Much has been written on the specifics of the National Association of REALTORS® settlement, including the practice changes that will be implemented this summer.  The Arizona REALTORS® and its dedicated volunteer members have been hard at work to make sure updated forms will be available to meet the changes coming to our industry.  Below is an update on the most important new/revised forms that will likely be available and their proposed distribution date.

Listing Agreements.  The settlement requires disclosures to consumers that that broker compensation is not set by law and is fully negotiable.  New MLS Policy Statement 8.12.  Furthermore, a seller must give authority to their listing agent to offer any compensation to a prospective buyer’s broker.  A workgroup tasked with revising the Residential Listing Contract Exclusive Right to Sell/Rent (and related forms) has already met twice. The proposed revisions not only ensure the forms are settlement compliant, but also promote consumer choice and transparency.  The revised Residential Listing Contract Exclusive Right to Sell/Rent has been sent to the Form Reviewers Loop (the Loop is a group of approximately 5,000 members who provide comments and suggestions to any proposed revised or new form).  The workgroup will review the Loop comments on May 13, 2024.  It is anticipated that final recommendations for the revisions will be made then, and a final draft will be recommended to the Risk Management Committee (RMC).  If passed by the RMC, it will then be considered by the Executive Committee and, if approved, will be set for release on or about August 1, 2024.

Buyer Broker Employment Agreement(s).  The settlement requires brokers that are working with a buyer to enter into a written agreement with the buyer prior to touring a home.  New MLS Policy Statement 8.13.  Furthermore, the written agreement must include an ascertainable amount of broker compensation that is not open-ended (e.g., whatever is offered by the seller or listing broker).  Finally, the new Policy Statement requires that the broker be prohibited from receiving compensation from any source that exceeds the amount included in the written agreement.  Again, a workgroup tasked with revising the Buyer-Broker Exclusive Employment Agreement has already met numerous times, the proposed revisions have been Looped and final drafts have been prepared for the RMC.  The workgroup also felt a non-exclusive form may benefit some members, so a short one-page Buyer Broker Agreement to Show Property was created by the workgroup and will also be considered by the RMC.  If approved by the RMC and the Executive Committee, the revised/new buyer broker employment agreement(s) will be released on or about August 1, 2024.

Broker to Broker Agreement.  Currently, a seller’s broker may pay a buyer broker pursuant to an offer of compensation made through the Multiple Listing Service (MLS).  If the seller’s broker fails to pay the amount offered in the MLS, the buyer’s broker can resolve the dispute through a REALTOR® association.

However, the settlement announced by the National Association of REALTORS® will require all MLSs to remove offers of compensation to buyer brokers from the MLS.  Offers of compensation to buyer brokers can still be made outside of the MLS, but there would be no mechanism for such offers to be accepted or enforced.  The new Compensation Agreement Between Brokers form will provide a method for a buyer’s broker to be compensated by the seller’s broker.  The form removes the complexity and legal uncertainty of procuring cause and importantly provides an enforcement structure that REALTOR® associations have jurisdiction over.

 Broker Compensation Addendum.  If no cooperative offer, or an unsatisfactory offer, of compensation is made to a buyer’s broker, the new Broker Compensation Addendum form would allow the buyer to request the seller to compensate their buyer’s agent as part of the purchase contract.  Buyers can currently request seller concessions and use those funds to pay their broker, but separating buyer broker compensation from traditional seller concessions has important advantages: 1) broker compensation is not counted against the buyer’s cap on contributions; and 2) broker compensation amounts are not deducted from sale prices by appraisers (traditional seller concessions are).

A workgroup has drafted the Compensation Agreement Between Brokers form and the Broker Compensation Addendum and both have circulated to the Loop for comment.  The workgroup will meet to discuss the Loop comments and make final changes to the drafts on May 14, 2024.  The RMC and Executive Committee must approve both new forms, but it is anticipated that they will be released for use on or about August 1, 2024.

The new practice changes from the NAR settlement will be implemented on August 17, 2024.  However, the Arizona REALTORS® will release the new forms on or about August 1, 2024, along with educational articles and FAQs on their use and best practices prior to release.  This will provide its members ample time to become familiar with them prior to the practice changes becoming effective.