NAR addresses steering in latest settlement agreement update

NAR addresses steering in latest settlement agreement update

The National Association of Realtors addressed concerns of agent steering in its latest update to its commission lawsuit settlement FAQs. The topic of steering — when a buyer’s agent or broker prevents buyers from seeing homes that offer commissions lower than is typical for a market or discourages buyers from considering homes that offer lower commissions, as well as when a listing agent makes sellers fearful that if they don’t offer competitive compensation, buyers and their agents will avoid their property — came up at NAR’s mid-year Legislative Meeting last month.

According to NAR’s FAQ update, the business practice changes outlined in the trade association’s commission lawsuit settlement agreement “eliminate any theoretical steering.” NAR argues that by requiring agents to have signed buyer representation agreements with clients prior to taking them on a virtual or in person home tour, agents will not be able to steer buyers to certain listings that have higher offers of compensation. That’s because the buyer’s agent will already know their compensation on the transaction as it must be outlined in the buyer representation agreement.

“Written buyer agreements, required by the NAR practice changes that will be implemented on August 17, 2024, will also outline that MLS Participants may not receive compensation for brokerage services from any source that exceeds the amount or rate agreed to in the agreement with the buyer,” the FAQs state. “Since a broker working with a buyer cannot receive more compensation than the buyer has agreed to in that agreement, the amount of any offer of compensation is irrelevant to the buyer-broker’s compensation.”

The updated FAQs also address steering done by listing agents. According to NAR, listing brokers should inform their sellers “about costs the buyer will incur, how the buyer might react to those costs, and how the seller can market a house considering the buyer’s costs; but a listing broker must not tell a seller that a broker will steer buyers based on the amount that broker is compensated.”

Additionally, NAR states that Realtors “MUST be honest and truthful in their real estate communications and MUST NOT exaggerate, misrepresent, or conceal pertinent facts relating to the transaction, including facts about broker commissions.”

These points are pertinent as the plaintiffs’ attorneys in the commission lawsuits argued that listing agents use the threat of steering to convince home sellers to agree to much higher commission rates than they would otherwise, helping convince the jury in the Sitzer/Burnett lawsuit that there was evidence of collusion among real estate industry players.

The FAQs also highlight that the Realtor Code of Ethics prohibits steering, noting that Realtors “MUST pledge themselves to protect and promote the interests of their client, putting their client’s best interests before their own. A Realtor must never put broker compensation before their client’s interests.”

While NAR may be confident that the terms of its settlement agreement will make steering obsolete, it appears that there may be some loopholes. According to NAR president Kevin Sears, agents and their clients can amend their representation agreement, which opens up the possibility of agents and their clients changing how much their agent is being compensated if the seller of the property they are purchasing has decided to offer a higher amount of cooperative compensation than what the buyer and their agent originally agreed upon. Although the FAQs do not address this, NAR does note that agents can have more than one agreement with their buyer clients.

Additionally, while sellers will no longer be able to see if or how much other sellers in the area are offering in cooperative compensation on the MLS, they can still find the information in other marketing material related to the property, which may lead them to offer larger amounts of cooperative compensation if they choose to go that route.

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