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The Path Forward: NAR Settlement Updates

TIMELINE OF CHANGES

 

May 16

ICAAR executes Appendix B of the NAR Settlement, so that ICAAR’s MLS is included as a Released Party from any ongoing or future litigation

July 1

Real Estate Transparency Act takes effect. Buyer Agreements are Mandatory.

August 1

ICAAR members to receive updated version of MLS Rules and Regulations, pending legal approval

ICAAR members to have updated Listing Agreement, pending legal review

August 13

Changes to ICAAR’s MLS take effect

Changes to ICAAR’s MLS Rules and Regulations in effect

August 14

Changes to Iowa Real Estate Commission Administrative Rules in effect. Agents will now be able to write offers of compensation into a Purchase Agreement.

August 17

NAR’s deadline for all MLS’s to implement policy changes

 

 

MANDATORY BUYER AGREEMENTS

Use of a Buyer Agreement in a residential transaction is mandated by Iowa Law beginning July 1

  • The Real Estate Transparency Act: Use of a signed Buyer Agreement in a residential transaction is required for all real estate licensees practicing in Iowa
  • It is required that a Buyer Agreement is signed before showing a property, or before an offer is submitted if no showing takes place
  • Showings include both in-person and live virtual tours.
  • Any compensation agreed to must be objectively ascertainable and not open-ended.

 

FAQ – Mandatory Buyer Agreements

 

Are Buyer Agreements required when listing agents talk with a buyer on behalf of a seller only?

No. An agreement is not required in this situation because the participant is performing work for the seller and not the buyer.

NAR Rules require written buyer agreements to be used when an MLS Participant is “working with” buyers. What does it mean to be “working with” a buyer?

“Working with” refers to an MLS Participant providing brokerage services to a buyer – such as identifying potential properties, arranging for the buyer to tour a property, performing or facilitating negotiations on behalf of a buyer, presenting offers by the buyer, or other services.

“Working with” does not refer to an MLS Participant simply marketing their services, talking with a buyer at an Open House, or by providing an unrepresented buyer access to a property they have listed.

An MLS Participant performing only ministerial acts, without the expectation of being paid for those acts, and who has not yet taken the buyer to tour a home, is not yet working for the buyer and therefore does not yet need to enter into a written buyer agreement.

What happens if the listing broker offers compensation, a bonus, or financial incentive that is higher than the amount agreed upon in the Buyer Agreement between the buyer broker and their client?

Buyer brokers may not receive compensation for brokerage services from any source that exceeds the amount or rate agreed to in the agreement with the buyer.

If cooperative compensation being offered is higher than the contracted price in the buyer agreement, agents are allowed to renegotiate a written buyer agreement for a higher compensation fee. However, that would require the buyer to agree.

Does the requirement for a written buyer agreement mean that the buyer must also enter into a written agency agreement?

No. Agents and buyers will still be able to enter into any type of professional relationship permitted by state law. ICAAR and NAR policy does not dictate:

  • What type of relationship is had between agent and buyer (agency, non-agency, subagency, transactional)
  • The term of the agreement (one day, one month, one house, one zip code)
  • The services to be provided
  • The compensation charged ($0, X flat fee, X percent, X hourly rate)

Are written buyer agreements required in a dual agency scenario?

Yes. If the MLS Participant is working as an agent for a buyer, a written agreement is required.

Do commercial transactions need a written buyer agreement?

Rental and leasing transactions are not required to have a written buyer agreement. However, commercial and residential licensees work under the same license and therefore commercial agents will need abide by the new Iowa law and have a buyer agreement in place prior to showing clients commercial properties for sale.

 

CHANGES TO MLS AND MLS RULES & REGULATIONS

Changes to ICAAR’s MLS and MLS Rules and Regulations take effect Tuesday, August 13 Members will have access to the updated version of rules no later than August 1, pending legal approval.

 

What MLS Rules will change?

The following are broad outlines of what will be contained in ICAAR’s MLS rules beginning August 13, 2024:

  • All commission-related fields will be removed from the MLS
  • Offers of compensation are strictly prohibited on the MLS. Agents will be unable to communicate offers of compensation anywhere on the MLS including private remarks, photos, associated documents, third-party products such as ShowingTime, or otherwise.
  • It is prohibited to use an MLS data or MLS data feeds to directly or indirectly establish or maintain a platform of offers of compensation from multiple brokers or other buyer representatives.
  • Compensation disclosures are required to sellers, and to prospective sellers and buyers
  • It is required for MLS Participants working with a buyer to enter into a written agreement with the buyer prior to touring a home

What are the changes to ICAAR’s MLS?

Compensation fields will no longer be available across all listing statuses (Active, Pending, Sold, etc.) for any property type (Residential, Commercial, Lease). Agents will not have access to historical compensation data.

Compensation fields being removed:

  • Variable Rate
  • Comm. to SB ($/%)

How does this impact pending listings?

Pending listings that receive an accepted offer on or before August 12, 2024 will still have the full effect of any unilateral offer of cooperative compensation made in the MLS that will still be arbitrable.

How does this impact active listings?

If a Purchase Agreement is not executed before August 12, 2024, any offer of compensation initially listed on the MLS will not be valid and buyers and buyer brokers may wish to protect themselves in writing with the listing broker or seller through a broker agreement or by including the offer of compensation in the Purchase Agreement after the August 14 IREC rule change is implemented.

Broker Websites, Data Feeds, and Offers of Compensation

What is allowed: Participants are able to communicate offers of compensation on their own broker website. If the website uses an MLS data feed to display listings, offers of compensation can only be communicated for listings of their own brokerage.

What is prohibited: Participants are not allowed to use MLS data or MLS data feeds to directly or indirectly establish or maintain a platform of offers of compensation from multiple brokers to buyer brokers or other other buyer representatives. Violations can result in MLS access termination, per NAR’s requirements.

Reporting Violations

Violations of the new rules may be reported the same as any other violation: through the link on the listing in the MLS, or by reaching out to nancy@icaar.org or another staff member. Reports of MLS violations to staff are confidential. Rule violations are subject to fine.

 

CHANGES TO IREC ADMIN RULES

Iowa Real Estate Commission Administrative Rule changes anticipated to take effect August 14

Changes to Section 193E of the Iowa Real Estate Commission’s Administrative Rules will allow offers of compensation to be written into a Purchase Agreement. These rule changes were accepted by the IREC in June, and take effect August 14.

 

FORMS

ICAAR’s Forms Committee is working to implement any required changes to our existing forms, while IAR’s Forms Committee is working to create new necessary documents ahead of the August 17th final deadline.

This fall, ICAAR will begin to address new forms that need to be created locally. Requests for forms can be sent to ICAAR staff.

 

Listing Agreement

ICAAR’s Forms Committee and Board of Directors have approved changes to the Listing Agreement, now pending legal review. It will be available to members no later than August 1.

Proposed changes to the Listing Agreement:

  • Compensation is broken apart to individually state what the Listing Broker and the Buyer Broker will receive.
  • “Broker” terminology has been clarified to “Listing Broker” or “Buyer Broker”
  • “Commission” terminology has been clarified to “Compensation”
  • Disclosure that broker compensation is not set by law and is fully negotiable

If brokerages or agents decide to utilize their own Listing Agreement form, it must include, at minimum, conspicuous language disclosing that broker compensation are not set by law and are fully negotiable.

Agents must obtain seller approval for any payment or offer of payment that a listing broker will make to another broker, agent, or representative acting for brokers.

A disclosure must be made to the seller in writing in advance of any payment or agreement to pay another broker, agent, or representative active for buyer and must specify the amount or rate of such payment.

 

Buyer Agreements

The latest version of IAR’s Exclusive/Non-Exclusive Buyer Agreement is now available on Remine and FormSimplicity.

If brokerages or agents decide to utilize their own Buyer Agreement form, it must include, at minimum, the following:

  • A specific and conspicuous disclosure of the amount or rate of compensation the Participant will receive or how this amount will be determined, to the extent that the Participant will receive compensation from any source.
  • The amount of compensation in a manner that is objectively ascertainable and not open-ended.
  • A term that prohibits the Participants from receiving compensation for brokerage services from any source that exceeds the amount or rate agreed to in the agreement with the buyer
  • A conspicuous statement that broker fees and commissions are not set by law and are fully negotiable.

 

New Forms Expected from IAR

Over the course of the coming weeks, many forms will be produced by IAR for preparation of a July transition. These forms include a broker-to-broker compensation form and cancellation form.

 

 

ENFORCEMENT OF RULES

The following new rules and citations have been approved by the Board of Directors as of July 11, 2024. All rules and penalties will be in effect August 13, 2024.

Rule: MLS Participants working with a buyer must enter into a written agreement with the buyer prior to touring a home

If requested by MLS staff, Participants shall provide any required legal documentation or documents required by ICAAR’s MLS Rules and Regulations regarding a member’s clients and/or any real estate transaction that they are party to. Documents to be submitted within 24 hours of the request.

Penalty: Violators shall be subject to a $500.00 fine. If requested documentation is found to be in non-compliance, violators shall be subject to additional fines up to and including $1000.00.

Rationale: Per the terms of the NAR proposed Settlement that ICAAR has opted-into, the ICAAR MLS is liable for and mandated to enforce the required use of written buyer agreements.

Note: In addition to being MLS policy, buyer agreements are also required by law in Iowa. Not using buyer agreements put you at risk of impacts with your real estate license, including fines and potential suspension, via the IREC.

 

Rule: The MLS must not accept listings containing an offer of compensation in the MLS to other MLS Participants and Subscribers. Further, the MLS may not create, facilitate, or support any non-MLS mechanism (including by providing listing information to an internet aggregator’s website for such purposes) for Participants, Subscribers, or sellers to make offers of compensation to buyer brokers or other buyer representatives.
Use of MLS data or data feeds to directly or indirectly establish or maintain a platform of offers of compensation from multiple brokers to buyer brokers or other buyer representatives is prohibited and must result in the MLS terminating that Participant’s access to any MLS data and data feeds.

Penalty: Violations will result in a $5000.00 fine.

Rationale: Per the terms of the NAR proposed Settlement that ICAAR has opted-into, the ICAAR MLS is liable for and mandated to enforce the prohibition of offers of compensation on the MLS.

 

 

NAR SETTLEMENT FAQ

How quickly does NAR expect the settlement to be reviewed and approved by the court?

The court granted preliminary approval on April 24, 2024. The final approval hearing is scheduled to take place on November 26, 2024. There are strong grounds for the court to approve this settlement.

Why is NAR putting the practice changes in place prior to receiving final approval?

The settlement requires NAR to implement the practice changes no later than the date of the class notice. The earliest date of the class notice is August 17, 2024.

 

BEST PRACTICES FOR BROKERS

Avoid Standard Fees

Brokers cannot send out letters or emails to other Brokers stating to arrange a standard fee between the brokerages. That is an antitrust violation. There should be no pre-arranged agreements between brokers for set standard fees. Standard of practice should be the buyer agents reaching out to each respective listing broker and having communication about whether cooperative compensation is being offered and negotiating on each real estate transaction.

Advertising Cooperative Compensation Publicly

It is unclear the scope of what is permissible related to advertising cooperative compensation on non-MLS mediums. The Iowa Association of REALTORS recommends the best practice for discussing cooperative conversations is agent to agent conversations.

While not an endorsement, the following methods of advertising are known to be permissible: Yard signs, riders, a broker advertising on their own website what a specific listing’s offer of cooperative compensation is.

Brokerage Media Policies

It is imperative that the facts of the NAR Settlement and the surrounding rule changes are reported accurately and with the most information. ICAAR has an Association Media Policy requiring Board of Directors and volunteer leadership to forward media inquiries to the association. Brokerages are encouraged to establish media policies of their own that dictate how media inquiries are to be handled by agents.

 

 

ADDITIONAL RESOURCES

Facts.Realtor
Settlement FAQ’s, added to regularly, information on buyer agreements, broker-to-broker agreements, MLS policy changes, the settlement agreement, videos, and more.