According to the NAR settlement, buyer brokers cannot:
Audio Lesson
Duration: 2:44
Question & Answer
Review the question and all answer choices
Represent buyers in transactions
A is incorrect because buyer brokers can absolutely represent buyers in transactions. This is their primary function and a fundamental aspect of real estate brokerage. The settlement doesn't restrict their ability to represent buyers but rather places limitations on how they can be compensated.
Receive compensation higher than the amount specified in the buyer agreement
Work with multiple buyers at once
C is incorrect because buyer brokers routinely work with multiple buyers at once through proper buyer representation agreements. The NAR settlement doesn't limit the number of clients a broker can represent simultaneously.
Negotiate on behalf of their clients
D is incorrect because negotiating on behalf of clients is a core function of buyer representation. The settlement doesn't restrict this fundamental brokerage activity but rather addresses compensation practices.
Why is this correct?
B is correct because the NAR settlement specifically prohibits buyer brokers from accepting compensation that exceeds the amount specified in their written buyer representation agreement, regardless of what a seller might offer. This prevents potential conflicts of interest where brokers might prioritize higher commissions over their clients' best interests.
Deep Analysis
AI-powered in-depth explanation of this concept
This question addresses a significant change in real estate brokerage practices following the NAR settlement, which fundamentally altered how buyer broker compensation is handled. The core concept revolves around the limitations on buyer broker compensation as stipulated by the settlement. To arrive at the correct answer, we must understand that the NAR settlement specifically addresses compensation practices that potentially inflated home prices. Option B correctly identifies that buyer brokers cannot receive compensation exceeding what's specified in their written buyer representation agreement, even if a seller offers more. This restriction prevents buyer brokers from potentially inflating prices to secure higher commissions. The question is challenging because it requires knowledge of recent regulatory changes rather than traditional real estate principles. Many students might confuse this with traditional dual agency or commission splitting concepts. This connects to broader real estate knowledge about agency relationships, disclosure requirements, and the evolving nature of real estate regulations following antitrust litigation.
Knowledge Background
Essential context and foundational knowledge
The NAR settlement refers to the 2024 agreement resolving antitrust litigation that alleged the National Association of Realtors and brokerages artificially inflated home commissions. A key provision requires buyer brokers to have written representation agreements before showing properties and prohibits them from accepting compensation exceeding the agreed-upon amount, even if a seller offers more. This change aims to increase transparency in the homebuying process by eliminating the potential for buyer brokers to push for higher prices to increase commissions. The settlement represents a significant shift in traditional real estate compensation practices that had been in place for decades.
Think of buyer broker compensation like a fixed-price menu item. The buyer agreement sets the price (like a menu), and even if the restaurant (seller) offers to pay more for a popular dish, the chef (buyer broker) can only accept the menu price.
When encountering questions about NAR settlement limitations, visualize this menu analogy to remember that compensation is fixed by agreement, not variable based on seller offers.
For NAR settlement questions, focus on compensation restrictions rather than agency relationships. Remember: buyer broker compensation cannot exceed their written agreement amount, regardless of what's offered by sellers.
Real World Application
How this concept applies in actual real estate practice
A buyer, Sarah, is working with Agent Mike under a written buyer representation agreement that specifies a 2.5% commission. Sarah finds a home listed for $400,000. The listing agreement shows the seller is offering 3% commission to buyer brokers. Under the NAR settlement, Agent Mike cannot accept the additional 0.5% commission even though it would mean more money for him. He must honor the terms of his agreement with Sarah, which protects her from potential conflicts of interest and ensures his loyalty remains focused on her best interests rather than maximizing his compensation.
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