Concerns and Guidance Regarding NAR Rule 58
Concerns and Guidance
Regarding NAR Rule 58(ii) and Rule 58(iv)
By Charles Jones
We address the recent implementation of rules 58(ii) and 58(iv) by the National Association of Realtors (NAR), focusing on their potential legal implications for real estate agents and brokers. These rules may significantly impact agents’ operations and could expose them to legal risks. Specific guidance is provided on navigating these challenges to mitigate liability and ensure compliance with broader legal and market standards.
Analysis of NAR Rule 58(ii) and Alternatives for Compliance
Rule 58(ii) Overview:
Rule 58(ii) prohibits sellers from advertising seller-paid compensation on MLS platforms. This rule could restrict agents' ability to fully market their listings and potentially conflict with sellers' interests by limiting the visibility of competitive compensation offers to buyer agents.
Legal Risks and Agent Guidance:
Agents are advised to consider alternative listing systems that do not impose such restrictions and allow for the advertisement of any seller-offered compensation. This approach would enable agents to fulfill their fiduciary duties to sellers by ensuring that listings are marketed effectively and competitively.
Recommendation:
Agents should explore and, if feasible, transition to listing platforms that offer greater flexibility in advertising compensation. This will not only help in aligning with sellers' best interests but also safeguard agents from potential lawsuits claiming inadequate marketing of properties.
Analysis of NAR Rule 58(iv) and its Enforcement Concerns
Rule 58(iv) Overview:
Rule 58(iv) mandates that agents cannot show properties unless potential buyers sign an agency agreement. This requirement could be viewed as coercive and potentially discriminatory, as it forces a commitment from buyers before they can engage fully in their property search.
Legal Warning for Agents:
Agents are advised to exercise caution regarding the enforcement of Rule 58(iv). Insisting on an agency agreement before showing properties may be perceived as limiting the buyers' freedom to choose representation freely and could lead to allegations of coercion.
Recommendation:
To avoid potential legal entanglements and accusations of anti-competitive behavior, agents should consider providing buyers with the option to view properties without the precondition of signing an agency agreement. This practice not only respects buyers' autonomy but also aligns with ethical business practices, reducing the risk of legal challenges.
Conclusion
The enforcement of NAR’s rules 58(ii) and 58(iv) poses significant legal and ethical challenges for real estate agents. To mitigate these risks, agents are encouraged to adopt more flexible and open practices that prioritize the interests of both buyers and sellers. By doing so, agents can better protect themselves from potential litigation and contribute to a fairer and more competitive real estate market.
Guidance Summary:
For Rule 58(ii): Agents should seek alternative listing services that allow for the open advertisement of seller-paid compensation.
For Rule 58(iv): Agents should provide options for buyers to view properties without the necessity of signing an agency agreement beforehand.
