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Realogy asks NAR to eliminate buyer agent commission requirement

Realogy publicly asks the National Association of Realtors to repeal a rule requiring listing brokers to pay buyer brokers to submit listings to MLS.

For the first time, Realogy openly asks the National Association of Realtors to abolish its requirement that listing brokers pay buyer brokers to submit properties to Realtor-affiliated MLSs.

The company's position was made public on Thursday. Realtors, RE/MAX, Keller Williams and HomeServices of America are all defendants in various antitrust lawsuits filed by sellers and purchasers seeking to have buyers pay their brokers directly rather than listing brokers paying buyer brokers from seller commissions. This shift might upend the US real estate business by demanding adjustments in buyer's agent compensation.

In order to engage in Realtor-affiliated multiple listing systems, listing brokers must give compensation to buyer brokers.

The seller suits, Moehrl and Sitzer, are currently in discovery and seeking class certification. Realogy filed the now-unsealed Sitzer filing.

"It is the position of Realogy that the mandatory nature of the NAR Cooperative Compensation Rule should be rescinded," said M. Ryan Gorman, president and CEO of Realogy Brokerage Group and Coldwell Banker.

In a phone discussion with Inman on Thursday, Gorman stressed that Realogy wanted to keep the commission requirement but make incentive offers voluntary.

“The best thing a seller can do is compensate buyers' agents for bringing in a buyer to facilitate the transaction,” Gorman said.

“I think the evidence is overwhelming and the market will continue to back it up. There is no reason why a home should have to be compensated to be included in the MLS. So we are basically saying the mandated component for listing a home in the MLS is unnecessary.”

Gorman said that MLSs should keep a compensation data field, but not require it to be filled out to market a home. He said Realogy was not asking for the rule to be optional for MLSs, allowing them to choose whether or not to offer buyer broker commissions.

“I don't think MLSs should require it,” Gorman added.

“NAR is committed to transparent and efficient markets for buying and selling homes,” said Mantill Williams, NAR's vice president of communications. We recently modified our guidelines to require MLSs to post the listing broker's remuneration offer for each active listing on their consumer-facing websites. Our laws have always required listing brokers to discuss with their customers about the buyer broker's commission."

“NAR believes its guidance on cooperative compensation in its Handbook on Multiple Listing Policy serves both consumers and brokers. It allows them to offer the buying broker a commission as low as one penny."

First-time and low/middle-income homebuyers can now afford a home and expert representation. Saving for a down payment is difficult enough for many. It would increase purchasers' out-of-pocket payments to the point where many would be priced out of an already competitive market.”

Some industry observers predicted the collapse of MLSs if the Moehrl and Sitzer antitrust actions were successful. Gorman said he understood but disagreed with the argument that the commission restriction was required due to the importance of buyer-listing agent interaction.

“I think cooperation is extremely beneficial and has been for literally tens of millions of Americans to unlock homeownership,” he remarked.

“I believe the value is extremely high and that a mandatory requirement is unnecessary. But I understand how certain regulations around cooperation might help ensure the market runs smoothly and all players understand how things function. So while I appreciate the viewpoint, I believe the value is extraordinarily high and will remain so.”

Realogy said in an email to broker-owners on Thursday that abolishing the commission-sharing obligation would benefit “all parties” when advertising a home.

To participate in and list properties on the MLS, a listing broker should not be compelled to make an offer of remuneration to a buyer broker.

In the end, we believe customers and brokers should be able to make decisions based on their own judgment, but we expect brokers to continue to pay for great buyer agent work.

The significant value generated by buyers agents will motivate everyone to continue doing what is done today, which is compensating buyers' agents, said Gorman. But there is flexibility. We believe on addressing consumers where they are and their listing needs.”

Realogy cited the broker-owned Northwest MLS, which repealed the need that sellers give a buyer broker commission in 2019. After two years, “no meaningful change in buyer broker compensation practices has occurred,” Realogy wrote.

“NWMLS does not monitor compensation rates and does not know the effect that these changes have had on offers of compensation,” NWMLS CEO Tom Hurdelbrink told Inman.

“However, NWMLS is aware that its database now includes listings that do not compensate a buyer's broker. Based on anecdotal evidence, NWMLS feels these modifications have improved customer knowledge of broker remuneration and increased consumer dialogues about it. NWMLS will keep looking for ways to improve competition, innovation, and consumer choice.

Realogy's decision to make its position on the commission ruling public now "warrants some explanation," Gorman added.

“We like to advocate for changes that could benefit the industry,” he said. “Not everything has to be done right away. We believe it strongly matches with our broader outlook and increasingly vocal stance on the value of transparency in the industry.”

NAR has not received any proposed language for a commission rule change from Realogy yet, despite Realogy having previously made its stance on other industry rules public, most recently in a letter to NAR's Multiple Listing Issues and Policies Committee.

Gorman refused to answer whether Realogy had discussed the commission rule with NAR. “I'm not sure,” Gorman replied when asked if Realogy planned to write the MLS committee before the NAR's midyear conference in May. We'll watch how the dialogue evolves, as we've already taken a public position on this today.

Let us know in the comments below what you think of this or discuss it with a colleague in our next class.

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where are the comments? I wouldn't mind adding comment, but want to see the others as well. Odd they are not visible here.

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