A HomeServices of America Inc. brokerage in Iowa is refusing to split commissions with buyer’s agents at a competing brokerage, and is paying reduced commissions to agents at another.

The move by Des Moines-based Iowa Realty has raised eyebrows, but does not violate local Realtor association or multiple listing service (MLS) rules, those involved say.

By LISA WAHLGREN

A HomeServices of America Inc. brokerage in Iowa is refusing to split commissions with buyer’s agents at a competing brokerage, and is paying reduced commissions to agents at another.

The move by Des Moines-based Iowa Realty has raised eyebrows, but does not violate local Realtor association or multiple listing service (MLS) rules, those involved say.

Iowa Realty, which is owned by Berkshire Hathaway affiliate HomeServices of America, has notified Keller Williams Greater Des Moines that it won’t split commissions with Keller Williams agents representing buyers of resale properties listed by Iowa Realty.

Iowa Realty — the largest brokerage in the state, with more than 65 offices and 1,000 agents — has also informed Exit Realty North Star that it will pay its agents only 80 percent of the commission it pays to agents with other brokerages.

Both brokerages singled out by Iowa Realty had long operated in the Des Moines market as independents, before affiliating with franchisors in recent months.

Clive-based Keller Williams Greater Des Moines is the product of a March merger with Burnett Realty, an independent brokerage founded 12 years ago. Founder Doug Burnett remained with Keller Williams as an investor, while Kacy Bell took over as operating principal of the 37-agent firm.

Norwalk-based Exit Realty North Star, which opened its doors in 1963 as Darwin Smith Realty, affiliated with Ontario, Canada-based franchisor Exit Realty in October, broker-owner Jon Niemeyer said.

"We’re one of the oldest companies in the Des Moines market. We purchased the Exit Realty franchise last October, and changed our name," Niemeyer said. "I believe that’s what prompted Iowa Realty to change our commission structure."

Bell and Niemeyer said their agents will continue to show buyers homes represented by Iowa Realty, and to pay full commisssion splits to Iowa Realty agents representing buyers who purchase listings their firms represent.

"I dont see we have any choice," Niemeyer said of his five-agent firm. "When we’re working with a buyer, it’s what they want to see, and what’s best for them," that determines which homes to show. "It might be an Iowa Realty listing, but that’s OK."

"We are truly looking for solutions and wanting to do the right thing," Bell said. "Our intention is to be a great competitor in the market, and we feel that Iowa Realty’s position is not in the best interest of clients in Iowa."

In a written statement, Iowa Realty did not specifically address its position toward Exit Realty North Star. But Iowa Realty claimed it was subjected "to dozens of subversive and distracting tactics" for six years by Keller Williams as the company considered entering the Des Moines market.

The unspecified tactics employed by Keller Williams "extended well beyond what is generally accepted as industry practice," Iowa Realty said, and were intended "to create a certain level of disruption" in the industry.

Iowa Realty said it alerted Keller Williams first in 2006 and again in 2011 "that we would not tolerate their methods and would not enter into a full commission-sharing agreement with them. Our position has been crystal clear, and we have been honest and consistent in our communications with them on the matter."

Austin, Texas-based franchisor Keller Williams Realty Inc. denied Iowa Realty’s allegations, and claimed the HomeServices of America brokerage had implemented similar measures against other competitors in the past.

Keller Williams Realty opens offices "in markets where there is interest and opportunity to deliver our value proposition," the franchisor said. "When we enter a new market, it is up to each individual agent, broker and owner to choose the company that is right for them. And we are fortunate that so many talented real estate professionals in the Des Moines area have chosen to join our company. Absolutely no part of our expansion into Des Moines was subversive."

In the past, Iowa Realty "has withheld commissions from agents associated with other real estate firms, including Re/Max, Coldwell Banker and Exit Realty," Keller Williams said. "In addition, companies outside the brokerage community, including banks and builders, have come out to disallow Iowa Realty’s policies in transactions in which they are involved."

Iowa Realty maintains that it sees commission sharing "exactly as it is meant to be — an agreement between brokers to cooperate. It is not an inherent right of every broker that enters the market to share commission with all brokers established in the market. Iowa Realty is happy to cooperate with companies that enter a market with honesty and transparency. As such, we share with 99 percent of the MLS."

Co-brokerage, or cooperation between real estate brokers representing sellers and buyers, is a cornerstone of the MLS system. In most markets, when listing brokers list homes for sale in the MLS, they make an offer of compensation to any broker who can bring a buyer to a sale — typically 50 percent of the commission paid by the seller.

The system provides an incentive for brokers and their agents to show their clients all of the homes that are for sale in a given market — not just those they represent — while preserving the ability of listing brokers to earn a commission for their efforts in marketing a property, even if it’s another broker’s agent who brings a buyer to the sale.

Niemeyer said Iowa Realty’s conduct is permitted under MLS rules. As long as brokerages provide advance written notice to other brokers, they may deviate from the offer of compensation made to other brokers through the MLS.

Officers of the MLS, which is operated by the Des Moines Area Association of Realtors, did not respond to requests for comment.

Exit Realty North Star received written notice from Iowa Realty in December that it would pay the brokerage’s buyer’s agents 80 percent of the commission split paid to those with other firms, Niemeyer said.

Since then, Exit Realty North Star agents have represented four buyers who purchased listings represented by Iowa Realty — nearly 15 percent of the sales the firm’s agents were involved in. No other outside brokerage represented a bigger share of the firm’s business, Niemeyer said.

Susan Sanders, a 15-year real estate industry veteran who left Iowa Realty to join Keller Williams Greater Des Moines, said no complaints concerning Iowa Realty’s commission policy have been filed with the state real estate commission, on which she serves. Sanders said it’s an issue that would be "left to others."

"This policy is certainly not serving buyers and sellers, and in a market where we are finally starting to see so much vitality, we don’t want to see anything get in the way of that," Sanders said.

The Des Moines Area Association of Realtors has also been quiet on the commission-split controversy. Ken Clark, association president and a Coldwell Banker agent, told Inman News last month that he had "no knowledge of the situation. I’ve only heard rumors." He added, however, "This is not the first time that Iowa Realty has used an adverse commission split. It has not been sustained in the past, and I don’t believe it will be sustained this time."

In a market that’s been on a sharp upswing since November 2011, with a 20 percent spike in sales activity this April over the same month last year, the vibe is generally upbeat and the industry tends to be OK with newcomers.

"I completely welcome anyone coming to town," said Julie Baudler, a Coldwell Banker agent and one of Des Moines’ top producers. "I just did a deal with an amazing Keller Williams agent. They were amazing agents when they were with Burnett Realty and now they are amazing with Keller Williams."

Joe Henry, also with Coldwell Banker, concurred, saying Keller Williams’ entry into the market is a positive sign. "The more the merrier," he said.

"More agents represent more opportunity to encourage sellers to sell and buyers to buy," said Henry, who has more than 50 active listings and is among the top producers in the city. Of Iowa Realty’s stance toward Keller Williams, Henry said, "I’ve heard something about that, and it doesn’t really make sense. Each brokerage has a different way of doing things, but I don’t think this can be sustained. It could lead to a slippery slope of exclusive listing arrangements, which you can’t do in a free market, and what we want is a free flow of business."

Carol Lynner of Prudential First Realty, also among the city’s top echelon of agents, was skeptical about Keller Williams prospects for success in the Des Moines market. "We have a core of really good companies, and agents don’t tend to leave where they are," Lynner said.

With 100 agents serving the Des Moines metro area in four offices, Prudential First Realty is, like Iowa Realty, a HomeServices of America company.

As a "sister company" to Iowa Realty, Lynner said Prudential First agents also have access to the company’s retirement plan, and "it’s hard to leave that. The history and strength of the other companies here is so strong that I just don’t think that Keller Williams, which took over a brokerage that was not doing that well, is going to catch on. Most agents are happy where they are."

But Brian Wentz, team leader of the new Keller Williams Greater Des Moines office, couldn’t disagree more. "Keller Williams has brought a business model and an electricity that this market has been lacking," he said. "It’s amazing to see agents cue into that and start to take their careers in a new direction."

Citing the current interest among agents in signing on with Keller Williams, Wentz added, "It’s going to be big. The market is going to look back on Keller Williams coming to town as a before-and-after moment."

Lisa Wahlgren is a freelance writer living in Texas. She can be reached at lwahlgren@austin.rr.com.

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