3 top takeaways from NAR’s updates on steering
New additions to the National Association of Realtors’ settlement FAQ page reinforce the idea that the client comes first, not the commission.
Key points:
- Realtors risk violating their fiduciary duty if they put anyone’s compensation ahead of their client’s interest.
- Spelling out compensation in the buyer agent agreement goes a long way toward preventing steering, NAR says.
- Talking with a home seller about what buyers may ask for can be tricky, and agents should not present steering as a threat.
As the industry prepares for the Aug. 17 NAR settlement policy changes, a topic that continues to drive interest is steering.
The National Association of Realtors recently added more information to its settlement FAQ page addressing two key concerns: that buyer agents will try to find ways to steer clients to listings that have higher offers of compensation, and that sellers will be pressured to offer compensation to buyer agents if they want to sell their home quickly.
Steering was a core issue in the commissions lawsuits that resulted in a $418 payout from NAR — so it's understandable that the association would want to make sure its members know steering is a bad idea — and potentially a very costly one. Especially since the concept is still very much on the mind of the U.S. Department of Justice.
Here are three takeaways from the latest NAR guidance around steering.
The client comes first, not the commission
One of the new updates was a clear warning to agents: "If a Realtor does anything to put their own (or another broker's) compensation before her client's interest, they are violating this primary code of ethics and potentially violating the broker's fiduciary duties to their client."
This is particularly problematic if the agent, not the client, is the one making decisions about what homes to see, said Ed Zorn, general counsel at CRMLS, when asked about various steering scenarios last month.
Compensation must be clearly spelled out in writing
NAR added more detail about what should be included in a buyer agreement, saying that it "must specify and conspicuously disclose the amount or rate of compensation it will receive or how this amount will be determined."
The importance of putting compensation in writing seemed to be a key point in the NAR updates. The organization elaborated that steering shouldn't happen if compensation is spelled out in the written agreement, because an agent is not allowed to accept more than that amount — unless the client agrees to rewrite the contract.
Don't instill a fear of steering in sellers
NAR seems to be walking a fine line with its latest update when it comes to keeping a client informed.
The organization notes that a listing broker should inform the seller about "the 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." Presumably, buyer agent compensation is one such cost.
However, that information shouldn't be presented as a threat: "A listing broker must not tell a seller that a broker will steer buyers based on the amount that broker is compensated," NAR says. In other words, listing agents can't tell their clients that if they don't offer compensation, they may get fewer showings.