By Summer Goralik
This article was published by Inman on October 1, 2024 as part of a series, "Ask a Compliance Expert." The original piece can be found here.
This week’s question
This week, two key questions are up for review. While they may seem different at first glance, I believe they are cut from the same cloth. In other words, I’m taking a “two birds, one stone” approach as I unpack these valid concerns, which I believe share a common denominator worth exploring.
The questions are:
Why are people still talking about sharing compensation?
Should listing agreements still have a buyer agent (broker) compensation field?
Compliance expert answer
Let me preface this piece with something personal. I work in real estate compliance, which means many of my days are spent advising licensed clients on transactional requirements, licensing matters, advertising compliance, and more serious issues like Department of Real Estate (DRE) inquiries or audits.
Admittedly, I tend to advise brokers and agents conservatively, aiming to protect them from potential DRE scrutiny and civil liability. To illustrate — and for fun — let’s use a non-real estate example: I’m not a fan of jaywalking. Sure, you might make it to the other side of the street without getting pulled over by a police officer or hit by a car, but there’s always a risk. You’re either willing to take that risk or not. I usually advise my clients not to jaywalk, and they either love or hate me for it.
After eight years of working as an independent compliance consultant, I’ve accepted that not all clients will be thrilled with my advice. For example, I might recommend that a client change a brokerage policy or practice immediately to prevent or mitigate state scrutiny. While they may begrudgingly follow my advice, they often realize later that it was the right thing to do.
Sometimes, the reward of my guidance is bittersweet — like when I advise a client about avoiding a risky practice, and three months later, they face a DRE inquiry into the exact activity I warned against. But the goal of compliance, for me, is prevention.
Upon further reflection on my experience, there’s a recurring theme — or perhaps I should say “color scheme” — in my line of work. When you can direct real estate practitioners to the exact answers they’re seeking, whether in real estate law or practice guidelines, it feels as though your job as a compliance consultant is complete. In essence, black-and-white questions offer coherence and resolution, making compliance more straightforward and productive for both my clients and me.
However, when you delve into gray areas, the waters become murky, and the path to compliance turns into more of a journey, making it much harder to navigate. You can still assist clients with decision-making, clarify compliance risks, and highlight the strengths and weaknesses of their strategies, but it’s less satisfying at the end of the day. These gray areas usually signal increased risk and make compliance more challenging — for everyone involved.
I may have digressed, but here is my point: In the current real estate environment, these gray areas — both real and perceived — are preventing Realtors from finding certainty and achieving full compliance.
While the ultimate goal should be to implement the practice changes from the National Association of Realtors’ (NAR) proposed settlement in a clear, black-and-white manner to avoid non-compliance or legal scrutiny, there are still conflicting directives on what compliance with the new rules should actually look like.
It’s not just commentary or speculation from the peanut gallery, either. There’s gray everywhere — from industry clarifications at the top to inconsistencies in multiple listing service (MLS) portals and rules, and disparities in the real estate forms being created and used by Realtors.
If I were to address both questions right now, without further explanation, I’d say this: The reason some Realtors are still talking about cooperative commissions while others are questioning whether listing agreements should include provisions for buyer-broker compensation is that the narrative on effecting change remains mixed.
Put more plainly, we are not all on the same page; the gray has gotten in the way, obscuring clarity and creating confusion. It’s a fog I had hoped would have lifted by now.
Consequently, instead of one clear process for Realtors to follow or implement, there are varying interpretations of the new practice rules, which have led to different trajectories and applications of change.
Speaking of differing opinions, at least two camps of thought — though there may be others — have emerged in the aftermath of the commission litigation and NAR settlement, exemplifying the competing dialogues within the industry. One camp, let’s call them Group A, is trying to preserve cooperative compensation outside the MLS mechanism, while the other camp, Group B, is advocating for its elimination. Let’s examine this further.
If Realtors are wondering why cooperative compensation is still being discussed — one of the questions on deck this week — it’s because Group A continues to support the practice and does not view it as unlawful, likely due in part to mixed guidance from the industry regarding the new rules. According to NAR’s frequently asked questions on their website, cooperative compensation is not banned; it’s simply prohibited from being offered or displayed on the MLS.
As such, Group A may find alternative ways, off-MLS, to continue offering and engaging in cooperative compensation. After all, NAR’s clarification regarding the proposed settlement does not discourage this activity. Therefore, commission-splitting remains an option for this group of Realtors.
It’s important to note that while this group may include individuals who push the boundaries, it is also composed of ethical agents and experienced practitioners who want to comply with the NAR settlement. They do not view cooperative compensation as unlawful or as the fundamental problem — perhaps because they have not been explicitly informed that it is.
On the other hand, the second camp of Realtors, Group B, has chosen to no longer engage in cooperative compensation. For them, this traditional commission arrangement led to antitrust litigation with significant claims involving conspiracy and collusion, steering, and commission price-fixing.
Interestingly, even though a verdict and substantial judgment were handed down in the Sitzer | Burnett case — where a jury found these claims valid — not everyone in this camp might wholeheartedly agree with the allegations. But they know one thing: It doesn’t matter. The outcome is the same.
Cooperative compensation is now associated with unlawful conduct and, in their view, needs to end. Otherwise, the threat of further legal action and continued scrutiny from the U.S. Department of Justice (DOJ) will persist.
Importantly, despite NAR’s clarifications about the settlement and commission sharing, as discussed earlier, Group B is not taking any chances. They have chosen to stop engaging in cooperative compensation altogether, taking more far-reaching steps to effect change, largely because they recognize the associated risks.
Part of this broader strategy is closely tied to the DOJ’s stance — specifically, their public statements about decoupling commissions. The DOJ has made it clear that they do not want offers of compensation to appear anywhere, let alone on the MLS.
Additionally, consumer advocates are echoing these sentiments, urging sellers and listing brokers to avoid pre-determining buyer-broker compensation.
Essentially, the DOJ and consumer watchdog groups want buyers and buyer brokers to negotiate their own representation agreements and terms of compensation, separate from and uninfluenced by sellers and their representatives. This approach is being referred to as the “consumer-centric model,” which embraces competition, leaving no room for cooperative compensation.
Finally, Group B is very aware of the looming threat of future litigation. Some plaintiff attorneys have already warned Realtors that they are actively monitoring the situation for any deviations from the post-NAR settlement guidelines.
For all these reasons, this second camp of Realtors has opted out of historical commission arrangements that include cooperative compensation. Accordingly, this group has embraced new real estate forms that align with both the NAR settlement and a consumer-driven approach. As a result, cooperative compensation provisions are absent from these forms.
It’s worth pointing out that even though this camp believes in eliminating cooperative compensation, they have still managed to deploy different forms in their execution of the practice changes.
This actually brings us back to one of the original questions: Should listing agreements still have a buyer agent (broker) compensation field? Unfortunately, even though it should be, this is not a black-and-white question, even for Group B, and thus, we have seen a spectrum of agreements being developed and utilized by Realtors.
Some listing agreements focus on outlining a full menu of options for sellers: to offer buyer-broker compensation upfront, to entertain such offers during the contract process, or to opt out of offering buyer-broker compensation entirely. After all, it’s the seller’s choice — they are the principal, and the fiduciary (broker/agent) has a duty to follow their wishes.
In contrast, other agreements don’t mention buyer-broker compensation at all. This latter group may be encouraging the negotiation of any potential seller-paid buyer-brokerage compensation by the parties during the offer phase. More importantly, the removal of buyer-broker compensation fields from listing agreements may serve as the clearest indication of real change — or perhaps it’s simply effective risk management at this point.
Notably, if you are a salesperson, the forms you use will largely depend on which camp your brokerage supports, as well as their office policies and procedures. These factors, along with state jurisdiction, existing laws, and any government-mandated forms, will undoubtedly shape agents’ choices and practices, including whether their brokerage firms are still discussing cooperative compensation or if their listing agreements contain any buyer-broker compensation fields.
Having worked in some form of real estate compliance for 15 years now, I find it fascinating that brokerages are creating and relying on their own agreements or using non-association forms. This is not a common practice, as association membership and its accessible forms have always provided a more cost-effective and reliable option for brokers than hiring attorneys to draft their own documents.
However, as the central idea of this piece suggests, when things get gray, compliance can become complicated. In this case, some brokers decided to carve out their own unique course to ensure compliance.
In closing, the answers to this week’s questions — and the underlying crux of commission confusion — are simple: We need the gray to go away. Let’s establish clear black-and-white positions on the big issues. These very issues could lead to more lawsuits and their attendant repercussions.
I’d like to see the DOJ, NAR, the Federal Housing Administration, Fannie Mae, Freddie Mac, and other integral stakeholders come together to outline common objectives, resolve pressing concerns, and lay the practical groundwork for improving the industry — not only for the homebuying and homeselling public but also for real estate professionals.
Hard-working and thoughtful Realtors, committed to their fiduciary duties and proud of their profession, want nothing more than to stay on the straight and narrow. Compliance shouldn’t be this hard. Remove the gray, develop a clear set of directions, and set up practitioners — and the clients they serve — for success.
Note: Licensed real estate agents should always check with their responsible brokers for guidance, direction and policy regarding the new practice changes, and licensed real estate brokers would be wise to consult with a licensed attorney for legal clarification and support.
The opinions, suggestions or recommendations contained in this discussion are based on Summer Goralik’s experience working for, and knowledge of the laws enforced by, the California Department of Real Estate and must not be considered legal advice or relied upon as legal advice. You should consult with your brokerage, and/or appropriate legal counsel in your jurisdiction, for further clarification.
About the Author
Summer Goralik is a Real Estate Compliance Consultant and licensed Real Estate Broker (#02022805). Summer offers real estate brokers a variety of consulting services including assistance with California Department of Real Estate investigations and audit preparation, mock audits, brokerage compliance guidance, advertising review, and training. She helps licensees evaluate their regulatory compliance and correct any non-compliant activities. Summer has an extensive background in real estate which includes private sector, regulatory and law enforcement experience. Prior to opening her consulting business in 2016, she worked for the Orange County District Attorney's Office as a Civilian Economic Crimes Investigator in their Real Estate Fraud Unit. Before that, Summer was employed as a Special Investigator for the DRE for six years. Among many achievements, she wrote several articles for the DRE, four of which were co-authored with former Real Estate Commissioner Wayne Bell. Prior to her career in government and law enforcement, Summer also worked in the escrow industry for nearly five years. For more information about Summer's background and services, please visit her website.