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Has the World Exploded? The NAR Settlement, Commission Law and Rules
What is a Broker to Do?
Let’s begin by saying that the world has not exploded. There are important changes taking place that have a particular impact on brokers who are REALTOR members. Earlier this year, the National Association of REALTORS® (NAR) entered into a settlement agreement in which it agreed to the following two practice changes, among other things:
- Compensation offers are prohibited in a Multiple Listing Service MLS.
- MLS participants working with buyers are required to enter into written agreements with their buyers before touring a home.
To have a full understanding of these practice changes and their relation to License Law and Commission Rules, brokers must understand that this change is mandated as part of a civil settlement between private parties and does not change or override License Law, or Commission rules. It involves members of NAR, state and local REALTOR associations, and various[KC1] MLS entities. The Commission licenses and regulates brokers who are members of these various entities, but many of the Commission’s licensees are NOT members of any of these entities. Those licensees may be impacted but are not otherwise subject to these new rules.
Now let’s dive into the two major practice changes for brokers who are subject to the settlement.
A. Compensation Offers
Communication with buyers and sellers has always been essential, but in the post-settlement world, it is imperative. If you are a listing broker, you should discuss offers of compensation with your seller-clients at the time of listing and explain the pros and cons of offering compensation. If they are agreeable to such an offer, they can sign NC REALTORS® Form #220 (Cooperating Compensation Agreement) up front and you can have it ready for any prospective buyers. The seller can also delay agreeing to any offer of compensation until a later date or decide to do so on a case-by-case basis.
If you are seeking to represent a buyer, once you have made the proper agency disclosure utilizing the, “Working With Real Estate Agents” (WWREA) publication, a proper agency relationship should be established either orally or in writing to meet the requirements of Rule 58A .0104. As part of the creation of the agency relationship, you should disclose the full amount of your fee in your discussions and explain to your client that if they choose a home with an offer of compensation, and that offer is less than their fee, the client will be responsible for paying the difference. If there is no offer of compensation, the buyer will be responsible for paying the full fee to you at closing. When you identify properties that meet your buyer’s criteria, you should determine whether or not there are offers of compensation on each property and present that information to your buyer-client so they can determine which properties they want to view. In this way, the buyer is able to make a fully informed decision. If you cannot determine whether or not there is an offer of compensation, you should inform your buyer of that as well and remind them of the possible scenarios.
Here are a few important things to know about offers of compensation involving North Carolina brokers who are subject to the REALTOR settlement:
- Are compensation offers eliminated? Absolutely not. They are prohibited from being offered in the MLS, but they may still be offered by either the listing firm/broker or the seller.
- Can I attach a contingency to the standard offer to purchase making the offer contingent on an agreement to compensate me as the buyer agent? No. Commission Rule 58A .0112 prohibits this. Any offer to compensate a buyer broker is between the listing firm/broker or the seller and the buyer broker and should not be part of the contract between the buyer and the seller.
- Can a buyer ask for seller concessions in their offer and use those concessions to pay their buyer broker? Yes. However, seller concessions can be used by the buyer for whatever purpose the buyer chooses and there is no guarantee they will be used to pay the buyer broker.
- If a buyer broker uses the NCR form 220, can it be sent to the listing broker simultaneously with the offer to purchase? As a last resort, yes. However, the buyer broker must be clear that the offer is not contingent on the signing of the 220. The buyer must also understand that the seller might sign the offer, creating a binding contract, but not sign the 220 agreeing to pay the buyer broker compensation or they may sign the 220 agreeing to only part of the compensation, leaving the buyer responsible for the rest.
- Can the buyer broker send form 220 and an unsigned offer to purchase, and wait for the seller to sign both before the buyer signs either? Yes. Keep in mind that even if the seller agrees to both as submitted, no contract will be formed until the documents are signed by all parties and acceptance is communicated. The best practice is for a buyer broker to determine what properties suit their buyer client’s needs, what compensation is being offered, if any, and present the properties and offers of compensation to the buyer to determine which properties the buyer may want to view or consider further based on their own financial situation.
- If I am a listing broker, is it better for my seller to not agree to offer compensation up front and wait to see what the offer is before agreeing to pay a buyer broker’s fee or to go ahead and offer it up front? Either is an option, and in both cases the seller can consider their bottom line in the context of the negotiation process.
- If I am a listing broker, and my seller signs a 220 before receiving any offers, does that mean they have to accept the first offer that comes along, or they still owe the buyer broker compensation? Certainly not. In the past, cooperating compensation was offered up front through the MLS, and buyers submitted offers that were not accepted, and no payment was due. Now, even though cooperating compensation offers are no longer made through the MLS, and the offer of compensation may not be the same from one property to the next, merely announcing the compensation offered in the event of a successful transaction does not bind the seller until a final agreement is reached. Listing brokers/firms should consult with their own attorneys to determine the best methods of advertising offers of compensation to remain in compliance with the terms of the NAR settlement. Just remember, form 220 states that the entitlement to the compensation will be determined by the buyer broker’s performance as the procuring cause of any sale of the property to the broker’s client. The seller can still negotiate any offer.
Written Agreements with Buyers
Under the terms of the NAR settlement agreement, beginning August 17, 2024, MLS participants working with buyers are required to enter into written agreements with their buyers before touring a home. Touring a home includes situations where the buyers and broker visit the home and walk through it together as well as when the broker visits the home and provides a video tour for the buyers who may not be local. It does not include videos posted by a listing broker to advertise the property, even when those are viewed by a buyer.
The NAR settlement language does not require an agency agreement, just a written agreement. However, a North Carolina broker cannot be a non-agent; the broker must either represent the seller or the buyer and should use the Working with Real Estate Agents Disclosure form to make the appropriate disclosure. If the broker is representing the buyer, the Commission rules allow an oral agency agreement until the time an offer is written, but the settlement requires an agreement in writing.
Buyer brokers have always had the option of requiring buyers to sign a buyer agency agreement prior to touring any homes. Some are concerned that a buyer may not be ready to sign a full buyer agency agreement at that point in time. Those brokers may choose to use a non-exclusive buyer agency agreement. Other entities have created “touring agreements” that permit a broker to show a home to a buyer. These touring agreements contain provisions for some small fee or no fee at all, and are limited to one day, one week, one property, etc. As stated earlier, communication with a potential buyer-client is crucial at this stage, including an understanding of who the broker represents – buyer or seller. It must be one or the other. Buyer brokers should discuss each of these possibilities with buyers and let the buyer determine which is best for them.
Any touring agreement or other type of agreement designed to meet the NAR settlement requirement must comply with Commission rule A.0104. This rule includes both agency agreements and any other agreements for real estate brokerage services. Touring a home with or for a buyer is a real estate brokerage service, so any agreement for these services must be for a definite period of time, include the broker’s license number, provide for termination without prior notice at the expiration of that period, and contain the required Fair Housing language.
Brokers-in-charge should create written policies and train their affiliated brokers in how to navigate working with sellers and buyers and emphasize communication with all parties as being key. The world is not exploding, it is a shift in the practice of brokerage that can be navigated by thoughtful planning and communication. In the end, the goal remains the same for all, and that is to find buyers for sellers wanting to sell and helping buyers get into a home that meets their needs. All parties working together can continue to make the dream of home ownership a reality.
Save the Date: NCREC Educators Conference
Are you ready to celebrate and learn valuable tools to become an education star? Join the North Carolina Real Estate Commission at its Educators Conference on Thursday, March 27, 2025.
Diversity, Equity, and Inclusion Article
October is LGBTQ+ History Month, which was founded in 1994 as a month-long observance of lesbian, gay, bisexual, transsexual, and queer (LGBTQ+) history and the history of gay rights and related civil rights movements. Based on a December 2023 report from the UCLA School of Law Williams Institute, an estimated 5.5% of all United States adults identify as LGBTQ+ and 4.4% of all North Carolina adults identify as LGBTQ+. According to the 2021 National Association of Realtors® Home Buyers and Sellers, study over 4% of respondents identify as LGBTQ+.
The North Carolina Real Estate Commission recognizes the history of unfair housing practices in America and the ongoing work needed to end housing discrimination and ensure all Americans have equal access to housing opportunities. As a real estate broker, you must treat everyone you encounter equally and fairly regardless of sex, race, color, national origin, religion, familial status, or disability. In addition to fair and equal treatment, consider how you can better listen and understand without judgment and check your biases.
We celebrate the increased diversity of our real estate brokerages and the immense contributions of LGBTQ+ real estate brokers across our state.
*Note LGBTQ+ History Month is not to be confused with Pride Month which is celebrated in June.
To learn more about LGBTQ+ History Month, Pride Month, and other LGBTQ+ historical facts about the observances above, or any other holidays or observances, refer to the links below:
2021 NAR Profile of LGBTQ Home Buyers and Sellers
Histories of the National Mall | National March on Washington for Lesbian and Gay Rights
Tips for Submitting a Real Estate Education Course for Approval
When submitting a real estate education course for approval to the North Carolina Real Estate Commission (NCREC), careful preparation of your course materials is vital. The process involves submitting Form REC 7.33 (Application for Approval of a Real Estate Education Course (Form REC 7.33)); having all necessary documentation ready can save both time and effort. Following the Course Approval Guidelines and understanding the requirements of Rules 58H .0401 and .0402 will help ensure your course is processed efficiently.
1. Course Objectives
Clearly outline the overall goals of your course. These should be broad statements of what the course intends to achieve. Your objectives should align with the needs of your target audience, whether it’s for prelicensing, postlicensing, or continuing education.
2. Learning Objectives for Each Topic
For each section or unit of your course, include specific learning objectives. Rule 58H .0101(9) specifies that a learning objective is a statement of what a student will be able to do after completing a unit or course, and that learning objectives shall be structured in accordance with Bloom’s Taxonomy.
3. Course Syllabus
Your syllabus is a detailed roadmap of the course. It should describe the scope and depth of coverage for each section, specify how much time will be spent on each topic, and reference any course materials used. Additionally, the syllabus should demonstrate how student interaction is integrated into the course, whether through quizzes, discussion boards, or group activities.
4. Instructional Methods and Aids
Include a comprehensive description of the instructional methods you will use to deliver the content, such as lectures, videos, interactive assignments, or hands-on activities.
5. Student Materials
Provide copies of all materials that will be made available to students, such as presentations, handouts, quizzes, worksheets, exams (if applicable), and any supplementary resources.
6. Attendance Verification
Describe the method you will use to verify and record student attendance for each type of course delivery method.
7. Verification of Required Course Materials
Outline the process for verifying that students possess all necessary course materials before the course begins.
8. Proctored Exam Details (for Prelicensing or Postlicensing Courses)
For prelicensing and postlicensing courses, include a detailed description of how exams will be proctored. Successfully submitting a real estate education course for approval requires careful planning and organization. Preparing essential elements like learning objectives, a detailed syllabus, and student materials, ahead of time can expedite your submission and help ensure it meets all regulatory requirements.
Case Study: Designated Dual Agency
FACTS:
XYZ Realty has two affiliated brokers, the BIC and a provisional broker. A consumer contacts XYZ Realty to inquire about a property listed by the brokerage. The provisional broker answers the call. During the conversation, first substantial contact is established. The provisional broker asks the consumer for their email address and sends the Working With Real Estate Agents Disclosure (WWREA) electronically and immediately reviews it with them. After the disclosure is provided, the consumer decides to allow the provisional broker/brokerage to represent their interests in the transaction. Next, the consumer enters into a written buyer agency agreement that authorizes designated dual agency. The consumer further tells the provisional broker they are preapproved for a $600K mortgage.
The provisional broker notifies the BIC about the brokerage’s new client and their preapproval amount for a mortgage. The BIC reviews the agency agreements, disclosures, and provisional brokers’ client notes. While reviewing the information, the BIC informs the provisional broker that their seller-client previously authorized designated dual agency in their listing agreement. The BIC also states they will notify the seller that they are now in a designated dual agency relationship. The BIC then designates the provisional broker as the agent for the buyer-client and themself as the designated dual agent for the seller-client.
The BIC reassures the provisional broker that the information they submit in the transaction file will not be disclosed to the seller-client; however, to comply with License Law and Commission rules, they must submit all their transaction records to the brokerage so the BIC can review them.
ISSUE: Did the BIC and provisional broker comply with Rule 58A .0104?
ANALYSIS: No. Rule 58A .0104(j) specifies that a broker-in-charge shall not act as a designated broker for a party in a real estate sales transaction when a provisional broker under his or her supervision will act as a designated broker for another party with a competing interest.
License Law and Commission rules state that a designated dual agent may be non-provisional or provisional brokers. Further, a BIC can be a designated broker for a party in a real estate sales transaction. However, the BIC cannot act as the designated dual agent for a party in a real estate sales transaction when a provisional broker under their supervision acts as a designated dual agent for another party with a competing interest.
In this scenario, the BIC and the provisional broker indicated to the seller-client and buyer-clients incorrectly that XYZ Realty could practice designated dual agency. Under License Law and Commission rules, it is not permissible for XYZ Realty to practice designated dual agency because there are only two affiliated brokers in the brokerage, the BIC and the provisional broker. Rule 58A .0104(j) clearly indicates that a BIC may not be a designated broker for a party in a real estate transaction if a provisional broker under their supervision is the designated broker for the competing party.
If the BIC wants XYZ Realty to practice designated dual agency, the BIC must have more affiliated brokers under their supervision. If the BIC has more affiliated brokers under their supervision, the BIC may represent a party in a designated dual agency transaction if a non-provisional broker is the designated dual agent for the competing party.
However, the Commission states a best practice for BICs is to not represent a party in a designated dual agency situation. If BICs adopt this practice it can reduce the chance that a BIC may violate Commission rules for either, (1)failing to maintain and review transaction records, or (2) learning confidential information about the other party and using or (failing to use) that confidential information to the advantage of their client in a designated dual agency situation.
BICs should establish policies and procedures to ensure compliance with License Law and Commission rules.
If a BIC chooses to be one of the designated dual agents in a transaction, the BIC would need to designate another broker in the office to collect/review records from the transaction for the client the BIC is not designated to represent. This will essentially prevent the BIC who is a designated dual agent from having access to confidential information about the other party in the transaction. It may also provide comfort to the other designated dual agents that they can provide records in compliance with Rule 58A .0108(d) and not have their client’s confidential information inappropriately shared with the other party in a designated dual agency transaction.
If the BIC and their provisional broker act as designated dual agents for competing parties in a transaction, they may be subject to disciplinary action by the Commission for failing to adhere to Rule 58A .0104.
Resources:
N.C.G.S. § 93A-6(a)(8), and 93A-6(a)(10)
License Law and Commission Rules: Rule 58A .0104(j)
Articles: 2022-2023 General Update Course
BICs and Designated Dual Agency Transactions- Room for Conflicts
Video: https://share.synthesia.io/1bba22d8-cc03-4eba-af98-634e78a07d49
What’s Next Once You Receive Your License?
Congratulations on receiving your hard-earned real estate license. What a great feeling after all that work! Once you have celebrated your accomplishment, you might wonder what the next step is. So glad you asked…there are three possible paths:
1. If you wish to begin working as a real estate broker as soon as possible: First, you must locate a supervising Broker-in-Charge (BIC) so you can activate your license. Consider interviewing with several brokerage companies to identify a work culture that appeals to you. The BIC of the company you select must agree to actively supervise your brokerage activities. Once a completed REC Form 2.08 License Activation and Broker Affiliation has been electronically submitted, you may begin your real estate practice under your BIC’s supervision.
2. If you wish to remain on inactive status and begin working as a broker later: Once you have your real estate license number, you can begin and even complete your 90 hours of Postlicensing education without activating your license. All provisional brokers (not just those on active status) are required to complete this educational series within 18 months of initial licensure. This will remove the provisional status of your license so that when you are ready to activate your license, it will be as a “full” broker.
3. If you wish to remain on inactive status indefinitely: As long as you renew your real estate license every year between May 15 and June 30, you are not required to complete any education or affiliate with any BIC. Be aware that this course of action can result in extensive educational requirements when you do decide to activate your license, depending on how long you wait to activate.
4. Recommendation: Regardless of which of the above paths you choose, you are strongly encouraged to complete the mandatory 8 hours of Continuing Education each year after your first license renewal. It will make activation much easier.
Reminders: Provisional Brokers
Provisional brokers will remain on inactive status until they affiliate with a designated broker-in-charge.
1. While on inactive status, brokers are not permitted to perform any brokerage activities, including making referrals. Commission Rule 58A .0504(a)
2. Postlicensing education must be completed within 18 months of the date of initial licensure. Commission Rule 58A .1902
For example, if the broker was first licensed on September 1, 2024, they must complete all Postlicensing courses by March 1, 2026. As soon as the courses are completed, so long as on or before the 18 months ends, the provisional status will be automatically removed.
Postlicensing education includes the following three 30-hour courses:
301 – Broker Relationships & Responsibilities;
302 – Contracts and Closing; and
303 – NC Law, Rules, and Legal Concepts.
3. Provisional brokers must complete continuing education each year by June 10 prior to the second renewal of their license. This requirement is separate from and in addition to Postlicensing education. Commission Rule 58A .1702.
4. All provisional brokers must renew their licenses between May 15 and June 30 of each year. Commission Rule 58A .0503
Whether the initial licensure date is September 1 or May 1, all brokers must renew their broker licenses on or before June 30 each year. There is a $45 fee to renew a broker license.
Reminder: Brokers-in-Charge (BIC) must submit License Activation and Affiliation, Form 2.08, for Provisional Brokers
Are you interested in affiliating a provisional broker? Have you completed the License Activation and Affiliation (Form 2.08) for the provisional broker?
Pursuant to Rule 58A .0506(b), a BIC is responsible for the submission of the License Activation and Affiliation Form 2.08 for provisional brokers under their supervision. The rule provides that if the provisional broker and broker-in-charge do not receive written acknowledgment from the Commission within 30 days of the date shown on the form, the provisional broker must cease brokerage activities pending receipt of the written acknowledgment from the Commission.
If you have additional questions, visit the Commission’s website.
Reminder: Do you know you can take the Update Course early?
While Commission rules allow brokers to complete their Update course anytime between July 1 and June 10, it is highly recommended to take it as early as possible. This will ensure you are up to date on the latest law and rule changes. If you wait until the spring, you may find the material covers changes that have already been in effect since the previous July, leaving you without the necessary information to conduct your business appropriately.
How do you find an Update Course near you?
A statewide CE Course Schedule is available on the Commission’s website. To search for courses, visit the Commission’s homepage (www.ncrec.gov), click on the Education menu, and select Search CE Course Schedule. You can search by course title, city, county, sponsor or instructor name, or date range.
Stay informed and compliant by taking your Update course early during the license year.