On Thursday, Realogy Brokerage Group CEO M. Ryan Gorman shared the company’s stance on the National Association of Realtors’ Participation Rule, saying, ‘There’s no reason why an offer of compensation needs to be a mandatory requirement for a home to be listed in the MLS .’ Mostly, real estate agents disagreed.
A day after Realogy publicly called for the National Association of Realtors to end mandatory commission sharing, real estate agents sounded off on the publicly owned real estate company’s position, saying they feared the ability to opt out could be confusing to consumers, threaten buyer agents or, worse, open the door to heightened competition from search portals like Zillow and Redfin.
“Cooperation was the original MLS premise,” Rhode Island-based broker-owner Greg Dantas wrote on Friday in a comment below Inman’s original Jan. 6 article. “Otherwise, it’s a portal and that’s Zillow’s game, set, match.”
The furor over commission sharing comes one day after Realogy wrote the latest chapter in a nearly three-year legal saga regarding buy-side commissions and who should be responsible for paying them.
In an unsealed legal filing and then in an interview with Inman, Realogy Brokerage Group President and CEO M. Ryan Gorman said the company believed the National Association of Realtors’ Cooperative Compensation Rule should be edited to make offers of compensation on multiple listing service listings optional rather than mandatory.
“The best thing for a seller in every case that I can imagine is to offer compensation for the good work that buyers’ agents will do to bring a buyer in to facilitate the transaction,” Gorman told Inman on Thursday. “I think that there’s tremendous evidence supporting that and the market will continue to support that. There’s no reason why an offer of compensation needs to be a mandatory requirement for a home to be listed in the MLS.”
“So it’s really just the mandatory component for listing a home in the MLS that we’re saying is unnecessary.”
Gorman also said MLSs should “continue to offer a data field for compensation, but should not require that it be filled out for a home to be listed” and Realogy “was not calling for the rule to be made optional for MLSs, which would allow MLSs to continue to make offering buyer broker commissions a requirement at their discretion.”
Agents and brokers responded in force on Friday, with many of them pushing back on Gorman’s assertion the market would “continue to prevail” if the commission-sharing requirement was removed.
“What Gorman is presenting is the WORST of both worlds,” Illinois-based agent Jeffrey Olichwier said. “It’ll make it more confusing for the consumer. It’ll make it more difficult for the buyer broker representatives. Buy brokers are already getting bad commission splits — and they cannot be negotiated by the buyer.”
Meanwhile, Florida-based agent Laura Michelis took it a step further and said that kind of system could make buyers’ agents obsolete.
“Asking the buyer to pay for buyer’s agent commission will make many buyers go directly to the listing agent and not use a buyer’s agent.,” Michelis said. “Little by little buyer’s agents will be nonexistent, and the MLS will be only a portal.”
Others said buyer’s agents won’t be the only ones getting stiffed if NAR were to implement Realogy’s buyer commission blueprint. Buyers, especially low-income, minority or first-timers, could be pushed out of the housing market for good, as many already struggle to save for down payments and other purchasing costs.
“Many of my buyers already require down payment assistance,” Minnesota-based agent Gerald Walsh said. “There is no way they could afford buyer-agent commissions outside the transaction. These are great people who dream of the opportunity to buy a home. This change could eliminate homeownership for hundreds of thousands.”
South Carolina-based broker Dan Lang highlighted the precarious position buyers who use VA loans, which grew in usage by 100 percent or more in 28 of the nation’s largest cities in 2020, would be placed in if offers of compensation became optional.
“Concerning. If implemented, VA buyers, in particular, will be forced to work with the listing brokerage with limited or no representation because they can not be charged a brokerage fee by a buyers’ agent per VA guidelines,” he explained. “FHA and other low downpayment buyers will be negatively affected as well. We have buyer representation now because of previous class action lawsuits where buyers were not represented.”
While some agents said the current rule simply needs to stay in place, several said there could be other ways — outside of Realogy’s — to make the commission process more transparent and understandable for consumers.
“I’m all for awareness and transparency,” Olichwier said. “I’m all for people knowing what they are paying for. I’d be happy if the compensation was totally separated. Seller pays listing broker and buyer pays buyer broker representative. Then it’s clear who is paying whom—and how much. It then should be rolled into the mortgage, as it is now.”
“Then, that eliminates bad commission splits,” he added. “Each gets paid by the people they represent what they feel they are worth.”
Meanwhile, Pennsylvania-based agent John Rainville said MLSs could eliminate some of the confusion regarding commissions with a database of buyer agency contracts. “The rEAL item the MLS’s need to do is to have a database of ‘Buyer Agency Contracts’ that are searchable so real estate agents can ‘see’ if a buyer is already under ‘agreement’ just like a property listing,” he said. “I see no issue with fees being attributed to who is actually paying them.”
The battle over buy-side commissions is far from over, with NAR approving several multiple listing service policy proposals in November, one of which requires MLS to allow brokers and agents to display buyer broker commissions. “[The proposal] bolsters transparency and Realtors’ existing duties and practices to talk with their clients about what services they provide and how they are compensated,” NAR said of the newly-minted policies.
As NAR continues to bat off antitrust woes and the bombshell buy-side commission lawsuit, known as Moehrl and Sitzer, heads into its third year, it’s unclear how the battle over commissions will shake out. Until then, agent Phillip Cantrell said agents need to focus on surviving in a wily real estate landscape where anyone could be in the bullseye.
“This is classic co-defendants trying to distance themselves from the others. Depending on what turns up in discovery, you may see a full turning against each other and possibly counter complaints,” he said. “For 25+ years it’s been agreeable, and now suddenly it’s not. Hmmm.”
“Just sitting over here popping the popcorn getting ready for the show,” he added. “Every man for himself, I guess.”