New England’s MLS Goes Its Own Way, Challenging DOJ Regarding NAR Settlement
On June 20, MLS Property Information Network (MLS PIN) informed its 44,600 New England subscribers that, effective immediately, they could submit listings with no offer of buyer agent compensation. That MLS field isn’t being removed, but will now designate the seller’s offer of compensation, not the broker’s.
The article about this development in Inman news service got me thinking about the rationale behind the litigation against co-op commissions and the 1st Amendment implications of prohibiting the display of a seller’s offer of an incentive for other agents to bring a buyer for their listing.
buyer’s agent to compensate. This is our policy at Golden Real Estate — a win/ win policy, under which we earn more for handling both sides of the transaction, and the seller pays less overall.
for them.
But let’s rethink that concept. Now, the listing commission in the above scenario would be 2.8%, not 5.6%, and the listing agreement would specify that the seller offers 2.8% to the buyer’s agent who represents the buyer for his home. The MLS would then have a field for displaying the seller’s offer of compensation, not the listing broker’s offer. This is where freedom of speech comes into play.
Let’s remember who has the resources to pay agents representing buyers. Unless buyers are paying cash, they’re already hard pressed to come up with the down payment and the fees charged by their loan officers. Those fees, except for the appraisal, are simply added to the principal amount of the mortgage loan, so they’re not out of pocket for buyers, but you better believe that a 4- or 5-figure agent compensation amount will be hard felt by buyers.
The many class action lawsuits regarding co-op commissions have echoed the same assertion, alleging that the sharing of commissions between listing and buyer brokers inflates seller costs and is a conspiracy in restraint of trade, a violation of the Sherman Antitrust Act. The change suggested in this column would, I believe, invalidate that claim.
MLS PIN made the following points in its June 20th email to subscribers:
The practice has, until now, been for the seller to agree to a listing commission which was high enough for the listing broker to share it with the agent who produced the buyer. For example, a listing commission might be 5.6%, specifying that 2.8% would be offered to a cooperating buyer’s agent.
Many, but not all, listing agents would insert in the contract a provision that the listing commission would be reduced by, say, 1%, if there was no
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It would be stated in the listing agreement that sellers are free to offer zero compensation to brokers who produce the buyer for their home. Because offers of compensation by sellers would be published for buyers and their agents to see when searching for listings, sellers would be incentivized to offer such compensation. It’s okay for the seller to offer zero compensation, but if that results in few showings and no offers, the seller might change his mind later on. Listings suffer when the “days on market” number grows. I suspect most sellers will agree to offer something in order to increase showings and offers. It has always made sense to me that agents for buyers be compensated by the sellers. The builders of new homes will continue to offer compensation to buyer agents, with or without that offer being displayed on the MLS, knowing that failure to do so would only drive buyers to their competitors. The failure of any home seller to do the same would have the same effect.
Builders must already be excited by the conventional wisdom that buyers will have to pay the brokers who represent them, knowing the great advantage that such a belief will increase business
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On the other hand, any compensation paid to a buyer’s agent by the seller is not paid upfront, but is taken from the seller’s proceeds, which makes it much less painful. But it needs to be a conscious decision of the seller to make that offer, just like any other incentive — for example, providing money to buy down the buyer’s interest rate. The shock of seeing the buyer’s agent’s commission on the seller’s settlement statement instead of the single commission payment to the listing agent is no doubt what triggered that class action lawsuits from sellers complaining, “Why am I paying my buyer’s broker?” With the decision to incentivize buyer agents being more conscious for sellers, that shock will not be as great.
“Offers of compensation, if any, will be made by the seller. Listing brokers and cooperating brokers will no longer split commissions.
“Listing agreements must disclose that the seller is neither required to offer compensation nor required to accede to any cooperating broker’s request for compensation. The listing broker must disclose this to the seller before the seller signs the listing agreement.
“If a seller elects to offer compensation, the listing agreement must also say that the cooperating broker will be an intended thirdparty beneficiary of the agreement with the right to enforce the same.
“Before posting a listing, the listing broker must certify, in a checkbox designated for this purpose in Pinergy [the MLS app], that the listing broker has notified the seller of the seller’s rights not to offer compensation and not to accede to a cooperating broker’s request for compensation.”
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Sitting at the end of a cul-de-sac in the small and quiet Canyon Point Villas subdivision, this home at 533 High Point Drive has a commanding view of the City of Golden, the table mountains and the foothills, including the famous "M" on Mt. Zion from its recently refinished full-width wood deck. You'll appreciate the interior too, including the recently refinished hardwood floors and new carpeting, and the updated kitchen with slab granite countertops. Even the two-car garage has been painted and includes wall cabinets and other storage. You will be able to view a narrated video tour next week at www.NorthGoldenHome.com, then come to our open house on Saturday, July 13th, 11 a.m. to 1 p.m. Or call Jim Smith at 303-525-1851 for a private showing.
Jim Smith
Jim@GoldenRealEstate.com 1214 Washington Ave., Golden 80401 Broker Associates: JIM SWANSON, 303-929-2727 CHUCK BROWN, 303-885-7855
DLUGASCH, 303-908-4835
KRAFT, 720-353-1922
POTTORFF, 970-281-9071
JONKE, 303-990-7428 In-house
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