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Broker-owned Multiple Listing Service Northwest MLS typically takes its own approach when it comes to commissions, and this week the nonprofit revealed that the settlement proposed by the National Association of Realtors is no exception.
On Tuesday, May 28, the NWMLS announced that it would not take advantage of a provision that allows MLSs to opt into NAR transactions, thereby immunizing them from potential antitrust claims that could be brought against MLSs over its commission rules.
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NAR’s proposed settlement, which has received preliminary but not final court approval, would require the NWMLS to make rule changes that real estate broker-affiliated MLSs must make, including prohibiting listing brokers from providing compensation to buyer’s brokers through the MLS, but not Including outside of Major League Soccer. That rule appears to be the main sticking point for NWMLS choosing not to join the deal.
“NAR’s proposed settlement largely repeats years of rules and practices in the NWMLS service area, with one glaring exception: The settlement eliminates compensation transparency for buyers and prohibits sellers from going through the MLS,” NWMLS read the announcement.
“Instead, the settlement agreement allows for compensation ‘outside the MLS,’ but this information is difficult to find and not available to all buyers and brokers. This change is a step in the wrong direction and is harmful to consumers and Brokers are harmful.
“Secret” deal? Or the fox guarding the henhouse?
The NWMLS said eliminating MLS compensation would hurt buyers and sellers by limiting choice and encouraging “secret deals” that could violate fair housing laws.
“NAR’s elimination of MLS pay transparency encourages consumers and brokers to engage in secretive transactions outside the MLS, resulting in deceptive practices, discrimination and unfair housing,” the NWMLS said.
“Depriving buyers of information about their transactions could harm buyers, particularly those who are already disadvantaged, including first-time homebuyers and members of protected classes.
“The MLS prohibition on indemnification also unnecessarily limits the seller’s choice and absolute right to provide indemnification to the brokerage firm representing the buyer.”
Michael Kagemak
Lead plaintiffs’ attorney Michael Ketchmark of Ketchmark & McCreight told Inman it’s not surprising that NWMLS went its own way because the company is not affiliated with NAR.
“Time will tell how the new NWMLS rules benefit home sellers compared to the NAR settlement,” Ketchmark said. “But generally speaking, I’m always skeptical when a fox says it’s guarding the henhouse, and that’s exactly what’s happening in Washington right now.”
How much does NWMLS cost?
According to the Settlement Agreement’s “Appendix D – Non-Real Estate Broker MLS ‘Opt-In’ Agreement,” non-Real Estate Broker MLSs are not automatically covered by the deal and have two options if they want to be covered:
- Option 1: Within 120 days of the court’s preliminary approval of the NAR settlement, an amount equal to 100 times the number of 2023 MLS subscribers reflected in the 2023 T360 Real Estate Yearbook will be deposited into an escrow account. 33,121 subscribers, which means the company will have to pay $3.31 million.
- Option 2: If MLS “believes in good faith” that it is unable to pay the amount required under Option 1, MLS agrees to engage in non-binding mediation with plaintiffs’ attorneys within 110 days of preliminary approval of the agreement.
open litigation
If NWMLS opts in to the deal, as of October 31, 2019, home sellers who sell their homes through the MLS will be immune from any lawsuits filed by the MLS claiming that the MLS requires the listing agent to provide compensation to the buyer’s agent The rules are unreasonable.
Justin Hager | Northwest MLS
When asked if the NWMLS was concerned that not settling would leave MLS vulnerable to such lawsuits, NWMLS President and CEO Justin Haag told Inman, “The NWMLS has been directly pursuing opportunities since 2019, Better serve consumers through industry-leading change.
“NWMLS anticipates that the future will provide additional opportunities for innovation that will benefit brokers and consumers. For these and other reasons, NWMLS has decided not to participate in a settlement that eliminates transparency and consumer choice. Instead, NWMLS has chosen to maintain its independence and continue The ability to innovate, independent of the restrictions imposed by the settlement agreement.
NWMLS rules changes since 2019
On October 1, 2019, the Northwest MLS changed its rules to allow for the public display of buyer’s agent commissions and eliminated the requirement for sellers to provide a buyer’s agent commission when listing a property for sale, along with 600 other properties across the country approach is in stark contrast.
On October 3, 2022, NWMLS eliminated commission sharing between the listing broker and the buyer’s broker as a default and provided that once compensation is provided to the buyer’s broker, it will come directly from the seller and not the listing broker.
Most recently, on January 1, 2024, a new law pushed by the NWMLS took effect in Washington state that requires brokers to sign written service agreements with buyers to represent them, rather than just signing service agreements with sellers as previously required .
“All service agreements must be entered into at the beginning of the relationship between the parties and fully address broker compensation and representation details,” NWMLS said.
“The rules and forms of the NWMLS, as well as the Agency Act, as amended, provide for a consumer-friendly brokerage relationship. The seller negotiates the amount to compensate the listing company and determines whether it is willing to compensate the buyer’s broker and any such proposed amount.
“Buyers agree at the outset of the relationship how much they will pay their agent and can then negotiate with the seller to help cover a portion of the purchase cost.”
NAR’s proposed settlement includes a similar provision that would require agents to enter into a written agreement with cooperating buyers before showing homes.
“NWMLS’s rules and formats expand, rather than limit, consumer choice and do not favor any brokerage service model or compensation structure,” the MLS said. “NWMLS allows the market to operate unencumbered by MLS rules.”
DOJ disagrees with NWMLS or NAR
MLSs, whether affiliated with real estate agents or not, and brokerage firms not automatically included in the settlement have until June 18 to opt into the deal. MLSs that opt in will have until August 17 to implement the changes required for the deal, although the deal itself is not expected to have a final approval hearing until November 26.
Whether final approval will occur is an open question. Last week, a DOJ attorney said, “We believe that the offer of compensation should not be made anywhere but certainly not on the MLS,” indicating that regulators not only disagree with the NWMLS’ position that the compensation be kept at the MLS, And the NAR settlement agreement also authorizes compensation outside the MLS.
The U.S. Department of Justice declined to comment for this story. However, in a statement of interest in a commission case called Nosalek, the Justice Department called for “an injunction prohibiting sellers from offering commissions to buyer’s brokers,” which the agency said would promote competition and innovation among buyer’s brokers because Buyers will have the right to negotiate directly with their own agent.
In the filing, antitrust enforcers pointed to NWMLS rule changes and said they did not appear to have had a meaningful impact.
The agency said the changes did not result in a reduction in buyer’s agent commissions and had “no discernible impact on the listing portion of buyer’s agent commission quotes or the number of zero-compensation offers”. Regional commissions have not resulted in a decrease in buyer agent commissions in the NWMLS regional metropolitan areas.
In the NWMLS, 99.2% of NWMLS listings between October 2019 and March 2022 continue to offer buyer agent commissions (the same as 99.3% before the rule was lifted). Almost all partners (94.5%) offer a partnership commission of more than 2%.
NWMLS argued that the Justice Department’s study of the NWMLS changes was flawed, including using trading data from only one brokerage firm in the NWMLS footprint for its analysis. NWMLS rule changes for 2019 and 2022 resulted in an average reduction of more than $1,000 in commissions for selling a home valued at $750,000, according to another analysis.
Upcoming rule changes
According to NWMLS, the company will modify its forms and listing processes to make sellers aware of the options that exist to inform buyers that sellers may be willing to pay compensation to buyers’ agents, but may not be willing to provide a specific compensation amount on the listing itself. .
“As a result, NWMLS listing forms and processes will be modified so that sellers can easily invite buyers to include any compensation requested by the buyer’s agent into the buyer’s purchase offer,” Haag told Inman.
“NWMLS is studying these revisions and plans to release them in mid-August.”
Haag declined to specify which forms and listing procedures will be revised, how, what the changes will be, and what date in August the changes will be made.
Send an email to Andrea V. Brambila.
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