Berkshire Settlement Implementation Details

Posted by on in | 3 Views

Last week you saw our at-a-glance plan… this week we are sharing this extensive FULL PLAN overview of how we will implement settlement changes in Berkshire County for those that have been anxious to see how all of these changes would play out in “real life”.  This PDF Berkshire Settlement Details version is easier to read and print out (and save!).  We wanted to make it pretty, but opted for printable instead!  If you look at this 14 page doc plus forms and are overwhelmed, don’t worry.  Take a little bit at a time, go at your own pace – we made it as approachable as possible.  If don’t learn best by reading, we will be releasing a video early next week that will cover this material as well, and have the live zoom programs linked below you can join.  But now is the important time to get yourself up to speed if you haven’t already, dig into and prepare your business for the changes ahead.  You’ve got this, and we are here to help.

Where we are now

You have new obligations to be protected by the NAR class action settlement, and so do we, as the MLS! It’s been a busy few months here (wild understatement), but this document contains the final documents and rules changes that await your attention.  Our obligations as an MLS owned by a REALTOR Association and affiliated with NAR drove the contract changes, system changes and practice changes shared here.

Thank you to the staff and volunteer leadership who debated, discussed, listened, read and researched so much over the past few months to make the best decisions we could make with the information at hand.  We especially thank Board President Nick Geranios and MLS President Paula McLean for their tireless work.

10 Marketplace Changes MUST Occur by August 17th:

  1. No offers of compensation in MLS.

MLSs must eliminate any requirements that brokers or sellers make offers of compensation through the MLS and prohibit the same. The MLS will eliminate all broker compensation fields and prohibit sharing offers via any other fields in the MLS system on August 8th, 2024. We have updated our rules to include this restriction.

Note: Off MLS offers permitted. The above changes do not prevent offers of compensation made from listing brokers to buyer brokers outside of the MLS.
Lots more on that later in this document.

  1. No off-MLS facilitated offers.
    MLSs can’t do an end run around these rules or help you violate them either. We can still provide data feeds to participants and third parties, so long as all agree not to use feeds to establish a platform for offers of compensation from multiple brokers. Brokers may still display their own offers, if any, on their own website.

Note: New Data Feed Agreements:  If you have a website that uses our MLS data, we will be submitting a new or amended data licensing agreement that complies with the terms of the settlement.  You can either agree that you won’t use the data as restricted by the terms of the settlement, or you can terminate the feed.  Expect that within the next month.

  1. Mandated Buyer broker agreements.
    MLSs must require all participants working with a buyer to have a written agreement before touring a listing. That agreement must describe the broker’s compensation, the amount must be objectively ascertainable and not open-ended, and the broker may not receive compensation from any source that exceeds the amount in the agreement.

Note: This is not for listing brokers. This is for agents working for buyers. The premise is this – if you’re working with a buyer and expect to get paid for that work, you need to lay out the terms and services that you will provide, the duration of that commitment and agreement to a fixed compensation rate for your services.

Note: Contract Triggers: Simply marketing your services or speaking to a buyer about creating a relationship does not trigger the need for an agreement.  But, as soon as you begin to work with a buyer and provide any brokerage services, as outlined in the FAQs, that triggers the need for an agreement.  There is a whole section of the NAR FAQs on this topic. The “working with” language is intended for those providing brokerage services to a buyer—such as:

    • identifying potential properties
    • arranging for the buyer to tour a property
    • performing or facilitating negotiations on behalf of the buyer
    • presenting offers by the buyer
    • counseling on financing and the homebuying process
    • or other services you provide for the buyer

Note For listing agents, speaking with a buyer at an open house or showing an unrepresented buyer a house that you have listed is NOT considered working with the buyer. You are working only as an agent of the seller with an unrepresented buyer customer.  You complete the agency disclosure form to indicate you are a seller’s agent, explain the buyer’s right to representation but do not have to provide a contract since your client service promises and payments of compensation are covered in the Exclusive Right to Sell agreement with your client, the seller.

Note: Dual agents DO work with both the buyer (and the seller) and a contract would be required.

  1. No advertising services as free.
    MLSs must prohibit participants and subscribers from representing their services are free.

Note: Your services aren’t free, they always financially impact the transaction. That’s why our REALTOR Code of Ethics changed a while ago to reflect this as well. No news here, you are worth every penny, don’t diminish that.

  1. Participant disclosure regarding offers.
    MLSs must require participants to disclose to sellers and obtain seller approval for any payment or offer, if any, the listing broker or seller makes to another broker, agent, or representative (e.g., attorney) working with a buyer.

Note: Sure thing. You’ve always done this, and now the Exclusive Right to Sell makes it crystal clear how the seller directs their agent to make offers of compensation, if any, with clear disclosures that even broker-to-broker compensation is negotiable and determined by the seller. Other agreements can be taken up in the Purchase and Sale but of course all alternatives should be discussed during the listing stage, so the seller knows what to expect and how to properly price and market from the beginning.

  1. Participant disclosure regarding commissions.
    MLSs must require participants to disclose to sellers and buyers that commissions are not set by law and are fully negotiable in listing, buyer broker and in pre-closing agreements and documents, if any (unless it’s a government specified form).

Note: All of our agreements now have this displayed as a big, red statement. We thought the blank lines for compensation were a give-a-way that it was always negotiable but now there can be no question.

  1. No filtering.
    MLSs must prohibit participants and subscribers from filtering out listings based on the existence or level of compensation offered to the broker assisting the buyer.

Note: All Listings, Despite Conversations: The settlement says the MLS must stop agents from filtering listings, so we will add this to the list of things we will monitor and enforce. You should ALWAYS expose your buyers to all the listings on the market that match their criteria.  ALWAYS.  How the offer plays out down the road is one of many financial considerations in offer negotiations.  No one can tell in advance what negotiations will secure a winning deal. You are your buyer’s professional representative – you’ll tell them everything you know about the listing, make sure they are fully informed about any research and market knowledge you can share, and help them develop strategies that align with their financial interests and desires.

  1. Educational materials.
    MLSs must provide settlement educational materials. (How could we not?!?!) Video, Virtual, Paper and Online, we are doing it all. We will discuss the topics featured here and take questions at the scheduled education zoom sessions this month, and add more if needed.   Plus, there is this giant compendium on all things related to Berkshire settlement compliance!
  1. Concessions in MLS permitted.
    Sellers may offer buyer concessions on the MLS (e.g., for buyer closing costs), so long as they are not limited or stated for cooperating broker compensation. Local MLSs may/ may chose not to adopt fields for this disclosure.

    • Berkshire MLS Rules? Buyers have always been able to ask the seller to pay closing cost credits as part of their transition.  Now, Sellers can direct their broker to offer their home for sale with closing cost credits, if desired.  In MLS, we have chosen not to add a field for concessions because it isn’t binding.  Sellers may offer buyer incentives like CLOSING COST CREDITS, only as long as they are not limited, and NOT directed for the use of compensation payments. The buyer can use concessions, according to their loan restrictions, to pay for any of their closing fees. Any concession, just like now, would have to be stated and agreed upon in the final Purchase agreement or addendum.
  1. Cooperate when asked
    MLSs must agree to cooperate with plaintiffs by providing non-attorney-client privileged information. Fun!

So here we are, and this is what we have done to comply and ensure you do too:

Contract Changes Are Here!

As promised, we have approved local contract changes to help Berkshire REALTORS comply with settlement requirements. The changes aren’t as significant as you would fear – we had very transparent agreements to begin with, but certainly a tweaking was needed. While all practices changes must be made by August 17th, you can begin anytime making professional changes to assist your clients.  Seek your broker’s direction on all matters.

Forms Providers:

We have submitted the new versions to the following forms providers: Remine, Dotloop, and Ziplogix. It’s up to the provider’s schedule when updates will go live.  These forms are accessible in Remine right now and available to all Berkshire REALTOR members through a direct link in the MLS. This link checks your membership and automatically gives access when appropriate.  Do you use a different forms provider? Please reach out. Do you like these forms but aren’t a Berkshire REALTOR? Linda is happy to share the benefits of secondary membership!

IMPORTANT FORMS NOTE: If you use Dotloop or Ziplogix you need to manually update any templates you might have with the new forms. You will not get a notice to do so! We will keep reminding you, but make sure you add this to your to do list.

Berkshire Standard Contract Changes Overview

  • Additional Disclosure for Existing Exclusive Right to Buy – If you were an early adopter and have been getting buyer clients to sign the standard Berkshire County Exclusive Right to Buy agreement, this addendum ensures you comply with the settlement. There is no need to get a new contract signed after August 17th if you are using this addendum. This addendum is not needed if you sign a new ‘Buyer-Broker Representation Agreement’ released 7/24 moving forward.  Final Draft
  • Additional Disclosure for Existing Exclusive Right to Sell – If you have existing seller clients that signed a standard Berkshire County Exclusive Right to Sell agreement before 7/24 without the ‘ALL COMPENSATION IS NEGOATIABLE’ statements included, this addendum complies with the settlement. If you get this addendum signed, then you do not need to get a new contract signed after August 17th to comply. This addendum is not needed if your clients sign a new ‘Exclusive Right to Sell Agreement’ dated 7/24 or later moving forward. Final Draft

Update & Rename Representation Agreements

  • Exclusive Right to Sell Agreement – This agreement has been updated to include the required disclosures and to ensure that the seller is making a fully informed decision about whether or not your brokerage is allowed to offer cooperating brokers compensation outside of the MLS. Please note that this is an OFFER only and is not binding until agreed upon by the parties in writing. Final Draft/Some Markup
  • Buyer-Broker Representation Agreement – This agreement has been renamed to better reflect the intent of the contract. This agreement has been updated to include the required disclosures and to ensure that the buyer is making a fully informed decision on how their agent will get paid and provide direction for how the broker will secure payment. Final Draft / some Markup
    • Side note: Let’s be clear that this is an agreement between YOUR BROKERAGE and YOUR CLIENT. If a listing broker requests to see a copy of your Buyer agreement, start with no – but open a dialogue on why they feel they need to see a copy of it. It is the MLS’s job to enforce the regulation that a buyer agreement be executed before a showing, not a competing firm. Also, this has confidential information, like your agreed upon commission and brokerage strategy for assisting buyers.  You wouldn’t share a copy of your Exclusive Right to Sell Agreement, consider this as the same type of private client document.  Regardless, only your broker should decide about sharing any document outside of the firm. While we say you can share an agency disclosure as a courtesy, sharing a buyer agreement is NOT recommended.

Replace compensation addendums with updated purchase agreements

  • Purchase and Sale Agreement – This has been updated to reflect the new need for compensation to be clearly shown as a part of the offer and acceptance, so that all parties have a clear understanding of the financial impact of the agreement. Please note that while making changes, the board approved a reorganization of terms to flow better with like provisions grouped together.  (all environmental, all legal) etc.  This is just for ease of use when working through the terms with your clients. For those who had the paragraph numbers memorized, time for an update!  Please note that during the review process, legal counsel noted that having a third “other” option for possession is needed when a multiple unit dwelling. Final Draft with Some Markup
  • Purchase and Sale Land – This mirrors the Residential Purchase & Sale agreement. Please note that during the review process, legal counsel noted that there were a few terms that should have been in the agreement for “Closing” requirements. Final Contract with some markup

Update to enable attorneys and lenders to write closing disclosures and checks.

  • Compensation Statement for Closing Disclosure – We have restructured the uniform compensation statement to match the Purchase and Sale agreement. This is done to assist our legal and lending community in preparing for the closing disclosure and understanding who and how checks need to be paid at the closing table. Final Statement

Note that this summary does not apply to MAR form changes or Brokerage specific forms)

Future of Forms:

Here’s the thing – we have looked at so many other agreements, sat in legal meetings, contract meetings, been part of national, local and state conversations on the nuances of the settlement going forward.  We worked with our own local counsel, MAR state counsel and hired a national law firm. This allows us to help you comply with the settlement while ensuring transparency and understanding by a consumer.

  • And here is one thing we all agree upon:  We also all agree that there will be changes ahead.  We are all doing our best to develop simple, clear paths to compliance but know that there are other legal actions, other discussions with the Department of Justice, and quite frankly, when all of you start using these revised forms, hiccups or better practice suggestions.  When all is said and done, expect change!
  • Sharing Good Info:  We love your input. But, rather than you forwarding a document or newsletter to Sandy@BerkshireRealtors.org, please give me a heads-up on what you want us to make note of in the forward – “love paragraph 2”, “look at how they are handling XYZ”, “Can I use this form here?”.  That really helps us sort through all the docs and feedback we get daily. Thanks!

You’ve got this! We will work together to make sure you have resources to serve your clients well.

Where and how can compensation be negotiated:

  • Not in MLS: First, and most importantly, compensation offers CANNOT be made / accepted in the MLS or using an MLS data feed. Anywhere OUTSIDE of the MLS is fine.

In Practice:  Can someone call/ text/email and ask if there is any listing broker compensation being offered to buyer agents or facilitators? Sure. Can a listing broker send an email to other agents in your market place with this information? Sure, but NOT using the MLS email broadcast system!  Can you post it on your website as long as it’s not appearing with the MLS data feed of listings? Sure. Can a buyer ask about it at an open house? Sure. Can you put it on social media? Sure (but SHOULD you, might be a better question). Talk to your broker, talk to your seller and develop a strategy that will make transparency about compensation clear without the MLS displaying it everywhere for you.

  • Listing Broker Paying Ok: Listing brokers can still offer to pay cooperating brokers from a portion of their compensation IF THE SELLER GIVES YOU PERMISSION TO DO SO. Therefore, this is an important discussion to have when negotiating the Exclusive Right to Sell agreement and remains part of the term of this agreement.

In Practice:  Check out the Exclusive Right to Sell – you will find the language right there as it has always been, but super clear so the seller can have a strategic conversation with you about their options, the current market dynamic and your professional experience.  Note: The Department of Justice doesn’t love this, but it is legal, and the settlement expressly allows this practice to continue.

  • Seller Paying for Buyer ok: If sellers don’t agree to a listing broker offering of compensation from their portion of the selling fee, make sure they understand it could be a term in buyer offers since many buyers need this payment come from transaction proceeds.  This has been specifically allowed by the major mortgage providers as of right now. Discuss with your seller all of the terms that will make the sale a success for them and how they can calculate and compare offers accordingly.

In Practice:  Compensation is just one term that has a financial impact on the seller’s net.  Going in with a failing septic or setting initially high or low listing prices has an effect too. Your sellers need your expertise to help them realize their home selling goals, while presenting the property as best as possible.  Advise them of the options, your professional expertise and let them decide.

How does the Buyer / Seller agree?    Sellers can, upon receipt of a Purchase and Sale, decide if THEY will pay a cooperating broker compensation, at the request of the buyer.  The seller will negotiate this item just like any other term of the purchase agreement.  Therefore, it’s important for the seller to consider this knowing what has already been promised in the Exclusive Right to Sell agreement. It is equally important for the buyer to consider this knowing what has already been agreed to in their Buyer-Broker Representation agreement.   A fully-informed client means you’re doing your job well.

  • Buyers Paying their Own Agent is Ok: Buyers have always been able to hire and pay their own agent. It does present a challenge for many buyers who have to meet down payment requirements to come up with an additional payment separate from the transaction.

In Practice: One of the new terms of the Buyer Agreement is where the buyer can elect for their broker to try to get paid elsewhere first, or they can just agree to pay them directly.  The Buyer makes the determination on how their agent should pursue compensation.  Give them the information when executing a buyer’s agreement so that they can make a fully informed decision during the offer stage.

  • Agreement in Writing: Without a binding offer of compensation in the MLS going forward, compensation needs to be negotiated and secured appropriately, in writing, by the parties.

In Practice: The new Purchase and Sale Agreement can now be used to present a full picture of all the financial terms of the agreement with transparency and a written contractual agreement by all parties.  Remember a fully informed client, both buyer and seller, is the ultimate goal.

Other Contracts:

Some brokers have adopted their own agreements or prefer different forms, so always defer and check the agreements your broker want you to be using.  MAR has also updated their forms and they have also sent revisions to forms providers.  Remember that they deal with markets that primarily start with an Offer to Purchase and lead to an attorney drafted Purchase Agreement, unlike our direct route.  Given the changes make sure you learn when and how these forms can be used by the MAR legal hotline or your own counsel.  That said, they took input from REALTORS across the state so you’re welcome to use them as well.  MAR forms include:

Other housekeeping items:

Bye Bye Message Board:  We are removing the message board. While only randomly used, this was old technology and is no longer a forum we can maintain. Therefore, it will be removed from the MLS database.

Word Usage:  The staff, with guidelines from the MLS board, have created word usage limitations in open MLS fields to avoid accidental mistakes. We do have fines if you intentionally try to communicate about compensation in the MLS, but know that this is a new world – so after August 8th we will be restricting words like “commission”, “compensation” in open text fields in the MLS to help members avoid an error. We are asked to add and subtract words based on our experience.  For example, we had the word “fee” as restricted but low and behold there is a lot of talk about condo fees or HOA fees in Additional Disclosures. Remember – everything is a work in progress, it will take all of us to make this transition go smoothly!  There will be pop-up boxes with a clarification about what word is an issue and we can solve it from there!

Again with the Deadlines:  August 8th is the date change in our MLS when compensation is removed.  Compliance with all regulations (like buyer agreements, rule compliance) remains August 17th. You might hear this a few thousand times more between now and then.

Enforcement – Our rules have clear methods of fines, hearings and enforcement options. That said, this is a learning process for us and know that we will better define issues as we actually get into the new way of doing business. We are in ‘learning mode’ just like you. We do know that at this time, there is not a plan to require copies of Buyer Agreements when listings are pended.  We have been asked that a bunch.  BUT, we could ask for agreements to resolve a complaint, in the “request for documentation” ability we have. We will proceed carefully and re-examine enforcement as we go.  We also expect a lot of feedback from our members about experiences and concerns and will use that to help drive any changes to keep the market moving smoothly in the Berkshires.

Other MLS Membership: We are in a unique situation with many MLS types directly surrounding the Berkshire marketplace and we have been asked multiple times about compliance and liability if a brokerage or REALTOR choses to participate in an MLS that has not signed onto the national settlement.  And, in Massachusetts, there is an entirely different class-action settlement pending with MLSPin, that does not have the same terms and is not part of the national settlement.  The guidance for agents is singular – talk to your broker.  They should have policies and provisions in place for how your brokerage operates in all markets they hold membership.  From a legal standpoint, all are encouraged to seek legal counsel to determine the level of risk for future litigation if you choose to practice in manners that are not covered by the NAR settlement. For example, a brokerage that is a REALTOR member, who is seeking class action protection under the NAR settlement will need to comply with the NAR settlement rules – regardless of whatever marketing choices they make to advertise listings.

The Hammer:

We have updated all of our policies, regulations and bylaws as mandated by the National Association of REALTORS to ensure all of the 10 settlement obligations are in alignment with our governing documents.  The most notable changes, other than those stated above, are the addition of three new fines, shown on the next page.  We also struck the fairly recent change of assisting with compensation payments where there are no disputes in place but no check was forthcoming. Bummer but we are totally hands off on any matters of compensation, except in the offering of mediation and arbitration through the Board of REALTORS as usual.

 

 

Type

 Policy Violation Fine
Buyer Agreements Failure to secure Buyer Agreement with buyer prior to showing listed property

 

 ·    $500, First Offense

·    Second offenses will be assessed after a hearing with the MLS Board, the Participant, and the offending user; per Section 7 of the Rules and Regulations which could result in a minimum fine of $5,000 up to a maximum of $15,000 and/or suspension from MLS for a minimum of 30 days and up to a maximum of one year)

·    Subsequent offenses are handled according to Section 7 of the Rules and Regulations.

 
Settlement Compliance Inserting compensation, bonuses and/or making any reference on method of obtaining commission into any field or document in the MLS database accessible to other members. ·    $500, First Offense

·    Second offenses will be assessed after a hearing with the MLS Board, the Participant, and the offending user; per Section 7 of the Rules and Regulations which could result in a minimum fine of $5,000 up to a maximum of $15,000 and/or suspension from MLS for a minimum of 30 days and up to a maximum of one year)

·    Subsequent offenses are handled according to Section 7 of the Rules and Regulations.

 
Use of MLS data for compensation purposes. Electronic Display of Berkshire MLS Data comingled with any compensation offers or transmission of MLS data without authority or authorization. ·    ALL Offenses include termination of Participant’s MLS service and data feeds for up to three years, also, refer to Subscriber Agreement violation penalties.

·    Subsequent Offenses Termination of Participant’s MLS service up to 3 years*

For policy wonks, do you love the redline version or Bylaws, regulations or policies? You’ve come to the right place.  Here are links to all of the updated Governing Documents, with indications of what has changed.

• Board of REALTOR Bylaws
• MLS Bylaws
• MLS Rules and Regulations
• MLS Policy

NAR Resources

  • We cannot state enough how comprehensive and readable the NAR Settlement Resources at Facts.Realtor are laid out for all, REALTORS, Brokers and MLSs.
  • In fact, we also love the Window to the Law video series as well.  Click the link to be taken directly to the lawyer videos on many of the topics covered here.

MAR Legal Hotline

While the MAR Legal Hotline works with their own agreements, the MAR attorneys can assist all members with questions about the settlement, current state and federal laws and regulations, permissible business practices, and important court rulings affecting real estate professionals in Massachusetts.  Members are encouraged to seek independent legal counsel to assist with specific situations.

To Access the Legal Hotline:

Please note that legal resources are available to MAR members as a benefit of membership.

Berkshire Board of REALTORS

We hope it goes without saying that your local Board of REALTORS and your local MLS are here for you during the transition, still visiting offices to discuss your specific questions and welcome feedback, market intel and anything you wish to share.

Send to: Sandy Carroll, CEO, 413-442-8049 and Sandy@BerkshireRealtors.org.

I will be sharing information with staff, compiling for Leadership considerations, tagging for the Contract & Forms Committee or whoever else needs to know! We are in this together and encourage you to reach out to your broker – and your broker to us… it helps to make sure everyone is in the loop!