brokers and agents are prohibited from representing their services as “free” unless they receive no financial compensation from any source.
Explanation:
• Impact on Brokers and Agents: This rule targets misleading marketing practices, ensuring that clients understand the true cost of brokerage services. Agents who have traditionally marketed their services as “free” because they receive compensation from the seller must now adjust their messaging.
• Implications: Marketing materials, website content, and client communications will need to be reviewed and possibly revised to ensure compliance with this rule. Misrepresenting services as free could lead to legal consequences and damage to the agent’s reputation.
Rule 24: Written Agreements Before Home Tours (Paragraph 58(vi))
Summary:
• All brokers and agents working with buyers must enter into a written agreement before the buyer tours any home, specifying the compensation the broker or agent will receive.
Explanation:
• Impact on Brokers and Agents: This rule formalizes the relationship between buyers and agents, ensuring that compensation terms are agreed upon before any services are rendered. It eliminates ambiguity about payment and sets clear expectations for both parties.
• Implications: Agents will need to ensure that written agreements are in place before showing homes. This may require changes to the pre-tour process, such as integrating agreement signings into initial client meetings. Failure to comply could result in disputes over compensation or other legal issues.
Rule 25: Prohibition on Filtering Listings Based on Compensation (Paragraph 58(x))
Summary:
• Brokers and agents are prohibited from filtering or restricting MLS listings communicated to clients based on the existence or level of compensation offered to buyer brokers.
Explanation:
• Impact on Brokers and Agents: This rule ensures that clients receive a complete and unbiased view of all available properties, regardless of the compensation offered to the buyer’s agent. Agents must not withhold or prioritize listings based on the commission being offered.
• Implications: Agents may need to adjust their MLS search practices and communication strategies with clients. This rule also encourages agents to focus on the client’s needs and preferences rather than their own financial incentives, fostering greater trust and transparency in the client-agent relationship.
Rule 26: Seller Disclosure and Approval of Payments to Buyer Agents (Paragraph 58(viii))
Summary:
• Listing agents must obtain seller approval in writing for any payment or offer of payment made to another broker, agent, or representative acting for buyers. This disclosure must be provided in advance and specify the amount or rate of payment.
Explanation:
• Impact on Brokers and Agents: This rule requires a higher level of communication and transparency between listing agents and sellers. Agents must clearly explain the financial implications of compensating a buyer’s agent and obtain explicit consent from the seller before proceeding.
• Implications: Listing agents will need to incorporate this disclosure into their listing agreements and ensure that sellers fully understand and agree to any compensation arrangements. This may involve additional documentation and potentially more detailed discussions during the listing process.
Rule 27: Requirement for Educational Materials Reflecting Practice Changes (Paragraph 58(xii))
Summary:
• NAR must develop and distribute educational materials that reflect the new rules and eliminate any materials that contradict them.
Explanation:
• Impact on Brokers and Agents: This rule emphasizes the need for ongoing education and training for all real estate professionals. Brokers
and agents must stay informed about the new rules and integrate them into their daily practices.
• Implications: Brokerages may need to update their training programs, continuing education courses, and internal resources to align with the new rules. Agents will need to engage with these materials to ensure they remain compliant and knowledgeable about the latest industry standards.
Rule 28: Written Agreement Requirement Before Home Tours
(Paragraph 58(vi))
Summary:
• Brokers working with buyers must enter into a written agreement with the buyer before the buyer tours any home. This agreement must specify the amount or rate of compensation the broker will receive, how this amount will be determined, and the compensation must be objectively ascertainable and not open-ended.
Explanation:
• Impact on Brokers and Agents: This rule formalizes the compensation arrangement between buyer brokers and their clients, ensuring that both parties clearly understand the financial terms before any property viewings. This practice is intended to increase transparency and reduce potential disputes over compensation.
• Implications: Buyer brokers will need to ensure that all agreements are in place and signed before taking buyers to view properties. This may involve changes to their current process, such as incorporating these agreements into initial consultations or pre-tour meetings. Additionally, brokers must ensure that the compensation is clearly defined and cannot be subject to change based on external factors like what a seller might offer.
Rule 29: Prohibition on Misrepresenting Brokerage Services as Free (Paragraph 58(vii))
Summary:
• Brokers and agents are prohibited from representing their services as “free” or available at no cost unless they will receive no financial compensation from any source.
Explanation:
• Impact on Brokers and Agents: This rule directly addresses a common practice in the industry where agents advertise their services as
being free to buyers, even though they may receive compensation from the seller or through other means. The rule ensures that buyers are fully aware that agents are compensated for their services and that there is no hidden cost involved.
• Implications: Agents will need to revise their marketing and communication strategies to ensure compliance with this rule. Any advertising or communication claiming that services are free must be backed by the reality that the agent will not receive compensation from any source. This may lead to more explicit discussions with clients about how agents are compensated.
Rule 30: Mandatory Disclosure of Negotiable Commissions
(Paragraph
58(ix))
Summary:
• Brokers and agents must disclose to prospective sellers and buyers in conspicuous language that broker commissions are not set by law and are fully negotiable. This disclosure must be included in the listing agreement, the buyer representation agreement, and pre-closing disclosure documents if they are not government-specified forms.
Explanation:
• Impact on Brokers and Agents: This rule reinforces the idea that commission rates are not fixed and can be negotiated. It ensures that clients are aware of their right to negotiate commission rates, potentially leading to more competitive pricing and terms.
• Implications: Agents will need to update their forms and agreements to include this disclosure. They must also be prepared to have more in-depth conversations with clients about commission structures and be open to negotiation. This could lead to a broader range of commission rates in the market and potentially affect agents’ income.
Rule 31: Prohibition on Filtering MLS Listings Based on Compensation (Paragraph 58(x))
Summary:
• Brokers and agents are prohibited from filtering or restricting MLS listings communicated to their clients based on the existence or level of compensation offered to the buyer broker or other buyer representative.
Explanation:
• Impact on Brokers and Agents: This rule prevents agents from showing only those properties that offer higher commissions. It ensures that buyers have access to the full range of available properties, regardless of the compensation offered to their agents.
• Implications: Agents will need to adjust their practices to ensure they present all suitable properties to their clients, regardless of the commission structure. This could result in agents showing properties that offer lower or no commissions, which may impact their earnings but will align with the goal of providing unbiased service to clients.
Rule 32: Rescind or Modify Inconsistent Rules (Paragraph 58(xi))
Summary:
• The National Association of REALTORS® (NAR) must rescind or modify any existing rules that are inconsistent with the practice changes outlined in the settlement agreement.
Explanation:
• Impact on Brokers and Agents: This rule ensures that all practices within the NAR and its associated MLSs align with the new settlement requirements. Any pre-existing rules or practices that contradict these changes must be updated or removed.
• Implications: Brokers and agents will need to stay informed about changes to the rules and ensure that their practices comply with the updated guidelines. This might involve retraining or adjusting procedures to align with the new standards.
Rule 33: Development of Educational Materials (Paragraph 58(xii))
Summary:
• The NAR must develop educational materials that reflect and are consistent with the new practice changes. Any educational materials that are contrary to the settlement’s provisions must be eliminated.
Explanation:
• Impact on Brokers and Agents: This rule mandates that brokers and agents receive updated education and training on the new rules and practices. The NAR is responsible for creating resources that help real estate professionals understand and implement these changes.
• Implications: Brokers and agents will need to participate in training sessions or review educational materials to ensure they fully understand and comply with the new rules. This may require some time investment but
is crucial for maintaining compliance and providing accurate information to clients.
Rule 34: Restrictions on Offers of Compensation (Paragraph
58(xiii))
Summary:
• The practice changes introduced in the settlement do not prevent offers of compensation to buyer brokers or representatives from being made off the MLS. Additionally, sellers are allowed to offer buyer concessions on a REALTOR® MLS, provided these concessions are not tied to or conditioned upon retaining or paying a cooperating broker, buyer broker, or other buyer representative.
Explanation:
• Impact on Brokers and Agents: This rule clarifies that while the settlement imposes new restrictions on how compensation is handled within the MLS, it does not entirely eliminate the possibility of offering compensation. Such offers can still be made outside the MLS system, and sellers can provide buyer concessions as long as they aren’t tied to the compensation of a buyer broker.
• Implications: Brokers and agents need to understand that while compensation offers within the MLS are restricted, there remains flexibility outside the MLS. This allows for continued negotiations and agreements on compensation between sellers and buyer representatives, albeit in a more controlled and regulated environment.
Rule 35: Termination of Obligations (Paragraph 59)
Summary:
• The obligations imposed by the settlement agreement will end seven years after the Class Notice date. However, if a court issues a final judgment in a related case that requires different practice changes, the NAR may comply with that judgment, even if it contradicts the settlement agreement, unless the judgment is reversed or vacated.
Explanation:
• Impact on Brokers and Agents: This rule sets a timeline for how long the new practices must be adhered to. After seven years, these specific obligations will no longer apply unless extended by further legal action. Additionally, there is a provision for the NAR to adapt to new legal requirements if they arise from other court cases.
• Implications: Brokers and agents should be aware that the rules set out in this settlement are not permanent and may evolve over time, especially if new legal challenges or rulings arise. This means staying informed about ongoing legal developments that could impact the real estate industry.
Rule 36: Materiality of Practice Changes (Paragraph 60)
Summary:
• The NAR acknowledges that the practice changes required by the settlement agreement are a critical component of the settlement. The NAR agrees to use its best efforts to implement these changes fully.
Explanation:
• Impact on Brokers and Agents: This rule reinforces the importance of the practice changes outlined in the settlement. The NAR is committed to ensuring these changes are effectively implemented across all its associated MLSs and member boards.
• Implications: Brokers and agents should expect that the NAR will actively monitor and enforce compliance with the new rules. This could involve increased oversight and possibly more stringent penalties for non-compliance, emphasizing the need for brokers and agents to adhere strictly to the new guidelines.
Rule 37: Cooperation with Plaintiffs (Paragraphs 61-64)
Summary:
• The NAR is required to provide significant cooperation to the plaintiffs in ongoing legal actions related to the settlement. This includes providing documents, testifying, and assisting in verifying the authenticity of records, among other responsibilities.
Explanation:
• Impact on Brokers and Agents: While this rule mainly affects the NAR at the organizational level, it could indirectly affect brokers and agents if the NAR’s cooperation leads to further legal scrutiny or changes in industry practices.
• Implications: The cooperation could result in additional disclosures or data becoming public, which might influence future regulations or standards. Brokers and agents should be prepared for potential industry shifts that could arise from the ongoing legal actions.
Rule 38: Opt-In Requirements for REALTOR® and Non-REALTOR® MLSs (Paragraphs 66-68)
Summary:
• REALTOR® and non-REALTOR® MLSs must agree to specific practice changes, including the elimination of requirements for offering compensation to buyer brokers and other buyer representatives. They must also agree not to create or support non-MLS mechanisms for such offers.
Explanation:
• Impact on Brokers and Agents: MLSs opting into the settlement must eliminate fields related to broker compensation and prohibit listing brokers from making compensation offers on the MLS. This represents a significant shift in how MLS data is structured and shared.
• Implications: Brokers and agents need to adapt to a new way of listing properties where compensation details are not disclosed on the MLS. This could lead to more direct negotiations between parties regarding compensation and could change how buyer and seller agents collaborate.
Rule 39: Disclosure of Commissions and Compensation Agreements (Paragraphs 68(ix) and 68(x))
Summary:
• MLS Participants must disclose that broker commissions are fully negotiable and are not set by law This must be stated in listing agreements, buyer representation agreements, and pre-closing disclosure documents unless these forms are government-specified.
Explanation:
• Impact on Brokers and Agents: Agents are required to clearly communicate to clients that commissions are negotiable, which could lead to more discussions and negotiations about fees. This transparency aims to empower consumers but could also lead to more complex client interactions.
• Implications: Agents should be prepared to justify their commission rates more frequently and to engage in negotiations with clients who are more informed about their rights. This may require stronger communication and negotiation skills to maintain profitability.
Rule 40: Prohibition on Filtering MLS Listings Based on Compensation (Paragraph 68(xi))
Summary:
• MLS Participants are prohibited from filtering out or restricting MLS listings communicated to their clients based on the existence or level of compensation offered to the buyer broker or other buyer representatives.
Explanation:
• Impact on Brokers and Agents: This rule prevents agents from hiding or deprioritizing listings with lower commission offerings. All listings must be presented to clients without bias, regardless of the compensation offered to the buyer’s agent.
• Implications: Agents will need to adjust their practices to ensure that all potential properties are shown to their clients, regardless of the commission structure. This could potentially lead to situations where agents feel less incentivized by certain listings, but they are required to act in the best interest of their clients and show all relevant properties.
Rule 41: Rescission or Modification of Inconsistent Rules (Paragraph 68(xii))
Summary:
• Any existing rules within the MLS or associated real estate practices that are inconsistent with the settlement’s practice changes must be rescinded or modified.
Explanation:
• Impact on Brokers and Agents: Real estate agents and brokers who are accustomed to older practices must stay updated with the new rules to ensure compliance. Any previous practices that contradict the new requirements must be adjusted.
• Implications: This could require brokers to undergo additional training or revise their operational procedures to align with the new standards. Agents may also need to revisit their client agreements to ensure that they conform to the updated rules.
Rule 42: Development and Elimination of Educational Materials (Paragraph 68(xiii))
Summary:
• REALTOR® and non-REALTOR® MLSs are required to develop educational materials that reflect and are consistent with the new practice changes. They must also eliminate any existing educational materials that are contrary to the new rules.
Explanation:
• Impact on Brokers and Agents: Brokers and agents will be provided with new educational resources that align with the settlement’s changes. They must familiarize themselves with these new materials and discard any outdated resources that no longer apply.
• Implications: Continuous education and staying informed will be crucial for brokers and agents to remain compliant with the new standards. This may involve participating in new training programs or workshops offered by their MLS or the NAR.
Rule 43: Flexibility in Offers of Compensation Outside of the MLS (Paragraph 68(xiv))
Summary:
• The practice changes in the settlement do not prevent offers of compensation to buyer brokers or other buyer representatives outside of the MLS. Sellers can still offer buyer concessions (e.g., for buyer closing costs) on the MLS, as long as these concessions are not limited to or conditioned on the retention of or payment to a cooperating broker, buyer broker, or other buyer representatives.
Explanation:
• Impact on Brokers and Agents: Brokers and agents may still negotiate compensation agreements outside of the MLS. This flexibility allows them to tailor agreements to specific transactions without breaching the new rules.
• Implications: Agents must be transparent about any compensation arrangements and ensure that these are not tied to conditions that could conflict with the new settlement requirements. This rule encourages fair competition and transparency in compensation practices.
Rule 44: Cooperation Obligations of Opting-In REALTOR® and Non-REALTOR® MLSs (Paragraph 69)
Summary:
• REALTOR® and non-REALTOR® MLSs that opt into the settlement must cooperate with the plaintiffs and Settlement Class Members by
authenticating documents, providing necessary facts, and producing non-privileged documents to support class notice, administration, and litigation.
Explanation:
• Impact on Brokers and Agents: MLSs and their participants must cooperate in legal processes that support the enforcement and administration of the settlement. This may include sharing data, authenticating documents, and providing testimony.
• Implications: Brokers and agents must be aware that their MLS might require their participation in legal proceedings or data sharing. Compliance is essential to ensure that their MLS remains in good standing and continues to operate under the new rules.
Rule 45: Protection of Attorney-Client Privilege (Paragraph 70)
Summary:
• The cooperation obligations for MLSs do not require the production of information, testimony, or documents protected by attorney-client privilege, work product doctrine, joint defense privilege, or any other applicable privilege.
Explanation:
• Impact on Brokers and Agents: Brokers and agents are protected from having to disclose privileged communications or documents during cooperation with the settlement’s requirements.
• Implications: While MLSs and their participants must comply with cooperation requirements, they can still protect confidential communications with their attorneys. Agents should ensure they understand the boundaries of what can be shared and what remains protected under legal privilege.