NAR Settlement and What it Means to You


On March 15, the National Association of REALTORS® (NAR) reached a significant settlement agreement with plaintiffs, resolving litigation regarding broker commissions in real estate transactions, brought on behalf of home sellers. If approved by the court, this settlement will bring changes to how real estate services are conducted, specifically concerning transparency and consumer choice regarding service and broker compensation. Here’s what you need to know:

Key Changes Starting August 17, 2024

1. Written Agreements with Buyers:

Real estate agents who use and list properties for sale on Multiple Listing Service (MLS)—a local marketplace used by real estate professionals (both buyer brokers and listing brokers) to share information about inventory in a particular area—will be required to enter into written agreements with buyers before touring a home. Those written agreements must include:  

  • A specific and conspicuous disclosure of the amount or rate of compensation the real estate agent will receive or how this amount will be determined.
  • Compensation that is objective (e.g., $0, X flat fee, X percent, X hourly rate)—and not open-ended.
  • A term that prohibits the agent from receiving compensation for brokerage services from any source that exceeds the amount or rate agreed to in the agreement with the buyer; and
  • A conspicuous statement that broker fees and commissions are fully negotiable and not set by law.

These measures are designed to ensure that consumers have a clear understanding of the services provided, the costs involved, and their rights in negotiating fees.

2. Restrictions on Compensation Offers in MLS:

Changes are also being made to how compensation offers are communicated among real estate professionals. Offers of compensation will no longer be displayed on MLS platforms. However, sellers can still offer compensation outside the MLS and can provide buyer concessions, such as assistance with closing costs, on MLS listings.

What This Means for You

For Home Buyers:

  • If 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.
  • Pursuant to legislation expected to become law in California on January 1, 2025, all licensees showing any type of property will be required to have a written agreement prior to showing.
  • 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 continues to be fully negotiable.
  • When negotiating compensation, you should discuss factors such as the agent/broker’s expertise and experience, the type of broker services to be performed, and the broker’s time and expenses, among other considerations.
  • Buyers and brokers benefit when the terms of their relationship and respective duties are in writing. A written agreement establishes clear, mutual expectations and helps avoid misunderstandings over the buyer and broker’s duties and the amount of compensation the buyer’s agent/brokerage is to be paid.

For Home Sellers:

  • Agent compensation remains fully negotiable with your listing agent.
  • When negotiating compensation, you should discuss factors such as the agent/broker’s expertise and experience, the type of broker services to be performed, and the broker’s time and expenses, among other considerations. 
  • Many home buyers do not have additional funds to pay for their buyer brokerage compensation, in addition to their down payment and other closing costs.  They will likely write it in as a term of their offer (purchase agreement) – 1) the seller to pay all or a portion of the buyer’s brokerage compensation or 2) a concession, or credit from the seller, to offset their closing costs, including but not limited to buyer brokerage compensation.  This will become a negotiable term of the offer and purchase contract between buyer and seller.

Historical change to compensation practices:

Historically in California, many seller’s brokers used a MLS to make a unilateral offer to compensate a buyer’s broker who procured a buyer for the seller’s property. However the nationwide NAR settlement prohibits the seller’s broker from using an MLS to make such an offer of compensation. The California Association of REALTORS (C.A.R.) listing agreement forms no longer provide for such offer of cooperating broker compensation. The parties of the purchase agreement, buyers and sellers, must separately negotiate compensation with their respective brokers.

Key Takeaways

Ultimately, sellers may still offer compensation to the buyer’s broker as a negotiated term in the purchase agreement, but they will no longer be bound by a pre-negotiated, unilateral offer of compensation to the competing agent/brokerage.    

These changes aim to increase transparency and empower consumers with clear information about their real estate transactions. As a buyer or seller, it’s crucial to ask questions about an agent’s services, compensation, and the new requirements for written agreements. By doing so, you can make informed decisions and have a better understanding of your real estate journey.

UPDATE: On September 24, 2024, Governor Gavin Newsom signed a package of bills that will strengthen protections for consumers, addressing issues that have put financial strain on Californians while setting new standards for transparency and accountability across industries, including mandatory buyer-broker representation agreements for all real estate licensees

AB 2992 by Assemblymember Stephanie Nguyen (D-Elk Grove) – Real Estate Law: buyer-broker representation agreements


Our Commitment to You

At BEACH REAL ESTATE GROUP, we are dedicated to providing transparency and ensuring informed decisions for our clients. In line with the recent NAR settlement, we will:

  1. Use clear, written agreements that detail our compensation and services.
  2. Ensure all compensation terms are fully negotiable and disclosed upfront.
  3. Provide comprehensive information about your rights and options as a buyer or seller.
  4. Uphold professionalism and clarity in all communications.

We are committed to guiding you through every step of your real estate journey with honesty and integrity.