Dear Association Partners, 

Following up on our call on Monday, below is a message sent to all members a short time ago providing an overview of the NAR settlement and Alabama specific guidance, handouts, and FAQs.  

More to come. Please reach out if we can helpful in the meantime. 

 Jeremy Walker, CEO

Dear Alabama REALTORS®,

As you are likely aware, the National Association of REALTORS® (NAR) recently announced a proposed settlement agreement to end the class action litigation of seller claims related to broker compensation. Please note that the court must approve the settlement. If approved, the earliest implementation would be July. The details of that settlement are provided at competition.realtor and facts.realtor.
 

Settlement Overview and Highlights:

• NAR agreed to pay $418 million into the class action settlement fund over 4 years.
• NAR agreed to the following rule changes:
  • MLS Changes - removal of compensation from MLS.
  • Require written agreements with buyers.
  • Agents working with buyers may not receive compensation in excess of buyer agreement.
  • Sellers’ agents must obtain written permission before making offers of cooperative compensation.
  • Disclosure on certain legal forms that commissions are not set by law and are fully negotiable.

Who is covered by the NAR Settlement:

• 1 million of NAR’s 1.5 million members (2/3^rd of membership)
• Brokerages with 2022 Total Sales Volume  LESS THAN $2 billion
• State and local REALTOR® Associations
• REALTOR® Owned MLSes – this includes both MLSes owned by REALTOR® Associations and by individual REALTOR® members

Who is not covered by the NAR settlement:

• 500,000 of NAR’s 1.5 million members (1/3^rd of membership)
• Brokerages with 2022 Total Sales Volume MORE THAN $2 billion
• Non-REALTOR® Owned MLSes

Alabama Specifics

Under the settlement, Alabama buyers and sellers will continue to have access to professional representation. Alabama REALTORS® are well-positioned to adapt to the settlement changes. Last week AAR held a legal briefing with Alabama brokers to walk through the NAR settlement agreement terms, implications, and ways to begin preparing their agents for changes in the coming months. Here are some of the key highlights:
 

Key Takeaways for Buyer Agents and Transaction Brokers: 

• The settlement requires written agreements with buyers. REALTORS® and REALTOR® MLS Participants will be required to have a written agreement with the buyer in place prior to any property tour. Alabama REALTORS® are still permitted to act as either buyers' agents or transaction brokers. Whether you are acting as a buyer’s agent or a transaction broker, you will be required to have a signed written agreement in place prior to a property tour. Remember, transaction brokerage is NOT an opt out from being required to have a buyer or transaction brokers agreement in place BEFORE any property tour.
• The written agreements are required to comply with the following:
  • The agreement is required to “conspicuously disclose” the amount or rate of compensation the broker will receive or how this amount will be determined.
  • The amount of compensation may not be left open-ended (e.g., “as much as the listing agent is willing to pay”).
  • The agreement must specify that the REALTOR® may not receive compensation from any source that exceeds the amount of compensation agreed to by the buyer that is defined in the buyer agreement.
• Alabama is fortunate to already recommend buyer agreements as a best practice. AAR’s Buyer Agreement clearly explains how an agent will be paid for their services and that the buyer is ultimately responsible for paying their agent. Many states will need to start from scratch in drafting this agreement and implementing this process. AAR will make further revisions to strengthen the form and will release the updated form and provide training as soon as the Legal Forms Task Force makes those changes in the coming weeks. 

Key Takeaways for Sellers Agents:

• Cooperative Compensation. Cooperative compensation is still permitted but you cannot make offers of compensation on the MLS. Offers of compensation are permitted on a broker or agent’s own website. Expect agents working with buyers to begin contacting you asking about offers of compensation. Alabama law allows a listing brokerage to share their compensation with a buyer’s broker, which oftentimes satisfies the buyer’s contractual obligation to pay their broker/agent. Under the settlement, the listing brokerage may continue to offer to offset the cost of the buyer’s agent so long as they pursue it outside the MLS. This allows cash-strapped buyers to continue to have professional representation.
• Written Seller Approval. REALTORS® and REALTOR® MLS Participants must obtain seller approval in writing prior to making any offers of cooperative compensation. The written agreement must specify the exact amount or rate of compensation being offered and it must be signed prior to any offer being made.
• Listing Agreement. AAR’s Listing Agreement will continue to provide transparency and allow sellers to negotiate with the listing brokerage the price for real estate services. The listing agent will continue to use the listing agreement to notify the seller and have the seller acknowledge that the listing agent MAY share the compensation with a cooperating buyer-broker, if the seller authorizes.
• Under Alabama law, buyers also have the option to ask the seller to pay the buyer-broker compensation within the Real Estate Purchase Contract.
• AAR will make further revisions to strengthen our forms and will release the updated forms, along with providing training, once the Legal Forms Task Force finalizes their revisions in the coming weeks. 

AAR Resources

The Alabama Association of REALTORS® has a variety of resources to help you prepare for these changes:

• NAR Settlement Resource Webpage: We have created a comprehensive webpage that contains the resources mentioned below, along with general overviews of the lawsuits and proposed settlement. This webpage will be updated as new information becomes available. You can find a link to the page at the bottom of this email.
• Buyer Agent Compensation Infographic: We have created a downloadable infographic that explains the ways a buyer’s agent/ transaction broker may be paid under the settlement.  
• Frequently Asked Questions: We have compiled a list of Alabama-specific FAQs. We will continue to update these as information becomes available.  
• AAR Statewide Legal Forms Updates: In the coming weeks, AAR will release updates to the AAR Statewide Legal Forms and provide training on the changes.
• Webinars: In the coming weeks and months, AAR will host webinars on topics such as negotiating compensation in the purchase contract, negotiating cooperating compensation outside the MLS, and more.

The Alabama Association of REALTORS® will keep you up to date as more information becomes available. If you have additional questions about the settlement and its implementation in Alabama, give the AAR Legal Line a call at (334) 262-3808 or by visiting our website. 
 

Thank you for your support of our Association!
 

Warm regards,

Senia Johnson                                                             
President                                                                   

Alabama Association of REALTORS® 

Jeremy Walker
Chief Executive Officer
Alabama Association of REALTORS®