DBrief: After the Verdict Webinar FAQs
What kind of financial impact will the jury verdict have on our members?
As of now, the award has been made against NAR and it is planning to appeal the decision. From what we understand, NAR is also exploring the possibility of putting up a bond to demonstrate its ability to cover the damages awarded. However, it is important to note that, at least for the time being, there won't be any impact on the dues at the local, state, or national levels. Local and state associations have already determined the dues amounts for the year 2024, and NAR has also established its dues for that year. Therefore, in 2024, there is no anticipated change in dues as a result of this legal situation.
In lay terms, what are the basic allegations in the buyer and seller class action lawsuits and how are brokers in Washington State better protected than in other states?
Class action lawsuits have been filed against NAR and other defendants (State and local REALTOR® associations, MLSs, real estate companies and franchises, individual brokers) by sellers and separately, by buyers. The various lawsuits make similar allegations concerning a National Association of REALTORS® MLS rule (“the Rule”) that requires listing firms to collect compensation from sellers and share some of it with buyer brokers. Recently, NAR announced that the offer of compensation to a buyer broker could be zero, so long as buyer broker compensation is addressed. Broadly speaking, the allegations include the following:
- It is unfair to require sellers to offer compensation to buyer brokers, the broker who is negotiating against seller;
- MLS members will not sell property unless compensation is offered at an inflated rate;
- It is unfair to require buyers to fund buyer broker compensation through payment of the purchase price because buyers have no control over the amount of compensation negotiated between seller and listing firm; and
- Even if buyer negotiates lower compensation with buyer broker, the reduced compensation benefits listing firm and not buyer.
For more than four years, which is the statute of limitations on the claims asserted, most of Washington’s real estate brokers engaged in different business practices than those described in the lawsuits. The following true statements illustrate this:
- In October 2019, NWMLS eliminated its rule requiring a seller to make an offer of compensation to a buyer broker. Most, if not all, REALTOR® MLSs in Washington have also eliminated any requirement for seller to offer compensation to buyer brokers.
- Any compensation offered by a seller to a buyer broker is identified on the public facing portion of the MLS printout so that buyers can see the amount of compensation seller offers to buyer broker.
- NWMLS listing agreements allow seller to make a distinct offer of compensation to listing firm and to buyer broker firm (if any compensation is offered to buyer broker firm) so that if buyer negotiates a reduction in buyer broker compensation, the benefit of the reduction flows to buyer and not to listing firm. Most, if not all, REALTOR® MLSs in Washington will decouple the offer of compensation between firms not later than January 1, 2024.
- Effective January 1, 2024, Washington’s Agency Law will require every buyer broker in Washington to negotiate and enter an agreement with buyer regarding compensation and other terms of their relationship at the outset of the relationship.
Will real estate brokers be personally liable for the judgments?
In nearly all the class action lawsuits currently filed, corporations (real estate companies and franchises) are named as defendants, but individual brokers are not. If a real estate broker is personally named as a defendant, the broker could be held liable.
Are there any current lawsuits in Washington?
As of the writing of these FAQs, there are no known lawsuits (like the class action lawsuits described above in FAQ #2) filed against any MLS, REALTOR® association, real estate company, franchise or individual broker based on business conducted in Washington State.
How do the January 1, 2024 changes in Washington law affect VA/FHA Buyers? For instance, how will a VA Buyer’s broker be compensated if the seller offers no compensation to buyer’s broker?
Recall that buyer brokers must enter a buyer agency agreement with all buyers (effective 1/1/24), including VA and FHA buyers. The compensation charged by buyer’s broker must be clearly identified in the agency agreement. Buyer may also instruct broker to collect the compensation from seller through negotiations for buyer’s purchase of seller’s property. If that is buyer’s instruction, then buyer broker will properly draft buyer’s purchase offer to identify the amount of compensation offered by seller to buyer broker, if any, and attach a Form 41C seeking seller’s contribution to the remaining balance owed by buyer. Although VA guidelines prohibit a VA buyer from paying compensation directly to buyer’s broker, VA guidelines anticipate that buyer will be represented by a real estate broker whose compensation will be paid by the seller.
What happens to transactions already in progress without a Buyers Agency Agreement… are they grandfathered in or must you add an updated Buyers Agency Agreement?
If the transaction closes after January 1, 2024, brokers representing parties in the transaction must have an agency agreement with the broker’s client. If there is no agency agreement, neither broker nor the broker’s firm may receive compensation. Moreover, the agency agreement must satisfy the requirements of the revised law. If the broker represents buyer, broker should enter an agency agreement or replace an existing buyer agency agreement after January 1, using the revised buyer agency agreement (Form 41) that will be released on January 1, 2024. If broker represents seller, then broker should amend the listing agreement to gain seller’s initialed consent to broker serving as a limited dual agent if the listing broker is engaged in limited dual agency.
What outreach has Washington REALTORS® conducted and what additional outreach with Washington REALTORS® be offering to help educate real estate brokers and consumers about these industry changes?
Washington REALTORS® has been disseminating information to our members on industry change topics consistently since 2019 and will continue to do so. We have released the following articles, videos and podcast episodes via email, our website and social media to help members stay informed and ahead of the industry changes. Please visit our Agency Law Resource Page that includes:
- The 'Operation Evolve' Video/Podcast Series
- The 'Industry Evolution' Video/Podcast Series
- Industry Evolution articles and other related articles
- The 'Conversations Around Buyer Broker Compensation' Video/Podcast Series
- The new DBrief Series tailored for Designated Brokers and managing or supervising brokers.
We have also provided a co-branded informational flyer titled “Information for Buyers” and “Information for Tenants” available Jan 1 for the purpose of educating consumers as to why brokers are telling them they must have an agency agreement. See the draft versions available on the Forms Revisions Resource Page.
Additionally, Washington REALTORS® will be focusing on media outreach throughout 2024 in an effort to educate consumers on the value of using a REALTOR®. There are powerful and positive stories to be told about the importance that real estate professionals who belong to the REALTOR® organization play in our communities and in the real estate transaction. Our focus in the media sphere will include:
- Protecting consumers and the transaction with REALTOR® advocacy efforts, including championing transparency in the real estate transaction;
- 179 Ways real estate brokers who are REALTORS® are worth every penny of their compensation; and
- REALTOR® community stewardship. For instance, Washington stories that support the NAR CARE report statistics state that:
- 66% of REALTOR Members volunteer every month.
- 79% of REALTOR® Members donate to charity.
Stay tuned throughout 2024 as we publish and share these stories!
Where can I find information about the upcoming January 1 Agency Law Changes?
Please visit our Forms Revisions Resources page (members only, log on required) and Agency Law Resources page. Additionally, please use the Washington REALTORS® Legal Hotline resource. Chances are, someone else has already asked the question you need an answer to! Browse through the Q&As or, if you don’t find your answer, ask the Legal Hotline Lawyer a question directly.
Guidance / Resources for REALTORS®
- As a reminder, this verdict and other pending actions don't change the many choices buyers and sellers have when deciding to buy or sell their home. They can choose to hire a real estate agent who is a REALTOR®, to hire someone else, or to do all the work themselves.
- Continue explaining to consumers the choices they have when it comes to representation during the home buying process and articulate the value you will bring to their experience.
- Continue expressing to clients, friends, and family that compensation arrangements (including commissions) are, and have always been, negotiable and set between a broker and their respective client.
- Continue to use your listing and buyer agreements to help clients understand 1) exactly what services and value you are providing; and 2) importantly, how much you charge.
- Continue explaining that listing brokers decide how much compensation to offer in their seller's best interest, and it can be $0, a penny, or any other amount. NAR rules do not specify an amount. This is negotiated between brokers and their clients.
- Reiterate that REALTORS® will still and always be there for clients to guide them through the financial, legal, and community complexities of buying and selling a home, protecting and promoting their best interest.
- If you have questions specific to a lawsuit in your jurisdiction, please contact a member of NAR's Legal Team (Katie Johnson, Lesley Muchow, Charlie Lee) or email@example.com.
ADDITIONAL NAR RESOURCES:
- Message From NAR President Tracy Kasper
- Competition in Real Estate
- REALTORS® As Champions
- NAR will continue to provide guidance and resources at competition.realtor.
- Also, check out realestatecommissionfacts.com. It is a resource that provides a concise overview of how real estate commissions work and benefit consumers.