Lawyer Reviews EVERY Change in the NAR Settlement

I read the entire 108 page n AR settlement agreement proposed settlement agreement so you don't have to so I am going to take the opportunity to break it down for you so that you know what actually changed and what [Music] didn't so first things first who is released and that will include and part of me I am going to be referring to my notes because like I said this thing is 108 pages so who is released n and its members uh realtor mls's non- realtor mls's real estate brokerages with 2022 transaction volume of less than 2 billion and this is not no strings attached it's not just because you fall into one of those categories you have to fall into one of those categories and you have to abide by the terms of the settlement agreement which includes some compliance cooperation um and in some cases payment next thing let's talk about the total amount of the settlement total amount of the settlement is $418 million which sounds quite a bit better than the 1. uh maybe not quite 8 billion um I think it it rounds to 1.8 billion jury verdict another thing I want to say is yes the settlement agreement has been entered into between the parties but because there's ongoing litigation and there's a lot of people involved yes a court does have to approve this so this this thing isn't done yet it is highly highly likely to be approved as written most of the commentary and the smart people that have looked at this don't really see a lot of opportunities for this to be changed materially so we're we're looking with the at a very high percentage that the document that we have been provided and that we have seen even though it hasn't been submitted to the court will be the final [Music] document now the main thing that you guys are going to care about are the these practice changes and I know I keep doing air quotes but because when I tell them to you you're going to be shaking your head and probably remember I'm just a messenger I'm not saying that this is what you do in fact I know this is not what most of you do so the practice changes include that n will eliminate or prohibit any requirement that listing Brokers or sellers must make offers of compensation to buyer brokers that like I said that is already not a requirement there is no requirement that sellers um must pay the buyer's agent um that is one of the biggest things I think that the headlines uh are getting wrong and probably the biggest things that most real estate agents are frustrated by is that you know the headlines are saying oh n is agreed to get rid of the 6% commissions well that is not a requirement anyway um it while it may be customary in some areas some areas it's certainly not um it is not a requirement there's not been anything you know there there's no written stated you must pay 6% and you must give half of it to the buyer's agent um now I I'm not suggesting that there may not be some people in the US that didn't abide by the already existing rules and they've said that it's a requirement but it isn't um but remember remember this is really the part where it comes in that this language is colored strongly by uh the allegations made by the plaintiffs so the plaintiffs were saying well it it was required of us you know these are sellers that are saying what was required of us to pay the buyer's agent um part of that is lack of Education they didn't know um another thing eliminate and prohibit any requirement that any offer of compensation to buyer reps um must be blanket unconditional or unilateral again that is um to my knowledge not a requirement anyway um in fact there I think especially in North Carolina um brokerages around here are very careful to say you can decide what you want to do you can ask us for input about what may be common in the area uh but there it is up to you seller what you're going to do now some of the commentary about this particular change uh practice change is that there this may open up a window for some sellers to to be discriminatory to where they'll say I will offer buyer agent compensation but only to agents of a certain gender race age we hope that doesn't happen but um this this particular wording of the language has people questioning oh my goodness will this mean that um sellers can be discriminatory and no they are not allowed to be discriminatory but it may open up Windows for them to to covertly be discriminatory uh next thing and this is probably what everybody is a buzz about is that offers of compensation to the buyer's broker cannot be made via the MLS or disclosing on the MLS uh total broker compensation so basically combined compensation to both listing and cooperating Brokers this is the change so right now you're allowed to state that on MLS not anymore now it's a very important to notice that it doesn't say prohibit making offers of compensation it is that you cannot do it using the MLS you cannot make those offers of compensation to a buyer agent on the MLS you can use off MLS means of doing that um next require realtor MLS is to eliminate all broker compensation fields on the MLS um and then prohibit the sharing of offers of compensation using any other MLS field so this is really just pushing the fact that not only are you not supposed to use the MLS anymore to make those offers that the mls's are supposed to make it uh nearly impossible for you to try so there's not going to be a dedicated field to you know buyer agent compensation uh there in your MLS maybe there isn't one already uh but if there is it has to be removed and then also clamping down making sure that other fields are not being used to share that so you can't come up with code words and try to stick it in the property description to let buyers agents know that the sellers offering compensation really the other things here A big one is agreeing not to create some other website to facilitate the offers of compensation and this is specifically to uh n and the mls's so they can't promulgate and create these other websites to say hey um for this property this is what we're offering but that doesn't prevent these types of websites from being made they just can't be made by the MLS they can't be encouraged by the MLS or Nar um it can't they can't use the data that they have to create some other website to share this information in order to circumvent the requirement um that are the requirements that are imposed on them by this settlement agreement and then the next thing that is again not truly a change but is becoming more um firm it is already strongly encouraged and in some instances required by your local Association of Realtors that you be um you have to have your Buyer Agents agree buyer agency agreement signed before you make any chores of the property that is now it's just a requirement now and that is maybe making some agents nervous of um you know buyers are are not patient in a lot of cases they see a house and they they text you and they say can we see it in 30 minutes um well maybe but now you're going to have to make sure that your buyer agency agreement is signed before you ever get into that property um and in that buyer agency agreement already your you know in your existing buyer agency agreement at least in North Carolina um you're already disclosing what your compensation will be and how it will be determined uh the settlement is very careful to call out that the your language describing your compensation can't be open-ended you have to have a way of determining what the amount will be from that document so the the example that they give in the settlement agreement is you can't write buyer broker compensation shall be whatever amount the seller is offering to the buyer that that's not ascertainable so so you you have to be able to say buyer agent compensation is 2 and 1.5% of the purchase price or whatever it is that you agree upon if it's a flat rate buyer agent shall be paid $8,000 for these Services it that is again negotiable between you and the buyer but it has to be um you have to use language that you can end up with a number um from reading that document and then also this says that the the agent the realtor cannot receive compensation out in excess of what is agreed to in that buyer agency agreement so in North Carolina there have been versions of the buyer agency agreement that would allow a buyer agent um say they agreed to 2 and a half% with the buyer but the seller was offering 3% would allow them to capture that extra half percent this language pretty explicitly says that's not possible anymore next the uh Realtors and MLS participants cannot represent that a buyer's uh brokerage really any brokerage services are free or available at no cost unless they are actually not being paid to do the work so um it has you know I've heard of this myself in in our Market where it's you know gosh my law partner even used to say this is I don't understand why a buyer wouldn't get an agent it doesn't cost them anything and agents can't say that anymore you can't say that by buyers uh it it's no cost to the buyer unless you will not be making any money from your services all right also that you have to um if you're acting for a seller you have to conspicuously disclose and obtain a seller approval to make any offers of compensation to the buyer um again not a change you you can't um you know make an offer to a buyer's agent to pay their compensation with the seller's money if you haven't gotten their approval to do that so this is kind of a duh next that Realtors and MLS participants must disclose to sellers and buyers in conspicuous language that commissions are not set by law and fully negotiable this is another one that is probably having you roll your eyes um especially if you're in one of those markets or you're participating in a local Association that those forms already say that um that part of the the allegations in this lawsuit is that even if these that commissions aren't standard and that they are negotiable that these plaintiffs didn't know that or they were they were told that wasn't the case so this is really kind of a prime example of why education is extremely important uh whenever you are taking on a seller or buyer client and this has now just become part of the requirement is that you even if you don't find yourself being the best at explaining or educating on this topic you will unfortunately have to get good at it very quickly and there's some repeated information about making sure that it is not possible to filter out listings based on offers of compensation to buyers so they're you know making it like I said nearly impossible difficult or nearly impossible for an agent to be able to sort Properties by um sellers that are offering buyer agent commission now moving on from the practice changes oh not yet a big thing is that these practice changes all the obligations set forth in that paragraph 58 which is the really the biggest paragraph in this document um these things are going to terminate 7 years after the class notice date okay so um 7 years from whenever that probably sometime in 2024 um 7 years after that class notice date is when this will end um now these prac changes have to go into effect it says as soon as practicable but not later than the date of the class notice so some of you may have been hearing this July 15th date thrown around and that is is kind of saying that's kind of based off of um if this settlement had been filed for approval already and there had already been that motion made um you know I guess this came out on the 15th then it would have fallen right around the 15th n AR I don't believe they've said anything say saying it was July 15th their Communications have been mid July and that's kind of based off of okay assuming that the motion to approved the settlement gets filed pretty promptly then the class notice date is going to fall sometime in mid July so that's the the drop dead date for these practice changes to go into effect so I would not be reliant on any July 15th date uh I don't I don't believe that's accurate based on the wording of the settlement uh but I believe the N once this um this the motion to approve the settlement has been filed will be giving communication with specific dates of when the practice changes will go into [Music] effect now the cooperation section which comes next um this is where the N is agreeing to provide valuable cooperation to the plaintiffs and the class members in other actions for uh providing documents and authenticating them um providing um people to testify at depositions and in live testimony at trial really essentially this is like participating in helping them in their Discovery process and being Witnesses for them um so really that is the meat of the settlement agreement and yeah I went into all the details of what it says and what it does not say and I really think that what you're going to find is not that much changed most of the stuff is stuff that you already have to do are already not allowed to do so this is um I guess if there is any good out of that is that there are going to be more educational materials put out um that will help buyers and sellers understand how commissions work uh we are lucky in our state to to have a lot of agents that do this already so from our perspective as a real estate attorney in Lake Norman um not a whole lot's going to change for our agents I do think there are going to be challenges for especially buyers agents going forward uh having to get in these buyer agency agreements for a certain compensation and then finding out that the seller is not willing to offer the buyer agent compensation and then buyer having to bring those funds to closing I think that um lack of awareness of what's really going on with the settlement may have a lot of buyers scared to engage buyers agents and this is really the time to clarify the value that an agent adds to the transaction I will speak from a closing attorney's uh perspective in that when we have good agents representing buyers and sellers the transactions go way better just like any profession I've said this in other videos there are people that are good at it and people that are bad at it if we have a bad agent on a transaction no it doesn't go better but there are many more good agents than there are bad agents and I would rather um have a good Agent involved in the transaction because when there are not agents involved in the transactions they go off the rails um and the parties you know are listening to people that don't have any knowledge or education about the process you know they're looking listening to their um you know Uncle Jim who last bought a house in 79 um and that doesn't mean those people aren't full of wisdom but they're not up to dat on what's going on now they may not know the vendors they may not have um all of the current training that agents are required to keep up with to keep their licenses so what I mostly fear is if if buyers are not educated about the value that agents add to the transaction that they may be reluctant to bring an agent into the transaction um so this is going to require a lot of innovation and education on the part of Real Estate agents we are really looking forward to um our North Carolina Association of Realtors providing some guidance um going forward about what is you know what is going to be required of agents and um just suggestions for how to navigate the the changes here and the new landscape and hopefully providing more education that will be consumer facing um the intent of class actions is usually to protect consumers and uh while I understand the intent behind the the settlement um what I fear the most is that there may end up being a lot of buyer consumers harmed in the process because they won't have adequate representation throughout the transaction um so this is the time where we all get creative and uh put on our Innovation hats and we're going to figure out a way through this just like Realtors have been doing for a 100 years um so hopefully this was helpful to explain the settlement um like I said less changed um then stayed the same but the things that changed are are big changes that are actually going to affect how we do our day-to-day work so um if you have any questions about that you know leave them in the comments we can do follow-up videos but hopefully this helped you understand the settlement a little bit [Music] better

Channel: The Real Estate Lawyer

Views: 80,139

Keywords: real estate, real estate investor, homeowner, mortgage, realtor, nar, nar settlement, nar settlement reaction, nar settlement explained, nar settlement now what, nar settlement 2024, real estate commission, realtor commission change, realtor commission news, realtor commission, nar lawsuit, nar lawsuit explained for realtors

Id: xr6pcqjPXWg

Length: 18min 57sec (1137 seconds)

Published: Fri Mar 22 2024