Monica Staaf is longtime general counsel for the Rhode Island Association of Realtors, where she’s responsible for answering legal questions and staffing the organization’s legal hotline. Staaf writes advice for members, teaches continuing education classes for the association and produces legal update videos on YouTube. On top of that, she works with teams of volunteers to develop risk management tools and to create and update the content of the organization’s forms, along with forms used for the Rhode Island Statewide Multiple Listing Service.
PBN: New rules are going into effect on Aug. 14 applying to consumers in a real estate transaction and new requirements for Realtors on what they need to do when providing someone services. Why are these changes happening and what do you make of it?
STAAF: The National Association of Realtors negotiated a settlement agreement to resolve various class action lawsuits that were filed by former home sellers against NAR, various real estate companies and Multiple Listing Services in different parts of the country, including in Massachusetts.
The settlement agreement requires nationwide changes to forms and practices to help ensure that real estate compensation is transparent to all consumers. Statewide MLS will implement new rules on Aug. 14, several days before the national deadline, to make sure that staff are available to answer questions.
PBN: What do Realtors need to know most about these changes regarding these requirements for real estate transactions going forward from Aug. 14?
STAAF: Realtors need to understand the new rules and familiarize themselves with new forms resulting from those rules. And just as important, if not more so, consumers need to understand them. Buyers need to sign a written agreement with their real estate professional before touring a home – either in person or virtually – that is listed in the MLS so they understand exactly what services will be provided and for how much.
A written agreement is not needed if they are just speaking to a listing broker who represents a seller at an open house. Most important, compensation to a real estate professional continues to be fully negotiable. When finding a real estate licensee to work with, buyers and sellers should ask questions about their services, compensation and these written agreements.
PBN: What's your biggest concern about implementing these changes among your membership?
STAAF: Many Realtors who work mainly with buyers may need to make significant changes to how they are compensated and how they explain that to their clients. For decades, it has been common for a residential listing broker to offer part of his/her compensation from the seller to pay a cooperating broker who works with the buyer. Those offers of cooperative compensation will no longer be allowed through Multiple Listing Services that are covered by the settlement agreement. As a result, buyers will need to compensate their brokers directly if they want professional representation or ask the seller to pay some or all of those costs.
Our concern is that many buyers are not prepared for additional costs to buying a home, particularly at this time of soaring housing costs. This can create special hardship for first-time homebuyers and buyers from marginalized communities who want help with negotiations but cannot afford it.
From an industry standpoint, Realtors will have had only five months since the NAR settlement agreement was announced to adapt to new rules, forms and requirements.
PBN: How will these changes affect homebuyers and sellers, the clients of your members, and what each group should be aware of?
STAAF: Adding to what I mentioned above, most buyers, and first-time buyers in particular, aren’t aware of the complexities of a real estate transaction. Without an experienced professional to guide them through the maze of deadlines, deposits, inspections and legalities, they could find themselves making costly mistakes.
Sellers should anticipate that a buyer may ask them to pay some or all of the cooperating broker’s compensation when they negotiate a purchase and sales agreement. Many buyers could find it difficult to pay for representation themselves out of pocket, particularly in light of today’s already high housing costs. This could limit the pool of eligible buyers if the buyers pull out of the market altogether or a seller prefers not to negotiate.
PBN: What are the penalties or pitfalls if someone fails to follow these new rules, and what final words of advice do you have about this for Realtors?
STAAF: The plaintiffs’ attorneys in the lawsuits have announced that they will take active steps to make sure that the real estate profession is complying with the settlement agreement. Failure to comply can mean that a real estate brokerage or MLS is no longer protected by the settlement agreement and could be sued. Also, regulatory agencies can take enforcement actions.
Realtors tend to be resilient. Over the years, they, along with their clients, have weathered recessions, a banking crisis, a global pandemic and significant changes in the profession and through it all, real estate has remained the best way for families to build wealth. I’m confident that they will adapt again and continue to help buyers, sellers, tenants and landlords.
Marc Larocque is a PBN contributing writer. Contact him at Larocque@PBN.com. You may also follow him on Twitter @LaRockObama.
