The WRA Legal Hotline has fielded many questions about the National Association of REALTORS^®’ (NAR) proposed settlement agreement and its impact on Wisconsin real estate. This article provides information about WB form updates as well as guidance for policy letters and written showing/touring agreements. The information provided is based on interpretation of the proposed settlement agreement as of drafting. For further and updated information, see NAR’s FAQs.

WB forms updates  

Will the state-approved WB agency agreements be updated? 

Yes, as of May 30, the DSPS Real Estate Forms Advisory Council forwarded proposed changes to the Real Estate Examining Board (REEB) for approval, which was granted on June 13. The advisory council took the approach and made limited changes to assure compliance with the proposed settlement. The expected optional use date is July 1, 2024, and mandatory use date is August 15, 2024, for the listing contracts, buyer agency and tenant representation agreements, and the offers.

Given the multiple listing service (MLS) will no longer be a conduit of firm-to-firm compensation, references to offers of compensation via the MLS have been removed. The reference to cooperation in the MLS remains in the Seller Cooperating With Marketing Efforts section because the MLS will remain the mechanism for listing firms to offer cooperation to other firms.  

Listing agreements

The Marketing Provisions of the listings have been updated to allow the listing firm to advertise seller-offered concessions:

The Firm and its agents may advertise the following concessions, incentives, or special financing offered by Seller: _________________________________________.

To comply with the proposed settlement, the listings will also include the following note regarding seller-offered concessions:

NOTE: Concessions offered in the multiple listing service cannot be limited to or conditioned on the retention of or payment to a cooperating firm, buyer’s firm or other buyer’s representative. 

The provision in the Compensation to Others section makes clear that the firm disclosed that firm-to-firm compensation may be made off the MLS, and the seller approves such offers of compensation to cooperating firms:

The Firm has disclosed and Seller approves offers of compensation to cooperating firms working with buyers such as subagents and buyer’s firms: ____________________________.

To more closely reflect the language of the proposed settlement agreement, the following provision regarding the negotiability of commission rates has been updated. 

There is no standard market commission rate. Commissions and types of service may vary by firm. Commissions are not set by law and are fully negotiable. 

Buyer agency and tenant representation agreements

Three new notes were added to the Compensation section of the buyer agency and tenant representation agreements to facilitate consumer education. First in the Commission section, the following note is added: 

NOTE: A Firm may not represent that the firm’s services are free or available at no cost to their clients, unless they will receive no financial compensation from any source for those services. 

In the Other Compensation provisions, the prompt regarding compensation now includes “OTHER COMPENSATION.” The note that follows provides that compensation must be objectively ascertainable: 

OTHER COMPENSATION: ____________________________. [INSERT AMOUNTS AND TYPES OF OTHER COMPENSATION AND FEES (E.G., RETAINER, ADVANCE, HOURLY, ETC.) AND INDICATE WHEN DUE AND PAYABLE.] 

NOTE: The specific amount or rate of compensation must be objectively ascertainable (e.g., specific percentage of purchase price, flat dollar amount, hourly rate, etc.) Compensation may not be open-ended (e.g., buyer’s firm compensation shall be whatever the seller is offering to the buyer). 

Finally, in the Payment by Owner or Owner’s Agent section, the buyer agency and tenant representation agreements all include the following statement regarding the negotiability of commissions: 

There is no standard market commission rate. Commissions are not set by law and are fully negotiable. Commissions and types of service may vary based on the firm you hire.

Amendment to existing listings

If the firm entered into listings before the practice changes and MLS policy changes take effect, will the listings need to be amended? 

No. However, the firm shall provide sellers with new compensation disclosures. The WRA is currently working to create a form to facilitate the needed changes.

Policy letters 

Once offers of compensation are removed from the MLS, may the firm enter into a standing policy letter with other firms?

No. Firm-to-firm compensation agreements will need to be negotiated on a transaction-by-transaction basis. Creating a standing policy letter would contradict the provisions of NAR’s proposed settlement agreement. 

As part of the proposed settlement terms, a listing firm must conspicuously disclose to sellers, and obtain seller approval, for any payment or offer of payment that the listing firm or seller will make to another firm acting for buyers. This disclosure and seller approval must be in writing and must be provided in advance of any payment or agreement to pay another broker acting for buyers, and this disclosure must specify the amount or rate of any such payment.

This disclosure to sellers, such as in a listing contract, must be provided in advance of any agreement to pay a cooperating firm, such as a compensation agreement or policy letter agreement between firms. The underlining is added to emphasize the language that disclosure and seller approval of any offer of compensation to be made by the listing firm or the seller must occur prior to any agreement between firms regarding the compensation.

An existing compensation agreement, especially a standing compensation agreement, would be considered an agreement that was entered into before any offer of compensation was disclosed to and approved by a seller and would be a violation of the terms of the NAR proposed settlement agreement. This disclosure requirement does not technically go into effect until August 17, 2024, but some firms may be implementing the practice earlier than required.

Going forward, this may mean, for example, that firms may enter into a separate compensation agreement for an individual transaction after the property is listed, assuming offers of compensation to be made by a listing firm are disclosed and approved by the seller in the listing contract.

Written showing/touring agreements 

The agent understands that showing a home to a buyer may require a touring or showing agreement. Does each firm need to draft such an agreement? If an agent hosts an open house or acts solely as an agent of the seller, is this agreement needed?

The WRA is currently drafting a Pre-Agency Showing/Touring Agreement for use when a licensee is acting in pre-agency. Alternately, each firm may draft its own agreement. A licensee working only as an agent or subagent of the seller would not need to provide the potential buyer with a written showing agreement because the agent is not working for the buyer. In such scenarios, the written touring agreement is not required because the participant is acting on behalf of the seller or the listing agent as a subagent of the listing firm and not the buyer.

Antitrust resources

For more details about NAR’s proposed settlement agreement, visit the WRA’s antitrust resource webpage to see WRA and NAR resources.