The Ten: NAR’s new rules and the ‘messy’ race to comply 

Editor's note: In this year of evolution — much of it mandated by legal challenges — a handful of people and themes have emerged as defining forces. Real Estate News has selected the top newsmakers of 2024, based on their industry impact and influence. They are The Ten.

In March, with commissions lawsuits mounting, the National Association of Realtors found itself backed into a corner. Facing "extinction-level litigation," NAR opted to settle to the tune of $418 million. In addition to the steep monetary damages, at the core of the settlement were two rule changes: the removal of offers of compensation from the MLS and new buyer agreement requirements. 

While NAR brokered the deal, implementation — and enforcement — fell to the vast and fragmented assortment of industry players, including more than 500 MLSs, well over 1,000 local and state associations, roughly 100,000 residential brokerage companies and 1.5 million Realtors. The result? Varying degrees of confusion, frustration and action.

MLSs navigate technical challenges, compliance issues  

Once the settlement was announced, the clock started ticking for multiple listing services — they now had about 150 days to overhaul their systems and prepare their subscribers for the changes. 

This task was most daunting for the little guys. Nearly half (43%) of the nation's 521 MLSs have fewer than 400 subscribers, according to the Real Estate Almanac, and smaller players "have little resources for programmatic or technical innovation," said Russ Cofano, CEO of Collabra Technology.

Even some big MLSs experienced hiccups. California Regional MLS — the largest MLS in the country — had to backtrack after launching a new "Concessions in Price" field in May. While not framed as an offer of compensation, the new field allowed agents to indicate whether their seller would consider offering concessions with an option to include a percentage or dollar amount. 

But after the California Association of Realtors received pushback over its draft forms (more on that later), CRMLS removed those options in an effort "to avoid confusion between all parties."

Removing commissions a 'game-changer' — and a hit to MLS value

Updating their platforms was just the first step. MLSs also had to send a clear message to their members, explaining the new rules and how they would be enforced.

"To teach over one million agents around the country how to have new and different conversations with their clients was a massive undertaking for all involved," Bright MLS CEO Brian Donnellan told Real Estate News in November. CRMLS CEO Art Carter called the removal of commissions from the MLS "the biggest game-changer," adding that "when the game changes, so must our mindset." 

Changing mindsets, however, is no easy task. 

Agents are already questioning the value of the MLS in a post-settlement world. In an October survey of real estate professionals, 55% of respondents said their MLS would be less valuable without offers of compensation. Small MLSs may find it especially challenging to show their value, Adam Conrad, a Pennsylvania broker-owner, told Real Estate News in July. "There's going to be a point at which it doesn't make sense to belong," Conrad said. 

Buyer agreements get 'messy'

Under the new rules, buyer clients must sign a written agreement before touring homes with an agent. The concept isn't new: Prior to the settlement, several states already required some form of a buyer agreement, and advocates argued that such agreements were good for the industry as a whole and good for agents. 

But for many associations and brokerages, this was a whole new world. With no blueprint from NAR, they were left to start from scratch — resulting in a hodgepodge of forms, some of which appeared to violate the terms of the settlement. Zillow, meanwhile, was quick to create a non-exclusive touring agreement, which it introduced in April and expanded on in August. So far, the agreement has not been challenged in court, though Virginia Realtors cautioned its members that the form may not comply with Virginia state law. 

The revision (and scrutiny) of forms will likely continue for some time — especially given the Department of Justice's recent claim that buyer agreements could be anticompetitive — and more guidance may be needed. "I would argue that eventually we're going to end up in a place where the states have to come in and come up with a more standardized process, because we're going to create a mess of this thing," Next Home CEO James Dwiggins said during his Real Estate Insiders Unfiltered podcast in August. 

Some also challenged NAR to do more. Stephen Brobeck, senior fellow at the Consumer Federation of America (CFA), told Real Estate News in July that NAR must "take constructive leadership on this issue and make it a priority to ensure that the forms are consumer-centric."

C.A.R. feels the heat as models for the industry emerge

One "mess" was evident over the summer, when the California Association of Realtors faced an inquiry and intense criticism from the DOJ and CFA over its buyer agreement and listing agreement forms. 

After weeks in the hot seat, C.A.R. released new forms, highlighting its decision to remove offers of compensation — because "members and their clients are best served by making informed compensation decisions without relying on historically common practices," C.A.R. General Counsel Brian Manson said of the change.

Those "common practices" are what pulled the industry into lawsuits, some industry leaders have said, urging real estate professionals to "stop sharing broker commissions" altogether.

So who got it right? The CFA pointed to eXp's simple, one-and-a-half-page agreement as "fundamentally pro-consumer" and consistent with the spirit of the settlement. Law professor Tanya Monestier, a critic of association buyer agreements, shared her three-page version with the industry, suggesting that it could be used as a template and adapted to comply with state requirements. 

While the deadline to implement new buyer agreements has passed, it's likely that some noncompliant forms are still in use — which could mire the industry in yet another round of lawsuits, Brian Schneider, legal counsel for Bright MLS, said in June. "I've seen forms that haven't been updated in a decade. I'm baffled that more litigation hasn't come. I think this is the time to fix the forms."