A committee of the National Association of Realtors on Saturday approved several multiple listing service policy proposals, including one on buyer broker commissions that aroused spirited debate, prompting an antitrust reminder from the trade group’s senior counsel.
That proposed policy would require MLSs to display buyer broker commissions on their listing sites and to include buyer broker commissions in the data feeds they provide to agents and brokers, but would not require that the brokers and agents using the feeds display buyer broker commissions.
The approved proposals now move to the NAR board of directors, who will meet Monday at the 1.5 million-member trade group’s annual conference, the Realtors Conference & Expo, in San Diego.
‘Mud on glass’
The buyer broker commission display proposal is one of three that the Multiple Listing Issues and Policies Committee considered that were inspired by a now-scuttled antitrust settlement between NAR and the U.S. Department of Justice.
NAR policy currently allows MLSs to prohibit disclosing to prospective buyers the total commissions offered to buyer brokers on agent and broker Internet Data Exchange (IDX) sites and Virtual Office Websites (VOWs).
The proposed policy reads:
MLSs must include the listing broker’s offer of compensation for each active listing displayed on its consumer-facing website(s) and in MLS data feeds provided to participants and subscribers, and must permit MLS participants or subscribers to share such information though IDX and VOW displays or through any other form or format provided to clients and consumers. The information about the offer of compensation must be accompanied by a disclaimer stating that the offer is made only to participants of the MLS where the listing is filed.
The proposal inspired vigorous debate for and against.
Committee member Andy Alloway of Nebraska said he was “all for transparency,” but feared that the policy “diminishes the role of the buyer’s agent and causes possible conflicts on transactions.”
He pointed out that attorneys, accountants and healthcare providers don’t put their compensation on their websites.
“It could pose a problem when you’re talking about, you know, ‘If I go to your website, will you give me, if you’re the buyer’s agent, will you give me a rebate?'” Alloway said.
“Will you then have to negotiate with the listing agent a reduction in commission? ‘Well, if you’re not going to do that, then I’m going to go to the next guy.’ So it does degrade, potentially, the buyer’s agents’ role.”
“I feel like more buyers will potentially have to start coming out of pocket, because if we’re paying buyer’s agents less, because buyers are now involved in negotiating the buyer’s agent commission … then that’s the road that we’re potentially headed down,” Alloway added.
Another committee member said the policy would turn the real estate industry into the “wild wild west.”
“We’re placing ourselves in a situation where the consumer will feel empowered to try to reposition, go outside of an agent they may have an agreement with, to try to renegotiate or negotiate a different compensation when in all actuality they would not be reducing the compensation because they do not understand … how compensation works in a real estate transaction,” he said.
“We are setting ourselves up to do our customers a disservice. This is not about transparency. This is about throwing mud on glass.”
Janet Hamm, 2021 President of Greater Alabama MLS, suggested that compensation on both sides of the transaction should be displayed.
“If we’re going to be truly transparent, we need to disclose all compensation, whether it’s listing or buyers, because that does affect the price of the home,” she said. “I think we’re going down a slippery slope here.”
‘Exactly what should be happening’
Edward Zorn, California Regional MLS’s general counsel, said buyers should understand that they do participate in the payment of compensation in a transaction.
“To the gentleman who talked about potential rebates and maybe driving those elements, you’re absolutely right,” Zorn said. “I agree with you. And that’s exactly what should be happening. The buyer, if they think they can negotiate a better deal, they should go out and do that.”
Moreover, agents and brokers should already be disclosing their compensation under Article 9 of the Realtor Code of Ethics, according to Zorn.
“Under Article Nine, it should already be disclosed, so it shouldn’t be a shock or anything like that,” he said. “So they should already have an understanding of what they’re going to be paying and contribute to this transaction.”
CRMLS rolled out display of buyer broker commissions nine months ago, Zorn pointed out. “We did not see any kind of negative impact,” he said. “No negative pushback.”
Dave Noyes of Hendersonville, North Carolina, said he was “concerned about the unintended consequences, and how it could affect future business models that we haven’t even thought of yet by requiring compensation to be displayed.”
A committee member from Kansas said, “We should all already be having this conversation with buyers. I don’t see what the problem is in being open and honest to what we get paid.”
‘Will not be tolerated’
Charlie Lee, NAR’s senior counsel and director of legal affairs, stressed to attendees that the proposal was not being considered to “appease” the DOJ.
“It is rather because we believe it serves the best interests of the participants and subscribers and the way that they serve their clients and consumers,” he said.
Lee also reminded the committee of an antitrust statement that had been posted when the meeting started. The statement said NAR was committed to conducting its events “in a professionals [sic], ethical, and lawful manner, including adherence to all antitrust laws” and “Any discussion inconsistent with this policy will not be tolerated.”
“As these discussions go along, also please be cognizant of the antitrust policy that was read in the beginning of the meeting,” Lee said. “So please be mindful of that.”
After that, the committee voted to end discussion and vote. The committee members raised their hands to vote and it appeared that there were a similar number of hands up in favor and against.
When committee chair Jon Coile announced, “Motion passes,” there were murmurs of surprise in the room and then some scattered clapping. The vote count was not revealed for any of the committee’s votes.
‘No financial compensation from any source’
The committee also passed two other DOJ-inspired policy proposals. The first prevents agents and brokers from advertising their services as free unless they will not actually receive any compensation from anyone for them. It passed with no discussion and reads:
MLS Participants and Subscribers must not represent that their brokerage services to a client or customer are free or available at no cost to their clients, unless the Participant or Subscriber will receive no financial compensation from any source for those services.
‘Must not filter out’
The second would prevent brokers and agents from filtering out listings from website displays based on buyer broker commissions or the name of the brokerage or agent. The committee added “out” to the proposal to make clear that the policy was not prohibiting the sorting of listings, but rather not showing them at all.
There was no discussion opposing the amended proposal, which reads:
Policy Statement 8.5: MLS Participants and Subscribers must not, and MLSs must not enable the ability to, filter out or restrict MLS listings that are searchable by and displayed to consumers based on the level of compensation offered to the cooperating broker or the name of a brokerage or agent.
The policies for IDX and VOWs would change to prohibit brokers from choosing to not display listings based on the compensation offered to buyer brokers from listing brokers or on the level of service provided by a listing firm or on whether the listing broker is a Realtor.
A single MLS data feed
The committee approved a proposed policy that would require MLSs to offer their broker participants a single data feed for all of the uses for which they have authorization. The policy as proposed to the committee read:
Policy Statement 8.6: One Data Source:
MLSs must offer a Participant, or their designee, a single data feed in accordance with a Participant’s licensed authorized uses.
At the request of the Council of Multiple Listing Services (CMLS), the committee struck out “or their designee” and added: “At the request of a Participant, MLS must provide the single data feed for that Participant’s licensed uses to that Participant’s designee. The designee may use the single data feed only to facilitate that Participant’s licensed uses on behalf of that Participant.”
Brokerage back office feed
The committee also approved a proposed brokerage back office feed policy, which would entitle brokers to an MLS data feed that they, their agents and their designated vendors could use for internal purposes. The vast majority of MLSs across the country provide such a feed, but there is currently no national standard.
CMLS suggested amendments to the proposed policy to clarify that the data licensed under the policy must stay internal to the brokerage and the brokerage’s agents with the exception of the brokerage’s “bona fide clients as part of broker-client relationship management and transaction management systems” and in statistical analyses and reports. The committee approved the amendments without discussion.
Best practices with one change
The committee also approved a list of six recommendations from the committee’s MLS Standards Work Group. Those recommendations do not have to be approved by the trade group’s board of directors because they’re not mandates, so they will now be added to NAR’s MLS Best Practices.
The recommendations include best practices on rule violations, data feeds, governance and sharing aggregated data with NAR. The committee, at the request of Sam DeBord, CEO of the Real Estate Standards Organization (RESO), amended one of recommendations to eliminate a reference to creating “a timeline and cost estimate to establish a native RESO Data Dictionary compliant MLS.”
Instead, that best practice now reads:
By July 1, 2022, MLSs should create with their vendors and leadership a written plan with a timeline to convert all MLS Participant, Subscriber, and Participant designee data feeds to RESO Web API compliant services.