Hot Topics in Broker Risk Reduction

November 2023 | NAR Legal Affairs

Fostering Consumer-Friendly Real Estate Marketplaces

Formerly Competition in Real Estate

REALTORS® help foster competition through their participation in local MLS broker marketplaces. These marketplaces help create highly competitive real estate markets that are friendly to small businesses and new market entrants. REALTORS® work together for the benefit of consumers and help ensure buyers and sellers have the greatest access, transparency and choice in their homeownership journeys. As a result, brokerages of all sizes are able to compete and provide their services to consumers, who in turn have the freedom to choose between different service models and pricing that best meet their needs.


Call to Action

  1. Use buyer representation agreements and continue to have transparent conversations with consumers about the services buyer agents provide and how they are paid.
  1. Educate consumers, policymakers, media and other interested third parties about how local MLS broker marketplaces work, and how they promote equity, transparency and market-driven pricing options for consumers.
  1. Promote consumer understanding about the value REALTORS® bring to the transaction, how REALTORS® serve as champions in their communities and as advocates for private property rights.
  1. Use the fact sheets, FAQs, articles, infographics and other resources on Fostering Consumer-Friendly Real Estate Marketplaces to promote the value of local MLS broker marketplaces and how they work in the best interest of consumers.


Fostering Consumer-Friendly Real Estate Marketplaces

A resource for REALTORS®, consumers, media, academics, experts on competition, and anyone that wants to know more about how competitive and consumer-friendly local broker marketplaces —another name for MLSs—are, and the critical role NAR members play in advancing consumers’ interests. Consider this a go-to source to access a host of resources to facilitate conversations with consumers and other interested third parties about the local broker marketplaces, competition, the REALTOR® value. In addition, find the latest developments on legal and other challenges facing the industry.

Agen Showing Couple Homes on Laptop

Use and share this website to access information and facts about how real estate commissions work, and why the listing broker paying the buyer broker a commission underpins the local broker marketplaces, and enables efficiency, effectiveness and accessibility for all homebuyers, and especially first-time, low- and middle-income buyers.


Understanding the principles of antitrust law is critical for both brokers and agents, not only to protect the brokerage from costly antitrust claims, but to best serve consumers in their homeownership journey. Keep in mind that brokers may be held liable for the anticompetitive behavior of their salespeople and staff, so having an antitrust compliance program in place to educate and train staff is important. Business decisions should always be made unilaterally and independently, and never as a result of an agreement, understanding or conspiracy among competitors. Any agreement to fix prices is prohibited, and real estate professionals should never agree, expressly or implicitly, with their competitors about matters such as the commission rate charged to consumers or the cooperative compensation they will offer to MLS participants. Similarly, brokers should never agree with other competitors to refuse to deal–or to only deal on certain terms–with another competitor or business. Avoid discussions with competitors about how to do business with other competitors altogether.

Risk Reduction Tips

  1. Always make pricing decisions unilaterally and independently; avoid discussing pricing or compensation with other brokers.
  2. Never discuss or agree with competitors to boycott or refuse to deal with another broker or business.
  1. Do not agree with competitors to divide up markets, customers or practice areas. Such market allocation agreements are generally illegal.
  2. Implement a written antitrust compliance program and regularly educate salespeople and staff about antitrust laws.
  1. Never contribute to anticompetitive discussions - whether in-person or online. If you find yourself in a meeting or conversation where anticompetitive behavior occurs, make your objection clear by leaving the meeting and ask that your objection be recorded in the minutes or document it in a follow-up email.


From the REALTOR® Store

From the Handbook on Multiple Listing Policy

Cybercrime and Wire Fraud

Cybercrime continues to be a top concern in the real estate industry. In 2022, the FBI Internet Crime Complaint Center (IC3) reported a significant increase in total victim losses of $10.3 million, a 49% increase from 2021.

The Top Scams Facing Consumers & Businesses in the Real Estate Industry Are:

  1. Phishing/Vishing/Smishing/Pharming whereby fraudsters use unsolicited emails, text messages and phone calls from a purportedly legitimate company to obtain personal, financial and login credentials;
  2. Wire Fraud is carried out by fraudsters compromising email accounts to effectuate fraudulent fund transfers; and
  3. Ransomware where cybercriminals install malicious software that locks users out of their systems or encrypts data making it inaccessible unless a ransom payment is paid.

FinCEN’s Financial Trend Analysis report on business email compromise in real estate underscores that real estate continues to be an attractive target for cybercriminals to exploit the high monetary values generally associated with real estate transactions. According to the report, FinCEN found that 37 percent of fraudulent wire instruction emails impersonate the title/closing entity, and 23 percent of such emails impersonate a real estate professional in the transaction. Real estate professionals should be aware of the risks facing not only their businesses, but also consumers, and educate staff and clients about preventative steps they can take to prevent falling victim to cybercrime.

Risk Reduction Tips

  1. Train staff educate to be suspicious before clicking on unknown links or attachments.
  2. Routinely patch and update business software and equipment.
  3. Distribute consumer information and remind consumers throughout the transaction about the threat of wire fraud and to always verify any wire or payment instructions with a known contact before sending any money.
  1. Use multifactor authentication and require passwords to be updated regularly.
  2. Backup data and files regularly, following the 3-2-1 backup strategy; 3 copies of the data in 2 different formats with 1 copy stored off-site.
  3. Require vendors to adhere to good cybersecurity practices, and obtain assurances in contracts.
  4. Immediately report any suspected cyber crime incident by filing a report at, to the local FBI office, and local law enforcement.


Avoiding Wire Fraud in Transactions
October 1, 2022

Learn about recent cyber scams and best practices for helping you and your clients avoid becoming victims of wire fraud.

Cybersecurity: What You Need to Know
September 28, 2020

Learn about the importance of cybersecurity and what members can do to continue working smart while staying safe and preventing attacks.

Emerging Tech Episode 3: Ransomware
November 5, 2020

In the 3rd installment of the Emerging Tech Series, David Conroy & Dan Weismann discuss Ransomware with NAR REACH's Bob Gillespie & Kia Nejatian.

Cyber and Fidelity Insurance Report
May 16, 2017

Real estate transactions are a target for sophisticated fraud scams. When frauds succeed, all service providers are potential litigation targets.

Artificial Intelligence

Generative artificial Intelligence (AI) has become a game-changer for the real estate industry in the past year, offering a wide range of capabilities to improve efficiency and productivity. AI platforms can create listing descriptions, property searches, social media posts, marketing content, and more. However, understanding the risks of using AI is critical to avoid ethical issues and potential legal liability. AI platforms are not 100% accurate and its output may not comply with fair housing laws.  REALTORS® remain responsible under Articles 2 and 12 of NAR’s Code of Ethics to ensure their representations and communications are honest, truthful and avoid exaggerating, misrepresenting or concealing pertinent facts.

Risk Reduction Tips

  1. Always review AI-generated content for accuracy.
  2. Protect personal information from being shared with an AI platform. Information provided to a generative AI platform is used to train the AI for future interactions, so personal information you input may not remain private.
  1. Do not use AI to create content you wish to copyright, as AI-generated works are not protectable under U.S. Copyright law.
  2. Avoid using AI to draft contracts, modify standard forms, or provide legal advice to clients. Instead, seek appropriate advice from actual professionals.


Start Experimenting With AI Now
May 10, 2023

Generative tools are being added to programs you use, and they’ll enable your work in ways you can only begin to imagine.

2023 PropTech Forecast: Generative AI
April 7, 2023

Expert panelists discuss ChatGPT and AI’s potential to streamline the real estate industry from lead generation, customer engagement, and transaction.

Copyright Infringement

Copyright law affects multiple aspects of the real estate business, and it is easier than ever for copyright owners to discover unauthorized uses of their works. Therefore, it is important for real estate professionals to understand the basics of copyright and how to avoid infringing another person’s work. To avoid costly copyright infringement demands, real estate professionals should be sure to obtain permission to use any third-party work, the terms of the license to avoid copyright infringement and keep records to easily confirm rights as needed. Many of the most common activities performed by real estate professionals can create some risk of copyright infringement, including:

  1. Floorplans: A federal court recently found brokerages’ use of independently created floorplans in their listings to be a fair use of copyrighted architectural drawings of a home. The Designworks decision provides a clear roadmap for brokers facing allegations that their creation or use of floorplans infringes copyrights in underlying home designs and will hopefully deter other home designers from pursuing similar claims.
  2. Photos: Be sure to confirm that any rights received align with the current and planned use of photographs or other third-party work before using it, including on a website, in the MLS, and marketing materials. 
  3. Music: Real estate professionals should also ensure proper rights to any music used at live events, such as an open house, and before incorporating into recordings. Keep in mind that specific types of licenses must be obtained before incorporating music into a video recording. 
  4. Websites: Real estate professionals should comply with the Digital Millennium Copyright Act safe harbor to reduce the risk when third parties post on their websites, including photos and music that appear through an IDX displays.

Risk Reduction Tips

  1. Obtain ownership or a broad exclusive license for photographs.
  2. Secure a performing rights license to play music at a live event and a synchronization and mater recording license before incorporating music into a video, such as a listing video. Be sure to understand the rights granted in license agreements and consider any future use of copyrighted material when securing the license.
  1. Comply with the Digital Millennium Copyright Act safe harbor.
  2. Keep records of license agreements to easily confirm rights, if challenged.


Listing Photo Sample Agreements

NAR Legal Affairs has created sample agreements: Work Made for Hire Agreement, Assignment Agreement, and Exclusive License.

Who Owns Your Property Photos?
November 9, 2016

Learn how to reduce your risk of copyright infringement in listing photographs. Download sample agreements to help protect you from risk.

Vacant Land Scams

Vacant land scams have proliferated in recent months. Scammers posing as property owners target lien-free vacant land and unoccupied properties, tricking a real estate professional into listing the property for sale. In a “too good to be true” scenario, the seller asks to list below market value and wants a quick sale, preferably for cash. Communication is by text or email and the seller wants a remote closing, as they’re out of state or the country. These scams defraud innocent buyers and can result in liability for unwary agents. State regulators may take action against a licensee for negligence in failing to exercise due diligence to verify the seller’s identity and ownership interest. 

Risk Reduction Tips

  1. Look out for red flags when approached to list a vacant parcel or unoccupied property, such as insisting on a quick sale and all-cash buyers, accepting less than market value, and refusing to meeting in person or by videoconference.
  2. Exercise due diligence to verify the purported seller is the actual property owner, which may include sending a certified letter to the owner’s address of record on file with the county recorder.
  3. Conduct independent research to confirm the property owner, such as looking online for a recent photo or speaking to a neighbor.
  1. Make sure you or the title company select the remote notary at closing.
  2. Report a suspected vacant land scam to local law enforcement and file a complaint at
  3. Remove the listing from the MLS and take down any advertisements quickly.


Fair Housing

Fair housing laws prohibit a refusal to rent or sell real property based on a protected characteristic. The federal Fair Housing Act (FHA) includes characteristics of race, color, religion, sex, familial status, and national origin. New state laws regulating foreign ownership of real property raise concerns about potential FHA liability, because they may cause sellers and landlords—and the real estate professionals who work with them—to discriminate on the basis of national origin or race or adopt practices that have a disparate impact based on national origin or race. During the first six months of 2023, at least 15 states enacted legislation regulating foreign ownership of real property, and state lawmakers in more than 20 other states introduced bills that would regulate or restrict foreign ownership of real property if November 2023 Page 7 enacted. Some states enacted information-gathering laws that mandate disclosure of foreign ownership of U.S. land, while others directly prohibit certain transactions and may require divestiture of foreign-owned land.

The FHA declares invalid “any law of a State” that permits or requires a discriminatory housing practice, but whether courts will find these laws require discriminatory housing practices remains to be seen. In Florida, a group of plaintiffs are challenging a newly-passed statute that prohibits foreign principals domiciled in China from purchasing any real property in the state, alleging in part that the statute violates the FHA’s ban on national origin discrimination. The court recently rejected plaintiffs’ motion for a preliminary injunction that would block enforcement of the statute, finding in part that plaintiffs did not show likelihood of success on their FHA claim as the ban relates to alienage—whether a person is a citizen of the U.S.—not national origin. The case is currently on appeal to the Eleventh Circuit Court of Appeals.

Risk Reduction Tips

1. Continue following best practices when faced with discriminatory clients:

  • Remind clients of their obligations under the Fair Housing Act, and of your policy not to discriminate.
  • Discontinue representation of any client who has made a statement or taken an action in violation of fair housing laws.
  • Report the situation to your broker.
  • Document the situation in writing, including what actions you took in response to your client’s violations.
  • If you are unsure whether a client’s actions violate fair housing laws, consult with an attorney.
  1. Be consistent and objective if you implement additional documentation requirements or screening questions in response to these laws; ensure that all prospective buyers are required to respond.
  2. If you choose to provide clients with notice of these laws, the notice should be clear that it is merely providing notice of requirements recently imposed by state law. The notice should also directly quote, rather than paraphrase, the relevant provisions of the law.
  3. Incorporate regular implicit bias and fair housing compliance into your ongoing training plans.


The AHWD Certification

The AHWD certification will teach you how to apply fair housing laws in your business and work in the increasingly multicultural real estate market.

Fair Housing Declaration

Print a copy of the REALTOR® Fair Housing Declaration and post it in your office and/or association.

Independent Contractor Status

The ability to work as an independent contractor is recognized and protected under many state and some federal laws. The risk of misclassification poses a challenge for brokerages, particularly with the proliferation of teams, where team leads may want to dictate how team members manage their tasks and time. While there is often an inherent conflict between common law independent contractor status and the traditional classification of real estate salespeople as independent contractors, some state statutes expressly address the unique status of real estate agents, permitting classification as independent contractors despite the required control and supervision the broker has over the licensees. For example, in 2022, New Jersey amended its real estate brokerage law to retroactively exclude real estate salespersons from the state wage law, which uses the “ABC test” to classify workers. In addition, a recent California appellate decision affirmed a salesperson’s ability to choose to be an independent contractor, citing a 3-part test found in the state business licensing code.

However, litigation and new federal and state legislation continue to threaten workers’ ability to be classified as independent contractors, including many real estate professionals. In October 2022, the U.S. Department of Labor (DOL) issued a proposed rule to update the test for determining whether a worked is an employee or independent contractor under the Fair Labor Standards Act. The proposed rule does not impact real estate professionals’ explicit protection in the Internal Revenue Code (IRC), but NAR has advocated that the DOL incorporate the IRC provision, and made other suggested changes for the DOL’s consideration that would better recognize the real estate broker-agent relationship and state laws to ward off litigation or similar state measures.

Risk Reduction Tips

  1. Know your state law regarding independent contractor classification of real estate licensees. Statutes protecting this classification are the strongest defense to a legal challenge.
  2. Always have a written independent contractor agreement and consider including a mandatory arbitration and class action waiver provision in such agreements.
  1. Don’t mandate meetings, administrative office duties, or use of certain tools.
  2. Allow salespeople to work where, when, and how they deem best.

Additional Resource: Independent Contractor State Law Survey


Legal Issues for Teams
December 1, 2022

Learn what common legal issues should be addressed by real estate teams, and the brokers who supervise them.

TCPA & DNC: Texting and Calling

Plaintiff lawyers have created a lucrative business model filing class action lawsuits alleging real estate professionals have violated the Telephone Consumer Protection Act (TCPA) and Do Not Call (DNC) laws by sending text messages and placing phone calls without the recipient’s consent. Specifically, the TCPA requires prior express written consent before using an automatic telephone dialing system (ATDS) to place telemarketing calls or texts to wireless numbers.

The United States Supreme Court has narrowly defined the Ninth Circuit Court of Appeals and narrowly defined the TCPA’s ATDS definition to require that the call technology not only store or dial numbers, bust actually use a random or sequential number generator to place the calls. Thus, calls using random or sequential number generators still require prior express written consent, which involves a signed agreement clearly and conspicuously disclosing the text recipient’s permission to receive call and text messages from the sender. Now it is clear that calls generated individually - not using a random or sequential number generator - need not obtain prior consent at all, even if the device has the ability to store and dial call lists. Keep in mind that DNC laws should always be followed, which prohibits individuals from contacting phone numbers contained in the DNC registry.

In response to the U.S. Supreme Court’s decision, several states have enacted so-called “mini-TCPA” laws which change the ATDS definition and provide additional restrictions on telemarketing calls and texts. In some states, the requirement for express written consent has been expanded to include any calls made using an automated dialing device or artificial voice message, not just random or sequential numbers. States have also adopted additional restrictions on the times in which such calls can be made as well as specifying the content and timing of required disclosures during a telemarketing call. These mini-TCPA laws apply to calls made within and to consumers located within the applicable states, and could provide the setting for the next wave of litigation on this issue as state courts tend to be more consumer-friendly.

Risk Reduction Tips: TCPA

  1. Consent is the gold standard to avoid TCPA liability and must be obtained before using technology that employs a random or sequential number generator.
  2. Include language on consent forms stating that recipients who submit wireless numbers agree to receive calls and text messages from or on behalf of the sender.
  1. Allow recipients to easily cancel or opt-out (e.g., by responding “STOP” or “UNSUBSCRIBE”). Promptly remove individuals from messaging lists who have opted out. Maintain an opt-out record, including the date the person opted-out and the date the person was removed.
  2. Talk to your vendors about TCPA and DNC compliance and indemnification.
  3. Consult counsel regarding the applicability and requirements of any applicable “mini-TCPA” laws.

Risk Reduction Tips: Do Not Call

  1. Create an office policy for compliance with DNC rules and implement a method to monitor ongoing compliance.
  1. Obtain an updated DNC list monthly and cross reference with your company customer relationship management platform.

Additional Resources


Window to the Law: TCPA and Texting
April 4, 2018

In this edition of Window to the Law, brokerages can learn how to legally text clients under the Telephone Consumer Protection Act.

TPCA Update on Cell Phone Marketing
May 3, 2021

Real estate professionals may more freely use their cell phones for marketing purposes thanks to a recent U.S. Supreme Court decision.

Real Estate Brokerage Essentials®

Available from the REALTOR® Store, this comprehensive tool helps brokerages navigate important issues while minimizing legal risk.

Real Estate Brokerage Essentials

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Member Price: $32.95 

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