AUGUST 2024 UPDATE:
Navigating the NAR Settlement and MLS Changes: Insights from Grant Harpold and the Houston Association of Realtors
The landscape of real estate is evolving rapidly, and staying informed is more critical than ever. Recently, significant changes have emerged from the National Association of Realtors (NAR) settlement, impacting how Multiple Listing Services (MLS) operate. To help realtors navigate these changes, the Houston Association of Realtors (HAR) hosted a session with their legal counsel, Grant Harpold, who provided crucial insights into what these changes mean for realtors and their clients.
Understanding the New MLS Rules
As of last weekend, three pivotal MLS rule changes have come into effect:
- Removal of Compensation Information in MLS: Compensation details related to what a buyer’s agent will earn or what a listing broker will offer are no longer permitted in MLS listings. This change aims to foster a more transparent and negotiation-driven environment between buyers and sellers.
- Updated Forms with Conspicuous Consumer Information: Listing agreements and buyer representation agreements now include more explicit language to inform consumers about compensation. This update ensures that clients are fully aware that compensation isn’t legally set and can be negotiated.
- Mandatory Written Buyer Agreements: Before showing a property, realtors must have a written agreement with the buyer. This rule underscores the importance of clear communication and established expectations between realtors and their clients.
Enforcement and Practical Application
One of the most pressing concerns among realtors is who will enforce these new rules. MLS will be responsible for enforcing these changes, just as they do with existing rules. Realtors must be diligent in understanding and adhering to these updates to avoid potential fines or penalties.
A particularly significant aspect of the new rules is the requirement for a written buyer agreement before showing any property. This is a critical step in protecting both the realtor and the client, ensuring that all parties are on the same page regarding representation and compensation.
Addressing Common Questions
The new rules primarily target residential transactions, but commercial deals also warrant consideration under the evolving guidelines. Tenant representation agreements are not required by the updated rules, yet maintaining transparency and clear communication with clients remains crucial in all types of transactions.
Looking Ahead
These MLS changes stem from ongoing litigation and a settlement process that is still pending final court approval, expected later this year. Realtors need to stay informed as additional interpretations and potential form updates are likely to arise. He also emphasized the importance of adapting to these changes and continuing to prioritize client education and communication.
Final Thoughts
The recent NAR settlement and MLS changes mark a significant shift in the real estate industry. Realtors must adapt to these new rules, not only to remain compliant but to continue serving their clients effectively. As the industry continues to change, staying informed and proactive will be crucial for success.
For those who couldn’t tune in live, the full session with Grant Harpold at Buck Keenan is available for replay at: https://www.facebook.com/HARFans/videos/380311671511275
_______
JUNE 2024 UPDATE
The real estate industry is in the midst of significant transformations due to recent litigation. These changes, stemming from the National Association of REALTORS© (NAR) settlement of class action lawsuits, have introduced new MLS Rules and updated Texas REALTORS© (TR) Forms. Here’s a concise overview of what you need to know from the settlement and going forward.
Key Changes and Their Implications
New MLS Rules and TR Forms: The NAR settlement has led to updated MLS Rules and TR Forms, fundamentally altering how broker compensation is handled in property transactions.
Compensation Fields Removal: Starting August 16, 2024, the MLS will no longer display fields or language related to broker compensation for representing or assisting buyers or tenants. This marks a significant shift in the publication of broker compensation in the MLS—it will no longer exist in any manner—not even in agent remarks. Any publication of compensation for a broker must occur outside of the MLS.
Detailed Buyer’s Agent Compensation: As a buyer’s agent, you must clearly detail your compensation—either in specific amounts or the method of determination—in an executed buyer representation agreement with your client. This ensures that both parties have a mutual understanding of financial obligations from the outset.
Best Practices for Buyer Representation Agreements: To streamline operations and avoid compliance issues, it’s best to execute the buyer representation agreement when presenting the Information About Brokerage Services (IABS) form or as you begin providing services to a potential buyer client.
New MLS Rule for Showing Properties: According to Rule 5.0.1, an executed buyer representation agreement is now mandatory before showing a property to a buyer you are working with (this rule does not apply to tenants). This emphasizes the importance of formal agreements early in the client relationship.
Compliance by August 17, 2024: New listing agreements and new buyer representation agreements or amendments thereto must be in place by August 17, 2024. This is crucial to align with the updated language requirements resulting from the NAR settlement.
New and Updated TR Forms
TR released new forms as of June 24, 2024. These forms reflect the recent changes and should be adopted for new transactions or to update existing ones not expiring by August 17, 2024. The forms you’re most likely to need include:
- 1101 – Residential Real Estate Listing Agreement, Exclusive Right to Sell
- 1102 – Residential Real Estate Listing Agreement, Exclusive Right to Lease
- 1201 – Farm and Ranch Real Estate Listing Agreement, Exclusive Right to Sell
- 1501 – Residential Buyer/Tenant Representation Agreement
- 1507 – Residential Buyer-Tenant Representation Agreement – Short Form
- 2701 – Amendment to Representation Agreement
Additional Changes
Seller Concessions and Buyer Expenses: A new MLS field will allow sellers to publish any concessions or buyer expenses they may cover as part of the transaction, correlating with paragraph 11.F. in the new TR listing agreement. For written authority on the amount to submit to MLS, use TR form 1412.
Payment of Broker Fees: Use TR Forms 2402 or 2406 to address potential payment of buyer or other broker fees by the listing broker or seller in conjunction with presenting an offer on a property for your client. This ensures clarity and agreement on fee responsibilities.
Staying updated with these changes is crucial for maintaining compliance and delivering top-notch service to your clients. By familiarizing yourself with the new rules and forms, you’ll be well-prepared for the current transitions in the real estate industry. Integrate the knowledge of these changes into your daily operations to continue thriving in this evolving landscape.