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.
