(updated 7.1.2024)
The Burnett-Sitzer case verdict against the National Association of REALTORS® ushered in a sense of uncertainty in the real estate industry last year.
On Friday, March 15, the National Association of REALTORS® announced it reached a proposed settlement agreement resolving claims stemming from the compensation-related case, putting in motion changes to long-held compensation rules.
Under the terms of the proposed settlement, NAR has agreed to remove cooperative compensation from the MLS and create a rule that would require buyer agreements in every real estate transaction. It's important to remember the proposed settlement must first be approved by the court.
NAR received preliminary approval for the settlement on April 24. The proposed settlement must still receive final court approval; a hearing is scheduled for November 26, 2024.
Iowa Specific Changes
In the months prior and immediately following the Sitzer-Burnett verdict and proposed settlement, Iowa REALTORS® have worked to ensure members have the tools and resources to be successful in the changing real estate industry.
Leadership, staff and our members advocated for laws and state administrative rule changes that would allow REALTORS® across Iowa to continue the important work they do.
Mandated Buyer Agreements
On July 1, the Real Estate Transparency Act took effect requiring all real estate licensees to use a buyer agreement with their clients.
Iowa REALTORS® proactively introduced and passed this legislation to ensure licensees in the state were prepared for the future of real estate. This law requires that a buyer agreement be signed prior to showing a property or prior to an offer being made if no property is shown. The legislation was passed as SF2291and later amended through HF2326.
You can learn more about the Real Estate Transparency Act here.
Buyer Agreement Form
In preparation for the mandatory use of buyer agreements, Iowa REALTOR® released its own version of the form for member use. The form aims to help elevate the real estate business by creating contractual relationships, explaining REALTOR® value propositions to buyers, and protecting member interests in transactions.
The IAR Buyer Agreement was released in February and has since gone through several revisions to meet stipulations of the NAR proposed settlement and member suggestions. As we continue to learn more about the NAR proposed settlement and other industry changes, additional revisions to the form may occur.
You can find the most recent version of the Buyer Agreement on Remine and Form Simplicity.
Administrative Rule Changes
Following the release of the NAR proposed settlement, IAR leadership and staff recommended to the Iowa Real Estate Commission several changes to make negotiations of compensation easier for agents and the consumer.
The changes include
- Removal of provision that compensation cannot be included in a purchase agreement.
- Opening the door for additional methods of payment besides cooperative compensation including seller concessions, sale proceeds, and other avenues.
- Increasing flexibility of negotiations between agents, their clients, and cooperative brokers to allow for negotiation up until closing.
The IREC accepted and approved the recommended rules. Changes are expected to go into effect on August 14.
You can view the IREC Administrative Rule Changes here.
MLS Changes
On August 17, REALTORS® will see perhaps the largest changes to come from the NAR proposed settlement: the removal of cooperative compensation from the MLS. Per the NAR proposed settlement there will be a complete ban from compensation being input into any field on the MLS.
Compensation removed from:
- data entry
- display on MLS
- printed agent reports
- all historical data references
Additionally, MLS’s are forbidden from assisting in the aggregation of any cooperative compensation data or exporting information to third parties.
Please note that cooperative compensation can remain on individual websites and brokerages, and can be negotiated between parties, just outside of the MLS.
August 17 is the deadline for these removals. The actual date of removal for your MLS or local board will vary. Check with your MLS for information.
Important notes on offers of compensation: We are aware of the erroneous narrative currently circulating in the media that a standard commission rate is going away. We believe this claim is rooted in misconception and false.
Real estate commissions are negotiable, have always been negotiable and will remain negotiable in the future. REALTORS® have been and will remain able to set their commission based on their own business practices. If you are approached with this misguided assumption, please reiterate and continue to practice that compensation is negotiable.
Housing Affordability
As we continue to parse out shifts put in motion by the proposed settlement, one of IAR's tenants has come under question. IAR is a fierce advocate of housing accessibility and affordability. This will not change.
We have and will continue to partner with organizations and groups across the state to empower our members to seek out and elevate homeownership opportunities for all Iowans.
Nationally, the United States Department of Veterans Affairs announced this spring that it would temporarily implement changes that would allow homebuyers using VA loans to pay buyer-broker fees.
NAR has provided a thorough FAQ addressing the facts about financing related to the proposed settlement. You can find that information here.
Moving forward, please reach out to IAR staff and leadership with your questions. We anticipate providing a weekly update as the proposed settlement progresses.
Addressing Changes
We understand that receiving factual and timely information on changes to the real estate industry in Iowa is vital to the success of our members' businesses. With that in mind, IAR leadership and staff have worked to provide educational opportunities for our members to learn about upcoming changes at no cost.
The IAR School of Real Estate is continually scheduling additional courses to assist members in unraveling the changes in buyer representation.
Upcoming Buyer Representation Courses
BACKGROUND: The Lawsuit
The proposed settlement ends litigation of claims brought on behalf of home sellers related to broker commissions, including the copy-cat lawsuits filed against state and local associations and a number of brokerages following the Burnett verdict last year.
The Iowa Association of REALTORS® was not named as a defendant in compensation-related litigation. However, we proactively took steps to ensure our members were protected and had the resources available to continue your business. The Iowa Association of REALTORS® crafted a legal team and framework together to make sure we were prepared for any eventual legal outcome.
While IAR was not a named defendant in any litigation, it and many of our members are covered under the proposed settlement.
In all, the agreement will resolve claims against:
- more than one million NAR members
- all state/territorial and local REALTOR® associations
- all association-owned Multiple Listing Services (MLSs)
- all brokerages with an NAR member as principal that had a residential transaction volume in 2022 of $2 billion or below.
We are aware of at least one brokerage in Iowa that is not covered under the proposed settlement. IAR will continue to work with NAR to provide avenues of resolution for any parties not covered by the proposed settlement.
Who's Covered? Learn More Here.
Under the proposed settlement, NAR maintains it did not engage in any wrongdoing in connection with the Multiple Listing Service (MLS) cooperative compensation model rule (MLS Model Rule) that was introduced in the 1990s in response to calls from consumer protection advocates for buyer representation.
Under the terms of the proposed settlement NAR will pay $418 million over four years and will enact new rules related to the MLS and compensation.
Proposed Timeline from NAR
RESOURCES & NAR UPDATES