The National Association of REALTORS® stated that its post-settlement practice changes “eliminate steering,” according to a recent update on the organization’s settlement FAQ page that addresses steering concerns.
Steering concerns have been present in conversation since the commission lawsuits across the industry began. The argument presented in Burnett and many other cases is that when allegedly price fixing commissions, agents would also steer their buyers toward listings where they would receive a higher commission, thereby not representing the buyer’s best interests.
The update to NAR’s settlement FAQ page—added on Wednesday, May 29—introduced a section to address these steering concerns (questions 46-49). NAR announced the update to its members via an email from NAR Chief Legal Officer Katie Johnson on Friday, May 31.
The FAQ section states that NAR’s settlement addresses the theoretical possibility of steering, and that the organization has “eliminated any theoretical steering” via the practice changes they have brought forward.
NAR said that under their practice changes—meaning the requirement of buyer-broker agreements to set a fixed commission rate—brokers “will not make more compensation by steering a buyer to a particular listing because it has a ‘higher’ offer of compensation.” This is because brokers “cannot receive more compensation than the buyer has agreed to in that agreement,” so that other compensation offers are “irrelevant.”
The controversy of steering was also recently highlighted at a panel during the NAR Legislative Meetings in early May when broker Anthony Lamacchia reportedly made comments that some attendees interpreted as steering.
The updated FAQs also dive into NAR’s Code of Ethics and how it prohibits the steering of buyers based on commission, and requires that agents must be transparent by providing the amount of broker commissions and explain who is paying those commissions to potential buyers.
On transparency, NAR said in the FAQs 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.”
Also mentioned is whether a listing broker can explain to a seller that the buyer will know who is paying the commissions—to which NAR answered a resounding yes, but added that “a listing broker must not tell a seller that a broker will steer buyers based on the amount that broker is compensated.”
Even before NAR released the guidance, Lori Levy, vice president of legal affairs for Texas REALTORS®, told RISMedia that she was urging members to have general conversations about compensation and not avoid the topic while the industry worked through best practices.
“We have told our members, reminded them to talk about what that means—what does it mean to create an offer of compensation to a buyer’s broker, what can that mean for the offers that come into the property?” she said.
NAR’s settlement—while preliminarily approved—has yet to receive final approval, and could be interfered with by the Department of Justice. The D.C. Circuit Court of Appeals allowed the DOJ to reopen their investigation into NAR back in April, however NAR appealed for a rehearing in May.
Sure, I missed this scenario somewhere in all the articles & explanations but.
Hypothetically, if a Buyer’s Agent were to enter into a contract with their client for an amount lower than a seller was offering, how, when & would that “discount” be relayed to the seller?
Are Listing Agents now required to verify Buyer Agent compensation during the transaction?
What about an agent who does their job completely, and 100% in service to the interest of their customer?
Theoretical Steering is the assumption all agents only show based on commission, and thereby show houses that meet the buyers criteria, AND pays them the highest in commission. Biased? Of course but not illegal. So based on that perspective, assuming ALL agents do this, now EVERYONE is held accountable to those who greedily serve themselves within the legal scope of being a real estate agent.
– Do we tell doctors how much to charge for hip surgery?
– Do we tell lawyers what they can charge per hour; or when they have no prior experience in a given area of law?
Now this proposed settlement restricts income, because a buyer broker agreement says the buyer will pay X% despite the fact a seller incentive, for example, let’s say a builder offers Y% and a BONUS. Now, because of this settlement, the agent is prevented/restricted even though it is the buyer on the settlement statement would be charged the X% as agreed, and the seller would pay the difference that makes up Y% and said BONUS? Is not the proposed settlement on commission restricting fair trade, and price fixing, preventing this X & Y% example?
One of my very first customers signed a BBA (buyer broker agreement), which defaulted to a 2% minimum. We discussed commissions and agreed it was reasonable for services and that if a seller was willing to offer more, so be it. We found the perfect place in a multigenerational home, perfect for his family’s situation and the seller/builder happened to offer 1%. Upon closing, and in recognition of the overtly complex issues we experienced and several exhausted moments during the building process, we left the title office, went to his bank, and my customer had a check made out to my broker for the other 1% . He said, my services we worth much more than 2%. I thanked him, agreed, but suggested referrals of new business meant more to me instead.
This same seller/builder in 2021 previously offered 6% to buyer agents. I was under contract with another customer however we lost the deal because the preferred lender agent put this customer in a Debt Servicing Ratio Loan AND one with a 5% pre-payment penalty…yes, in 2021. This loan officer clearly was steering my customer into the ditch and succeeded in killing the deal. My customer never got me involved in the issues until he was beyond consideration. The lending agent told my customer to just sign the paperwork which restricted personal use of the unit, completely contrary to the reason he was buying it in the first place. This was a highly desirable community with a line of buyers who wanted it, some of which I am certain were familiar with said lending officer. Thankfully the seller/builder recognized the level of disservice the loan officer perpetrated and I was able to get escrow and earnest deposit returned, the sum of which was $58,000. The money was back in the customer’s account within 48 hours.
This customer, his parents and his sister were all in line to possibly move into this community but because of the ‘steering’ by this lender agent, these customers will never buy from this builder or recommend them to anyone ever despite the fact it was the lender who bludgeoned this deal. I of course will never work with the individual loan officer and dissuade others from engaging. His disservice to the customer, essential steering that deal into the ditch, ruined the entire relationship even though we remain in touch.
Bad apples exist, but we all, are not bad apples, so why punish everyone because of them…
Reading this article really upsets me. With the amount of information on the internet with Zillow, Realtor.com and all the others, MY BUYERS tell me which homes they want to see!! I honestly am so angry at the way this settlement has painted the Realtors in this industry. “Steering” is a word that was gone in the 70’s and 80’s and it had nothing to do with money!! So to bring it back again in another context is really rich!! I cannot remember how long it has been since I saw a 6% commission on a property!!! 4% has been the norm for years!! I am saddened by the way this has all played out. I hope the thousands of sellers are happy with their $35 compensation when the attorneys walk away with hundreds of millions! And we Realtors will be left to do what we always do. GIVE 2000% to our buyers and sellers as we always do.