Gary Carter, president of the Fresno Association of Realtors, offered an optimistic assessment for residential real estate in 2024 at the Feb. 7 Fresno Rotary Club meeting. Fresno Rotary Club photo

Long-anticipated changes to the homebuying process from the National Association of Realtors are scheduled to go into effect on Aug. 17. 

It’s the result of a legal settlement on claims brought by home sellers related to broker commissions. Agents are gearing up for the changes.

Fresno Association of Realtors President Gary Carter said real estate agents who use and list properties for sale on a 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 — would 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. It must also include objective compensation (e.g., $0, X flat fee, X percent, X hourly rate) — and not be open-ended. For example, it cannot be “buyer broker compensation shall be whatever the amount the seller is offering to the buyer.”

The agreement must include a clause prohibiting the agent from receiving compensation for brokerage services from any source that exceeds the amount or rate agreed to in the agreement, and a conspicuous statement that broker fees and commissions are fully negotiable and not set by law.

“NAR has long encouraged its members to use written agreements with buyers because they help consumers understand exactly what services they have agreed to, the roles and responsibilities, and the amount. For this reason, several states already have laws requiring buyer agreements,” said Carter.

There will also be changes to how and where real estate professionals may communicate with each other about compensation offers. These offers are no longer allowed to be made on MLS platforms. Sellers can still offer compensation off the MLS. Buyer concessions can be offered on an MLS.

Written agreements are required for in-person and live virtual home tours; a written agreement is not needed if someone is 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 entirely negotiable. When finding an agent to work with, buyers and sellers are encouraged to ask questions about their services, compensation, and these written agreements.

According to Carter, the settlement preserves consumer choice in home buying and selling. Cooperative compensation, or the ability of listing agents to compensate agents representing buyers, is prohibited on the MLS but preserved as an option off the MLS based on negotiation between consumers and real estate professionals.

Some real estate professionals anticipate that convention will remain as homebuyers are more cash-crunched.

Buyers and sellers will continue to have the flexibility to negotiate the commissions and fees that work for them. Their transaction and written buyer agreements will clearly outline the services buyers will receive and how much they will cost.

“A key priority of the settlement is to ensure that offers of compensation remain an option off-MLS because they are a critical tool to ensure the American Dream of homeownership remains accessible to all, including first-time buyers, low-income buyers, and Veterans,” said Carter.

Fannie Mae and Freddie Mac have confirmed that buyers whose agents are compensated by the seller will continue to have access to financing under the agencies.

The Department of Veterans Affairs 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 Aug. 10.

With the changes coming in August, it’s important to note that Realtors say they continue to support fair housing — compensation offers are just one part of ensuring fair housing.

“Realtors also must ensure that while we are negotiating with each consumer, we are not treating them differently because of their race, sex, national origin, or other protected characteristic. The settlement does not change this,” said Carter.

Regarding the critical components of the settlement, as Realtors present buyer agreements, they must ensure that they are opening the conversation in the same way with every buyer. As before the settlement, it is the seller’s decision whether to authorize offers of compensation to buyer brokers, but it is illegal to refuse to authorize compensation or to offer different compensation because of the buyer or the buyer’s agent’s protected characteristics.

Recently, the U.S. Justice Department launched a formal inquiry into the California Association of Realtors’ contracts and forms after a national consumer group complained that 2024 documents allegedly contained “anti-consumer provisions.”

In one analysis, the Consumer Federation of America said the association’s new buyer-agent representation agreement was too disorganized and complex for the average homebuyer to understand.

CAR responded, arguing that the Consumer Federation had issued a “misguided critique” of draft forms that were still in progress. CAR said it released updated forms on July 10.

The industry group has been revising dozens of standard forms, addenda, and contracts to comply with a national real estate commission settlement.

On June 24, CAR announced it was delaying the release of 19 forms after receiving the DoJ’s formal inquiry, saying it needed additional time to consider the department’s concerns.

The Consumer Federation issued a 19-page critique of two new CAR contracts: the Buyer Representation and Broker Compensation Agreement and the Residential Listing Agreement. It acknowledged that CAR has revised its forms since the critiques were written.

In a June report, University at Buffalo law professor Tanya Monestier said the buyer representation agreement is virtually unreadable because of its formatting, numbering, and lettering scheme, extensive cross-referencing, and language.

CAR argued that Monestier’s critiques contained flaws of their own. It argued that its forms are based on California law and that the Consumer Federation critique demonstrates the author’s lack of familiarity with California-specific statutory language required for our real estate contracts.