NAR Settlement Receives Final Court Approval

Now that the long-awaited practice changes are in place, Your Illinois REALTORS® is here to provide you updates and answer new questions that you have about the required written buyer broker agreements with your clients and the removal of offers of compensation from the MLS went into effect Aug. 17. Visit this page regularly and check our social media pages for the latest guidance to help you navigate regulatory changes and master negotiation tactics.

Latest Updates from Your Illinois REALTORS® Legal Team

Illinois REALTORS® New and Revised Forms

Illinois REALTORS® Resources

To help provide consumers accurate information about the practice changes, your Illinois REALTORS® published an open letter in newspapers throughout the state explaining the new rules. If you would like to share or personalize this advertisement, the following instructions outline the process to download and share in your company newsletter, on your social media channels and to send to your clients.

Download the Value of a REALTOR in buying a home Handout

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Personalize and Share

Illinois REALTORS® has created a new download you can share with your clients highlighting some of the things you do to help buyers navigate the homebuying process.

Download the Value of a REALTOR in buying a home Handout
Download the Value of a REALTOR in buying a home Handout

NAR Consumer Guides

Overcoming Barriers to Homeownership

Overcoming Barriers to Homeownership

Understanding & Protecting Yourself from Title Fraud

Understanding & Protecting Yourself from Title Fraud

Buying Land and Building a New Home

Buying Land and Building a New Home

Deeds and Titles

Deeds and Titles

Alternative Listing Options

Alternative Listing Options

Navigating Multiple Offers

Navigating Multiple Offers

Homeowners Associations

Homeowners Associations

Marketing Your Home

Marketing Your Home

Seller Disclosures

Seller Disclosures

Property Taxes

Property Taxes

Preparing for Homeownership

Preparing for Homeownership

Escrow and Earnest Money

Escrow and Earnest Money

Pricing Your Home

Pricing Your Home

Preparing to Sell Your Home

Preparing to Sell Your Home

Fire Damage and Policy Coverage

Fire Damage and Policy Coverage

Flood Insurance

Flood Insurance

Homeowners Insurance

Homeowners Insurance

Home Inspections

Home Inspections

The Appraisal Process

The Appraisal Process

Agency and Non-Agency Relationships

Agency and Non-Agency Relationships

(Disclaimer)
Steps Between Signing and Closing on a Home

Steps Between Signing and Closing on a Home

Mortgages and Financing

Mortgages and Financing

Buying Your First Home

Buying Your First Home

10 Questions to Ask a Seller’s Agent

10 Questions to Ask a Seller’s Agent

10 Questions to Ask a Buyer’s Agent

10 Questions to Ask a Buyer’s Agent

Listing Agreements

Listing Agreements

Fair Housing

Fair Housing

Multiple Listing Services

Multiple Listing Services

Seller Concessions

Seller Concessions

Why Am I Being Asked to Sign a Written Buyer Agreement?

Why Am I Being Asked to Sign a Written Buyer Agreement?

Open Houses and Written Agreements

Open Houses and Written Agreements

REALTORS’® Duty to Put Client Interests Above Their Own

REALTORS’® Duty to Put Client Interests Above Their Own

What Veterans Need to Know About Buying a Home

What Veterans Need to Know About Buying a Home

Offers of Compensation

Offers of Compensation

Negotiating Written Buyer Agreements

Negotiating Written Buyer Agreements

Dos and Don’ts When Working With Buyers

Dos and Don’ts When Working With Buyers

Dos and Don’ts When Working With Sellers

Dos and Don’ts When Working With Sellers

What’s Changing

1. Written Buyer Brokerage Agreements to be Mandatory

Many of our members have already been using written buyer brokerage agreements and it is a practice that Illinois REALTORS® has long recommended. Buyer brokerage agreements lay out exactly what you, as a broker, will provide to your buyer clients including services provided and how compensation will be determined and paid.

Beginning Aug. 17, the NAR settlement will require MLS participants who are working with a buyer to enter into a written buyer brokerage agreement.

Illinois REALTORS® was even more proactive during the spring legislative session and, working with the Illinois Department of Financial and Professional Regulation, successfully pushed for the Illinois Real Estate License Act to be amended to require written brokerage agreements with all buyers and sellers. Governor J.B. Pritzker is expected to sign the legislation that would go into effect Jan. 1, 2025.

2. Offers of Compensation Will Be Outside the MLS

A key element of the NAR settlement changes how buyer brokers are paid and eliminates and prohibits any offers of compensation in the MLS between listing brokers or sellers to buyer brokers or other buyer representatives. MLSs will eliminate broker compensation fields and broker compensation information within the MLS, according to NAR.

Compensation conversations and negotiations will still be able to occur off the MLS. Buyers could pay buyer brokers directly. Other options include the seller still choosing to pay the buyer’s agent or agreeing to pay concessions to cover some of the buyer’s costs in the transaction. Note: If the buyer broker has negotiated a compensation rate with their client in the buyer brokerage agreement, the NAR settlement prohibits the buyer broker from receiving more than was initially agreed to.

Frequently Asked Questions

The National Association of REALTORS® has provided a variety of resources to help REALTORS® prepare for the changes coming out of the NAR settlement.

Here are some of the top frequently asked questions you need to know:

Check with your source for your forms regarding revised or new brokerage agreements. This is true for both listing agreements on the seller’s side and buyer brokerage agreements on the buyer’s side.

For existing listing agreements:

  • If the listing is under a purchase contract and waiting to close before, on or just after August 17, 2024 you should be fine if the purchase transaction closes soon.
  • If the listing agreement is effective but there is no pending purchase contract, you need to amend your agreement in the following ways:
    • Provide a disclosure in conspicuous language that the broker’s compensation is fully negotiable and not set by law. This could be a separate addendum to augment your current listing.
    • IF there is reference to the MLS in any offer of compensation, this must be revised by an addendum to the existing contract or by signing a new, compliant contract.

For buyer brokerage agreements:

  • If you don’t have a written agreement, you need to have one signed. It can be any type of legal written agreement that meets the required practice changes.
  • If you have an existing written buyer brokerage agreement, should take steps to ensure that the buyer has agreed to the necessary terms required by the settlement agreement. Consider the following:
    • If there is an amount or rate of compensation, and
    • If the rate is objectively ascertainable (i.e. Not a range or “whatever seller is offering”), and
    • It prohibits the buyer broker from receiving more than the buyer has agreed to pay
  • This would be a compliant agreement along with a conspicuous disclosure that the compensation is negotiable and not set by law. If you have the prior three components, you can add the disclosure without having to sign a new agreement.

Yes, Articles 2 and 12 of NAR’s Code of Ethics apply equally to brokers working with sellers.

The listing broker should explain to her client the benefits and costs of the various types of marketing that can be done for a listing, and how potential buyers might respond to such marketing—including any buyer costs that the listing broker or seller may offer to pay.

A listing broker should inform the seller about costs the buyer will incur, how the buyer might react to those costs, and how the seller can market a house considering the buyer’s costs; but a listing broker must not tell a seller that a broker will steer buyers based on the amount that broker is compensated.

MLS Participants working with sellers must disclose in conspicuous language that broker commissions are not set by law and are fully negotiable.

MLS Participants must include the disclosure in the listing agreement, if the listing agreement is not a government-specified form. If the listing agreement is a government-specified form, a separate disclosure would satisfy the requirement.

Yes.The practice changes require that a REALTOR® or MLS Participant acting for sellers to conspicuously disclose to sellers and obtain seller approval for any payment or offer of payment that a listing broker will make to another broker, agent, or other representative acting for buyers.

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

Written buyer agreements will be required of all MLS Participants working with buyers prior to touring a home, unless state law requires a written buyer agreement earlier in time.

No, an MLS is not required to receive a copy but can request it as a matter of their local enforcement.

NAR’s mandatory MLS policy changes, which implement the settlement’s required practice changes, will take effect on August 17, 2024.

Our settlement requires NAR to implement the practice changes no later than the date of class notice. Through the preliminary settlement approval process, we now know the earliest date of class notice is August 17, 2024.

Additionally, to comply with NAR’s mandatory national MLS policies, REALTOR® MLSs must implement the practice changes by August 17.

NAR shared these practice changes in early May to provide a three-month window for NAR members and MLSs to prepare to implement these changes.

Article 3, Standard of Practice 3-1 of the REALTOR® Code of Ethics says that “terms of compensation, if any, shall be ascertained by cooperating brokers before beginning efforts to accept the offer of compensation.” Doesn’t this mean the listing broker must disclose the amount, if their seller client directs the listing broker not to disclose until the buyer’s broker submits an offer on behalf of their buyer?

Answer: Not necessarily. The answer to this question will depend on very specific facts, and to some extent, will depend on market conditions. In the present market, where there is a shortage of available housing, the seller client might direct their listing broker not to disclose any amount of compensation but to disclose that there could be seller-authorized cooperating compensation. The seller might want their listing broker to encourage the buyer’s broker to submit an offer which includes any of their buyer’s requests for concessions from the seller, one of which could be buyer’s broker’s compensation.

There is an argument that the listing broker could answer the buyer’s broker honestly that, while the listing broker is authorized to offer cooperating compensation off the MLS, the seller wants to see whether the buyer is asking for any concessions as part of the buyer’s offer to purchase. In addition, the seller and the listing broker may want to avoid paying more than the buyer has agreed to pay their own buyer’s brokerage. It is also important to note, according to the practice changes, the buyer’s broker may not accept more compensation than that agreed to in the buyer brokerage contract with the buyer. This seems like it would be lawful direction on the seller’s part, in which case, the listing broker could abide by this direction.

The buyer’s broker and the buyer have already negotiated the compensation for the buyer’s brokerage according to the terms of their own written agreement, which, depending on the circumstances, could be included as part of the buyer’s offer, along with other costs that are often negotiated in the transaction.

As market conditions change and more homes come to the market, sellers and listing brokers might change their strategies for marketing their properties to attract more buyers. However, steering is strictly prohibited for brokers who are REALTORS®, so buyer’s brokers must show their buyer clients any available listings that meet their buyer’s criteria and seller’s brokers need to present all offers so the sellers can make decisions based on the merits of the entire offer.

Whatever the market conditions, sellers and listing brokers must respond in a consistent manner to all buyer’s brokers who are inquiring.

Consumer Guide: REALTORS’® Duty to Put Client Interests Above Their Own

First, as the listing agent whose client is the seller, that is the first place to go for direction. You must discuss with your seller the pros and cons of showing to an unrepresented buyer and get direction from your seller client whether to show or tour your listing.

Next, if the seller has directed you to show/tour the home with the unrepresented buyer, you must give the buyer a Notice of No Agency. This disclosure will tell the buyer that you do not represent them as their agent, so the buyer should not disclose any information that the buyer would not want you to know. You owe a duty of honesty to this buyer. Also, if you have actual knowledge about physical defects in the property, you will need to disclose that.

Another item to consider is something that agents should do for all buyer showings, represented or not. Perhaps develop office policy that all buyers, whether they are your buyer clients or unrepresented customers, get some basic financial pre-qualification. This could reduce the number of buyers who are not serious about buying. This policy must be applied consistently to all!

In addition, follow your office policy regarding personal safety. If the buyer demands a showing without their own agent, and they have proven they meet the basic financial threshold for the property they wish to tour, try to meet them in a public place where you can be safe and where you can remind them about the Notice of No Agency. At this time, the buyer might be open to a referral for their own agent.

If the buyer wants to write an offer, you could provide your board approved form but do not assist the buyer other than to recommend they seek legal advice on any contractual questions. If the buyer asks questions that are appropriate for their own agent, deflect those questions and remind the buyer that you represent the seller. This means that you may not help the buyer determine what they will offer for the property, and your duties are to get the best deal possible for your seller client.

The Department of Veterans Affairs (VA) recently announced that it has temporarily lifted its ban on buyers paying for real estate agent representation. Veteran buyers now have more options, ensuring they can have professional access to representation in their home buying process. The VA’s policy takes effect on August 10.

The VA is evaluating the need for a formal rulemaking process on this issue.

NAR has strongly advocated for this change as we want to ensure veterans maintain access to the VA home loan program, which has been a significant tool in helping service members achieve the American dream of homeownership.

Listing brokers should inform their clients that offers of compensation will no longer be an option on an MLS.

This change will not prevent offers of cooperative compensation off an MLS. And it will not prevent sellers from offering buyer concessions on an MLS (ex. concessions for buyer closing costs).

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

If the sales contract is executed before the MLS policy change, the buyer broker should be able to rely upon the offer of compensation even if closing occurs after the date of the policy change.

But if a sales contract is not executed before the date the participant’s MLS implements the policy changes, the offer on an 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 sales contract.

Yes

No, 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.

Yes. In the agreement, NAR reaffirms its commitment to requiring that MLS Participants must not limit the listings their client sees because of broker compensation.

Written buyer agreements, required by the NAR practice changes that will be implemented on August 17, 2024, will also outline that MLS Participants may not receive compensation for brokerage services from any source that exceeds the amount or rate agreed to in the agreement with the buyer.

Since a broker working with a buyer cannot receive more compensation than the buyer has agreed to in that agreement, the amount of any offer of compensation is irrelevant to the buyer-broker’s compensation.

Under these practice changes, NAR has eliminated any theoretical steering because a broker will not make more compensation by steering a buyer to a particular listing because it has a “higher” offer of compensation.

Yes. In fact, REALTORS® must provide this information to potential buyers under NAR’s Code of Ethics.

Written buyer agreements, required by the NAR practice changes that will be implemented on August 17, 2024, will also outline that MLS Participants may not receive compensation for brokerage services from any source that exceeds the amount or rate agreed to in the agreement with the buyer.

The NAR Settlement also requires that “to the extent that such a REALTOR® or Participant will receive compensation from any source, the agreement must specify and conspicuously disclose the amount or rate of compensation it will receive or how this amount will be determined.”

No, MLSs will continue to have local discretion on seller concessions. This includes determining what local rules to have about seller concessions, except under the settlement an MLS must ensure that the seller concessions are not limited to or conditioned upon the retention of or payment to a cooperating broker, buyer broker, or other buyer representative.

Consumers should know that after August 17, 2024:

  • If you are a buyer and your agent is using an MLS, you will need to sign a written agreement with your agent before touring a home so you understand exactly what services will be provided, and for how much.
  • Written agreements are required for both in-person and live virtual home tours.
  • You do not need a written agreement if you are just speaking to an agent at an open house or asking them about their services.
  • Agent compensation for home buyers and sellers continues to be fully negotiable.
  • When finding an agent to work with, ask questions about their services, compensation, and these written agreements.
  • More details about these changes and what they mean can be found at competition.realtor.

Additional Updates from Your Illinois REALTORS® Legal Team

NAR Settlement Details

The National Association of REALTORS® (NAR) on March 15 announced an agreement that would end litigation of claims brought on behalf of home sellers related to broker commissions. Initially, the agreement would have resolved 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. Since then, most of the entities who would have been excluded from the settlement have also made proposed agreements with the plaintiffs’ side and will now be part of the settlement that is still subject to final approval by the court later in 2024.

MLS Policy Changes to be completed before August 17, 2024, the earliest date that Class Notice can occur

May 3, 2024

On May 3, 2024, NAR’s Chief Legal Office, Katie Johnson, announced that with assistance and approval from the relevant NAR Committees, required changes to NAR affiliated MLSs have been released. Here is a high level summary:

  • Eliminate and prohibit any requirement of offers of compensation in the MLS between listing brokers or sellers to buyer brokers or other buyer representatives.
  • Retain, and define, “cooperation” for MLS Participation.
  • Eliminate and prohibit MLS Participants, Subscribers, and sellers from making any offers of compensation in the MLS to buyer brokers or other buyer representatives.
  • Require the MLS to eliminate all broker compensation fields and compensation information in the MLS.
  • Require the MLS to not create, facilitate, or support any non-MLS mechanism (including by providing listing information to an internet aggregator’s website for such purpose) for Participants, Subscribers, or sellers to make offers of compensation to buyer brokers or other buyer representatives.
  • Prohibit the use of MLS data or data feeds to directly or indirectly establish or maintain a platform of offers of compensation from multiple brokers or other buyer representatives. Such use must result with the MLS terminating the Participant’s access to any MLS data and data feeds.
  • Reinforce that MLS Participants and Subscribers must not, and MLSs must not enable the ability to, filter out or restrict MLS listings that are communicated to customers or clients based on the existence or level of compensation offered to the cooperating broker or the name of a brokerage or agent.
  • Require compensation disclosures to sellers, and prospective sellers and buyers.
  • Require MLS Participants working with a buyer to enter into a written agreement with the buyer prior to touring a home.

Recently, the plaintiffs in the Sitzer-Burnett case filed a motion for preliminary approval of the proposed settlement outlined below. Judge Bough granted the motion today.

This action means the settlement is preliminarily approved and will continue towards final approval anticipated near the end of 2024. Importantly, per NAR Chief Legal Officer, Katie Johnson, “Settlement class members are now enjoined from filing complaints or prosecuting any claims based on the type of conduct at issue in Sitzer-Burnett and the other settled Actions on behalf of home sellers related to broker commissions against NAR or other parties that are released under the settlement.”

The plaintiffs asked for a hearing on final approval of the settlement on November 26, 2024. See this timeline for more information on next steps.

To be a party covered by the release of liability under the proposed settlement, the party must be a REALTOR® member as of August 17, 2024, which is currently the earliest anticipated date of class notice.

Stay updated here and at facts.realtor for all the latest developments.

What are the key terms of the agreement?

Release of liability

The agreement would release 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 whose residential transaction volume in 2022 was $2 billion or below from liability for the types of claims brought in these cases on behalf of home sellers related to broker commissions.

  • 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.

The agreement provides a mechanism for nearly all brokerage entities that had a residential transaction volume in 2022 that exceeded $2 billion and MLSs not wholly owned by REALTOR® associations to obtain releases efficiently if they choose to use it.

Compensation offers moved off the MLS

NAR has agreed to put in place a new rule prohibiting offers of 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). This change will go into effect in mid-July 2024.

Written agreements for MLS participants acting for buyers

While NAR has been advocating for the use of written agreements for years, in this settlement we have agreed to require MLS participants working with buyers to enter into written representation agreements with their buyers. This change will go into effect in mid-July 2024.

Settlement payment

NAR would pay $418 million over approximately four years. This is a substantial sum, and it will be incumbent on NAR to use our remaining resources in the most effective way possible to continue delivering on our core mission. NAR’s membership dues for 2024 will not change because of this payment.

NAR continues to deny any wrongdoing

NAR has long maintained — and we continue to believe — that cooperative compensation and NAR’s current policies are good things that benefit buyers and sellers. They promote access to property ownership, particularly for lower- and middle-income buyers who can have a difficult-enough time saving for a down payment. With this settlement, NAR is confident it and its members can still achieve all those goals.