At the end of June, the Northwest MLS updated its rules regarding buyer agent compensation and listing transparency.
Effective October 3, 2022, NWMLS’s forms will clarify that buyer agent compensation will come directly from the sellers. It will also provide new options and flexibility for how listing agents and buyer agents will be paid.
Behind these changes is a mess of lawsuits and recently intensified scrutiny on the real estate industry’s commission structure—both of which came up in a recent episode of The Walk Thru.
Looking beyond the lawsuits, Northwest MLS aims to create a more just and flexible commission structure for agents on both sides of a real estate transaction and the clients they represent.
What’s new with Northwest MLS forms?
The most notable difference to the Northwest MLS forms will be the clear default statement that buyer broker compensation will come from sellers—not from the listing agent.
Here are the changes taking place, directly from Northwest MLS:
- The compensation the seller offers to the buyer broker will be prominently stated on the first page of the NWMLS purchase and sale agreement, with an opportunity for the compensation to be accepted by the buyer and the buyer’s broker or modified by the parties in an addendum to the agreement;
- The compensation the seller offers to the buyer broker will be a direct offer determined by the seller – rather than commission sharing between the two brokerage firms;
- The NWMLS listing agreement will provide new options for broker compensation to address the role of the listing broker and buyer broker in the transaction;
- The NWMLS buyer representation agreements will offer alternatives for buyers and their broker for compensation that depend on the terms of the listing; and
- Brokers will more easily be able to fashion their own form of representation agreements with sellers and buyers to differentiate their services and fees, accommodate consumer’s needs and interests, and compete in the market.
The goal is to make each transaction as transparent and equitable as possible for all parties involved. In addition, it will make it easier for agents on both sides to differentiate themselves.
Why is Northwest MLS changing things now?
Historically, MLS listings took for granted that the listing broker would offer the buyer’s agent a percentage of their commission. Known as cooperative compensation, this model of commission sharing has been the norm for every known MLS, including Northwest MLS.
NWMLS CEO Tom Hurdelbrink told Inman that the goal of these recent changes is not to prohibit the sharing of commissions between listing agents and buyer agents. Instead, it aims to clearly state the seller’s responsibility for buyer agent compensation and provide all parties with a way to negotiate a commission structure on which they can all agree.
These changes build on those the NWMLS made in October 2019, when they became the first to allow the public display of agent commissions. They also changed the rules so listing brokers no longer had to offer buyer brokers a commission to submit a listing to the MLS.
In 2021, NAR changed its rules to allow brokers and agents to publicly display buyer broker commissions. Will NAR follow suit with these changes as well?
Filtering results by commission
The practice of filtering listings by commission is a sore spot in the real estate industry, and the DOJ has been paying attention. So has Northwest MLS, which now includes language prohibiting this practice unless the buyer and buyer agent agree otherwise.
Stuart Heath, owner of Bellmark Real Estate and chairperson of the Northwest MLS board of directors, explained their stand in the following statement:
Buyers should be fully aware about how and how much their broker is compensated. And buyers should be given the opportunity to freely negotiate that compensation with their broker. These changes are a positive step to help the industry evolve.
An end to commission bombshell lawsuits?
A primary argument in the bombshell lawsuits is that the buyer’s agent cannot negotiate the commission and that this restriction has resulted in a conspiracy to fix commissions. The NWMLS changes address these allegations head-on.
What does this mean for real estate agents?
Hurdelbrink believes these changes will make it easier for real estate brokers to differentiate themselves, compete in the market, and better serve their clients’ needs and interests.
Would you welcome similar changes to your MLS?