Realogy has urged the National Association of REALTORS® (NAR) to rethink one of its multiple listing service (MLS) policies.
The large real estate conglomerate publicly called for NAR to end its MLS mandate requiring listing brokers to offer compensation so they can post a seller’s property on a REALTOR®-affiliated MLS.
“It is the position of Realogy that the mandatory nature of the NAR Cooperative Compensation Rule should be rescinded,” said Ryan Gorman, president, and CEO of Realogy Brokerage Group and CEO of Coldwell Banker, in an unsealed court filing on Jan. 6.
The filing is part of two consumer class-action lawsuits accusing a group of real estate organizations—including NAR and Realogy—-of “agreeing, combining, and conspiring to impose and enforce an anticompetitive restraint within their multiple listing services.”
At the center of the issue is NAR’s Participation Rule—referred to in the filing as the Cooperative Compensation Rule—which requires listing brokers to offer commissions to buyer brokers to participate in certain multiple listing services.
“This is necessary because cooperating participants have the right to know what their compensation will be prior to commencing their efforts to sell,” read an excerpt from the NAR MLS policy.
Gorman indicated in the filing that the company believed NAR’s mandatory compensation rule should be changed to make offers of compensation on MLS listings optional.
“We predict removing the requirement will enable greater flexibility for all concerned when listing a property,” Gorman said. “We strongly believe consumers and brokers should be able to exercise their judgment to best serve the needs of the seller and the nature of the transaction, but we anticipate that, frankly, brokers will continue to offer compensation for the high-quality buyer agent work.”
Realogy has faced some criticism since the legal filings were unsealed, with Gorman indicating in a recent statement that some industry professionals have thought that the company is advocating to get rid of cooperative compensation.
“Make no mistake, we wholeheartedly believe in and support the economics that provides for the sharing of the commission with the buyer’s agent,” Gorman said in a Thursday message to Realogy broker/owners. “However, we do not believe a listing broker should be required to make an offer of compensation to a buyer broker to participate in and list properties on the MLS.”
Dawn Pfaff, president and CEO of State Listings Inc., indicates she understands Realogy’s stance.
“They want to be able to list a property that might not have a compensation offer to the buyer broker, but it doesn’t mean they are not going to cooperate with a buyer broker,” Pfaff said.
“I think that the seller who is the principal in this needs to be able to say, ‘this is what I want,'” Pfaff continued. “When they say that, it needs to happen because the listing agent is the fiduciary of that seller, and their job as the listing agent is to do what that seller has requested they do, not what the MLS requests that they do.”
An NAR spokesperson indicated that the association is “committed to transparent and efficient markets for buying and selling homes, which is why it updated its MLS rules to include the listing broker’s offer of compensation for each active listing displayed on its consumer-facing website.
“Our rules have always provided that listing brokers in consultation with their clients determine how much commission to offer the buyer broker,” said NAR VP of Communications, Mantill Williams, in an emailed statement to RISMedia.
“NAR continues to believe that the guidance regarding cooperative compensation that appears in its Handbook on Multiple Listing Policy serves the best interests of both consumers and brokers,” Williams added. “It gives them freedom to choose how much commission to offer the buyer broker, including as little as one penny.”
That aspect of the mandate is at the center of Realogy’s position, a company spokesperson told RISMedia.
“We’re not saying we don’t believe in the buyer agent cooperative compensation; we’re just saying that it’s unnecessary to make it mandatory, especially when you can input as little as $1, which totally undervalues and demeans the work of a buyer’s agent,” the spokesperson said. “The difference between $1 and zero is what the industry is fighting over, and it’s just silly.”
This is a developing story.
Jordan Grice is RISMedia’s associate content editor. Email him your real estate news to email@example.com.
I remember 40plus years ago when I started in this industry, the explanation to me regarding sellers paying…
Government and Bank regulations required compliance with many laws regarding sources of cash from buyers, etc. Therefore, once a sale price was agreed to, the buyer brought money to the table and the seller paid the expenses of sale, so to speak, minus down payment (unless negotiated) and mortgage costs (unless negotiated too) Therefore, the offering price agreed on had to allow for certain costs paid by seller, even though the money was brought to the table by the buyer. So, yes, our business is changing, as our banking rules, excessive fees are being paid by lenders to buyers, and agents for referrals…some of those I question relative to Federal Trade commission and licensing guidelines (not to mention IRS guidelines re cost of sale deductions). It is my opinion that the appraisals and values would change as the buyer would have to come up with more money (and I believe the majority of buyers are using 0 – 15% down, NOT 20% and or cash), would love stats on that, by the way, so vying for our listing inventory is challenging at best, costs of everything have gone up. While I understand the value of one sided marketing for client, I also understand the founding principles of buyers bringing money to table and seller agreeing for disbursements, while fully knowing their net. I, personally, am in favor or continuing that practice, as buyers usually don’t have excessive cash when purchasing. They have moving costs, repair, remodel costs, and appliance purchases, etc. I don’t want to reduce the amount of money Realtors would get paid, if cash had to come from buyer literally, I do understand comments relative to this, but think bringing cash to the table by the buyer and distributing it for closing fees and costs, partly from seller proceeds is full disclosure, complies with many federal laws, and generates the highest revenue possible for our industry. (and social media marketing and lead generation costs are definitely at an all time high, not to mention the multiple homes you show and offers you write to get a buyer under contract to close) Thanks for your time
Seems like a common sense issue. The policy should not require a listing broker to pay a commission to a selling agent regardless of representation, only to disclose what, if any, compensation is being offered. We can already enter zero for subagents commission so I see no reason that zero cannot be entered in buyer agent’s commission if that is actually NAR policy rather than the interpretation of the policy by the local MLS. Requiring buyers to pay the buyer agent’s commission is not totally unheard of in commercial sales and, although I’d hate to see that become common in residential transactions it can ultimately be negotiated as part of seller paid closing costs.