Perhaps attempting to get ahead of looming outside forces, broker-owned multiple listing service Northwest MLS is changing its rules to allow the public display of buyer broker commissions, starting October 1.
The rule changes allow NWMLS’s 30,000 agent and broker subscribers to publish the amount of commission the seller is offering a buyer’s broker on the subscribers’ websites along with other listing details.
Subscriber firms who syndicate to third-party websites such as Zillow and realtor.com will also be able to include this information, known as the selling office commission (SOC), in feeds to those sites for public display. NWMLS does not syndicate directly to any third-party sites.
“Making this information readily available to consumers will allow for complete transparency with regard to buyers’ broker’s compensation and provide consumers with additional information at the outset of the transaction,” NWMLS said in a press release.
This represents a sharp break from current practices among the 600 or so MLSs nationwide, some of whom have threatened to cut off brokerages who have attempted to publicly display commissions.
Most MLSs, unlike NWMLS, are owned by Realtor associations and National Association of Realtors’ policy allows, but does not require, association-owned MLSs to prohibit display of compensation offered to buyer brokers. Most, if not all, do.
NWMLS declined to comment on whether its status as a broker-owned MLS means that it is easier to make these changes than if NWMLS were Realtor association-owned.
To NWMLS’ knowledge, no other MLS is allowing the public display of commissions, a spokesperson told Inman via email.
“Consumers want greater transparency and flexibility in the home buying and selling process,” said NWMLS CEO Tom Hurdelbrink in a statement.
“We believe these changes encourage member real estate firms to continue to innovate and evolve their business models to better serve consumers.”
NWMLS has also removed a requirement that a seller offer a buyer broker commission when listing a property for sale.
“Letting brokerage websites publish the commission that a homeowner is offering the buyer’s agent will show everyone all the incentives at work in a home sale and make it easy for agents to explain the costs of our services,” Redfin CEO Glenn Kelman said in a statement.
“And being explicit that a listing can offer buyers’ agents any commission or now even no commission will assure consumers and agents alike that Seattle’s real estate market is wide open for competition.
“We’re proud that the broker-owned NWMLS has again led the way in promoting a fair marketplace for brokers large and small, and in giving real estate consumers here more information than people have anywhere else in the world.”
According to NWMLS, subscribers will receive the SOC information in their IDX feed and it will be up to the subscriber whether to display it or not on the subscriber’s site.
“Brokers cannot opt out of having the SOC from that broker’s listings displayed on another member’s IDX site,” the spokesperson said.
Other MLSs could follow NWMLS’s lead. Real estate commissions have been under increasing scrutiny in the past year. First, they attracted an unexpected amount of attention at a real estate competition workshop held in June 2018 by the Federal Trade Commission (FTC) and the U.S. Department of Justice (DOJ).
Then earlier this year multiple class-action lawsuits accused NAR and several real estate franchisors of antitrust over the sharing of real estate commissions between listing brokers and buyer brokers.
And the DOJ has launched an investigation into real estate commissions, prompting a demand that MLS system vendor CoreLogic turn over a bevy of information on MLS data, including all documents relating to any MLS members’ ability to search based on the amount or type of compensation offered by listing brokers to buyer brokers.
NWMLS, which uses CoreLogic’s Matrix system, told Inman it allows its subscribers to create and filter searches by any field in the MLS, including commissions, and this includes searches made on behalf of buyers in which they send search results to buyers or set up listing alerts for them.
Asked how often its agents and brokers search by commission, NWMLS said it does not monitor its subscribers’ searches.
NWMLS told Inman it had been discussing changing its rules to allow its members to publish buyer broker commissions on agent and broker Internet Data Exchange (IDX) websites ever since the DOJ-FTC workshop. IDX websites are those that display pooled listings from the MLS in a given market.
“NWMLS member brokers concluded that the buying public should have ready access to commission information, in addition to property information,” the NWMLS spokesperson said.
Previously, NWMLS members could share buyer broker commission information with their buyer clients directly, but now member firms want the ability to publish that information on their websites, the spokesperson added.
When deciding to eliminate the requirement that a seller offer compensation to the buyer’s broker, “[g]iving sellers more flexibility and options when listing their property for sale was the primary consideration,” the spokesperson said.
Asked whether the commission lawsuits played a role in the changes, NWMLS said, “The recent class-action lawsuits certainly called attention to this issue and afforded NWMLS member brokers the opportunity to review NWMLS rules and improve them to allow brokers to continue to innovate and provide better service to buyers and sellers alike.”
As part of the changes, NWMLS will revise its listing agreement form to remind sellers that Washington law says that buyers’ brokers and agents are not required to show property for which there is no written agreement to pay compensation to the buyer’s broker.
Asked why this was being added, NWMLS said, “When listing their home for sale, sellers in Washington state need to be aware of the legal consequences of not offering a SOC.”
A written agreement to pay compensation to the buyer’s broker could refer to an agreement between the listing broker and the buyer broker or to an agreement between the buyer broker and the buyer, and in either case, the buyer broker would be required to show a property, NWMLS said.
NWMLS will also revise its Form 41C (the selling firm’s commission addendum) to add an option for the buyer and the buyer’s broker to negotiate the compensation of the buyer’s broker as a part of the offer to purchase even if they do not have a written buyer agency agreement, if a seller does not offer a buyer broker commission in the MLS.
“This revision allows greater flexibility for sellers when listing a property, while affording buyers and buyer’s brokers a vehicle for negotiating the compensation for the buyer’s broker’s services (if no SOC is offered),” NWMLS said.
Buyers and their brokers could previously negotiate the buyer broker’s compensation as part of an offer to purchase, if greater compensation was owed as part of a written buyer representation agreement than the amount offered by the listing broker.
As part of the new rules, if a buyer broker commission is offered, buyers and their brokers will still be able to negotiate with the seller to pay compensation due to the buyer’s broker as part of the offer to purchase, “if it is owed pursuant to a written buyer representation agreement and greater than the SOC offered,” NWMLS told Inman.
In a statement, NWMLS board member Jason Wall of Lake & Company said the NWMLS rule changes are welcome.
“Transparency in real estate transactions benefits everyone. Why shouldn’t a buyer know, in advance, how much his or her broker will be paid for the broker’s services?” he said. “Flexibility and choices for consumers and brokers are good things.”
Fellow NWMLS board member Meredith Hansen of Keller Williams Realty, Greater Seattle noted that a home purchase is typically the largest investment most people will make during their lifetime.
“Consumers deserve full transparency in advance on the cost of commissions when making such a monumental decision and expenditure,” she said in a statement.
Editor’s note: This story has been updated with additional comments from NWMLS.