Support for Navigating the NAR Settlement

Supporting Fair Agent Compensation

At Bluegrass Land Title, we understand that real estate professionals deserve fair compensation for their work while maintaining their commitment to serving their clients' best interests. The NAR Settlement has introduced changes to how agent compensation is structured and documented, but the fundamental goal remains the same: ensuring agents receive appropriate payment for their services.

Scott Harper, Attorney and Louisville Market President says, “We want agents paid fairly for the work they do while promoting and protecting the best interests of their clients.” 

Understanding Agent Compensation Options

While the traditional agent compensation structure remains available, the settlement has introduced new flexibility in arranging agent compensation.

Traditional Structure

The conventional approach to real estate compensation involves the seller paying the listing broker a total commission. The listing broker then shares a portion of this commission with the buyer's broker as a cooperating commission. While this arrangement continues to be common practice, the settlement now requires these terms to be explicitly documented outside of the MLS.

Alternative Payment Structures

The settlement allows for more flexible compensation arrangements. A seller or listing broker might offer a reduced cooperating commission, with the buyer making up the difference to their agent. In some cases, buyers may pay their agent's commission directly. Parties can also create mixed payment arrangements that work for their specific situation. 

These compensation terms must be negotiated and documented in advance, rather than relying on traditional MLS disclosures about how commissions will be handled.

Key Changes Under the NAR Settlement

The NAR Settlement introduces two main changes to how compensation is handled. The cooperating commission amounts can no longer be listed on the MLS, and all compensation agreements must now be documented. 

Removal from MLS

One of the most significant changes is that cooperating commission amounts can no longer be listed on the Multiple Listing Service (MLS). Instead, agents must now communicate directly with each other about commission arrangements. This means buyer's agents should confirm commission terms before showing properties to ensure everyone has clear expectations about compensation.

Required Documentation

The settlement places greater emphasis on proper documentation of all compensation arrangements. This starts with the buyer's agency agreement that specifies compensation terms between the buyer and their real estate agent's broker. When paid partially or fully by the listing broker, commission arrangements should be included directly in the purchase agreement, or documented through separate broker-to-broker agreements. 

Any changes to these arrangements must be properly documented and signed by all relevant parties to ensure clarity and prevent misunderstandings.

Best Practices for Commission Management

To help ensure smooth transactions and proper compensation, we recommend the following best practices:

• Verify commission amounts and arrangements before showing properties
• Document all agreements and changes in writing
• Review commission terms before closing
• Confirm final commission amounts at closing
• Use standardized forms from local Realtor associations
• Maintain clear communication between all parties about compensation expectations

At closing, we provide an additional verification step to confirm commission amounts are correct and properly documented. This helps prevent misunderstandings and ensures all parties are satisfied with the final arrangements.

Standardized Documentation Practices

Before the NAR Settlement, real estate professionals relied on standardized contracts that had been refined over years of industry experience. Harper says, “While the settlement introduces new requirements, Bluegrass Land Title continues to advocate for using standardized agreements from local associations rather than custom or modified documents.”

Core Documentation Requirements

The settlement requires clear documentation from agents. The exclusive buyer agency agreement establishes the relationship between buyer and agent, including compensation terms. When needed, a broker-to-broker agreement documents commission arrangements between professionals. Commission terms may also be incorporated directly into the purchase agreement. These documents work together to create a clear framework for the transaction.

Understanding the Risks of Modified Agreements

Attorneys at Bluegrass Land Title have observed a trend of brokerages and companies creating their own versions of these agreements. “While this might seem like a way to streamline processes or add company-specific terms, modified agreements can introduce unexpected complications,” Harper explains.

Some modified agreements may appear similar to standard forms but omit critical protections. For instance, a modified buyer agency agreement might remove standard expiration clauses, potentially binding buyers to an agent indefinitely. In another case, altered agreements might lack clear language about commission arrangements, leading to disputes at closing.

Why Standardized Documents Matter

Local real estate associations have developed their standardized documents with several important benefits:

• Protection of all parties' interests through carefully balanced terms
• Inclusion of all legally required elements and disclosures
• Clear, consistent language that reduces misunderstandings
• Standard formatting that makes review more efficient
• Regular updates to reflect legal changes and industry best practices
• Time-tested terms that have proven effective in various situations

Standardized documents provide a stable foundation for real estate transactions. When agents use these established forms, your title company can process transactions more efficiently and help prevent issues that might delay closing. Most importantly, these documents help ensure that both real estate professionals and their clients have the protections they need throughout the transaction.

While the NAR Settlement has changed certain aspects of real estate transactions, the fundamental need for clear, comprehensive documentation remains unchanged. Using standardized forms from your local association helps maintain consistency and reliability in your transactions while adapting to new requirements under the settlement.

Clear Communication is Key

In the evolving landscape of real estate transactions, clear communication between all parties has never been more important. The NAR Settlement introduces new considerations that make open financial dialogue essential from the first client meeting through closing.

Starting the Conversation

Professional real estate agents have always needed to understand their clients' financial situations, including their budget, available down payment, and closing cost expectations. These conversations now take on additional importance as commission structures become more varied. Agents should help clients understand that while traditional commission arrangements still exist, they can no longer assume the seller will cover all commission costs.

Before showing properties, agents must now have a signed buyer's agency agreement. This represents a significant change in how agent-client relationships begin. When introducing this requirement, agents can explain that these agreements protect both parties by clearly outlining expectations and responsibilities. 

Agents should reassure clients about the flexibility of these agreements - they can be limited in duration, specific to certain properties, amended as needed, or even voided and rewritten if circumstances change.

Property-Specific Discussions

Communication becomes even more focused once buyers identify properties of interest. The process typically follows these stages:

Before Showings

Agents now need to contact listing agents directly to confirm available cooperating commissions for specific properties. This information helps determine whether a property fits within the buyer's budget when considering all costs, including any commission responsibilities.

During the Offer Stage

Commission arrangements must be clearly documented, either within the purchase agreement itself or through a separate broker-to-broker agreement. All parties should understand their payment responsibilities before proceeding with the transaction.

Approaching Closing

The settlement statement requires careful review, as commission amounts appear as dollar figures rather than percentages. This final verification step ensures all parties are satisfied with the commission arrangements before completing the transaction.

Making Communication Work

Successful communication in this new environment means:

• Maintaining detailed records of all conversations and agreements
• Asking questions when terms are unclear
• Confirming understanding with all parties
• Documenting changes promptly
• Verifying information at each stage of the transaction

Remember that good communication isn't just about sharing information - it's about ensuring understanding. By maintaining open dialogue throughout the transaction, agents can help their clients navigate these changes while protecting everyone's interests.

Practical Support for Agents

As the real estate industry adapts to changes under the NAR Settlement, Bluegrass Land Title provides comprehensive support to help agents and their clients navigate this new landscape. Harper says, “We understand that these changes can feel complex, and we're here to offer practical assistance for all parties at every stage of the transaction.” 

Legal Resources and Guidance

Our team of attorneys is available to help agents understand and implement settlement requirements. Whether you're dealing with an unusual transaction scenario or need clarity on how commission arrangements affect virtual showings and digital tours, we're here to help. As the industry continues to refine processes around documentation timing and virtual services, we will provide up-to-date guidance based on the latest developments.

We offer document review services to ensure your agreements meet all requirements while protecting both you and your clients. This includes reviewing buyer agency agreements, broker-to-broker agreements, and any commission-related contract terms. 

For situations involving out-of-state buyers, property-specific agreements, or commission disputes, we can provide targeted guidance to help you move forward confidently.

Transaction Support Services

Our commitment to supporting clients extends throughout the entire real estate transaction. We carefully review settlement statements to verify commission details and confirm all payment arrangements are properly documented. An additional verification step at closing provides extra assurance that commission amounts are correct and all parties understand the final arrangements.

We recognize that some scenarios require special attention, such as:

• Complex commission splits
• Multiple-party payments
• Special disbursement requirements
• Non-traditional payment arrangements
• Modified agreement terms

In these cases, we work closely with all parties to ensure proper documentation and clear understanding of the arrangements.

Partnership for Client Education

Informed clients make confident decisions. Your clients will likely need education about the implications of the NAR settlement, and we’re here to support those efforts. When needed, we can help explain settlement requirements, documentation timing, and commission payment options to your clients. 

Buyers may have concerns about new agreement requirements, but we can help address these concerns by explaining the various ways to make these agreements work for them. This includes discussing how agreements can be modified or adjusted, outlining the protections built into standard agreements, exploring different payment arrangements, and clarifying what responsibilities they have in the process. 

Evolving Guidelines and Best Practices

The legal landscape following the NAR Settlement continues to evolve. As Scott Harper explains, "Law is a living, breathing thing. It's always evolving and changing. In many situations, we can point to years of case law to clarify what the law really means. But because the NAR Settlement is so new, there is some legal ambiguity."

Principles for Compliance

While some aspects of the settlement continue to develop, certain principles remain clear. 

The foundation of compliance includes:

• Using standardized agreements from your local Association of Realtors, such as GLAR, NKAR, or Bluegrass REALTORS 
• Maintaining detailed written documentation
• Regularly verifying commission arrangements
• Communicating clearly about requirements with all parties

We recommend focusing on clear compliance with known requirements while maintaining careful documentation of all decisions and arrangements.

Areas Under Development

One key area still being defined is exactly when the required buyer's agency agreement must be signed. While it's clear that physical showings require a signed agreement, questions remain about activities like virtual tours, property searches, and general market discussions. For example, if an agent conducts a video walkthrough for an out-of-state buyer, does this constitute "working with" an agent under the settlement?

Until these areas are more clearly defined through practice and potential legal interpretation, we recommend taking a conservative approach that protects all parties. When in doubt about whether an activity requires a signed agreement, consider having a conversation with your client about signing one. This helps ensure compliance while building trust through transparency.

Remember that Bluegrass Land Title's legal team stays current on settlement developments and is available to help you understand how new interpretations might affect your business practices. While the NAR Settlement introduces significant changes to real estate transactions, the fundamentals of successful deals remain the same: clear communication, proper documentation, and protection of all parties' interests.

By maintaining standardized documentation practices, establishing clear communication channels, and staying current with evolving guidelines, agents can continue to serve their clients effectively while ensuring fair compensation for their work.