Due to recent lawsuits challenging local broker marketplaces (otherwise referred to as MLS’s) and the cooperative compensation guidelines that MLS participants and subscribers adhere to, the conversation around buyer agent/cooperating commissions has been front and center.
In 2021, the National Association of REALTORS®’ (NAR’s) Board of Directors passed several motions to reinforce greater transparency and disclosure around buyer agent compensation. This means that REALTORS® and MLS participants cannot represent their brokerage services as free. The updated guidelines are as follows:
Revised Code of Ethics Article 12, Standard of Practice 12-1 which prohibits REALTORS® from advertising their services as free or at no cost unless they truly are not receiving any financial compensation from any source.
New MLS Policy Statement 8.4, which prohibits an MLS participant from advertising their services as free if they are receiving compensation from any source.
New MLS Policy Statement 8.5, which prohibits an MLS participant from filtering listings based on the level of cooperating broker compensation.
New MLS Policy Statement 8.8 which requires listing brokers to display their compensation for each active listing on its consumer facing websites and MLS data feeds.
As NAR states at competition.realtor: “U.S. local broker marketplaces have long been – and are still – viewed as the best option for consumers around the world. By consolidating fees and the overall process, our nation’s model increases efficiency, simplifies the experience, provides greater certainty of success to both buyers and sellers, and provides guidelines that ensure the accuracy of housing inventory made available to real estate professionals and consumers, all at comparable or lower total costs than those in other countries.” (FAQs, 2022)
Why Is It Important To Disclose Buyer Agent Commissions?
According to NAR, these changes were made to improve transparency in a time where forces are pushing to muddy waters.
The changes that went into effect on January 1, 2022, do three things:
- Reinforce that local marketplace participants do not represent brokerage services as free. While REALTORS® always have been required to advertise their services accurately and truthfully, this change creates a bright line rule on the use of the word “free” that is easy to follow and enforce.
- Ensure disclosure of compensation offered to buyer agents. The change bolsters transparency and REALTORS®’ existing duties and practices to talk with their clients about what services they provide and how they are compensated.
- Ensure listings aren’t excluded from search results based on the amount of compensation offered to buyer agents. This wording change reiterates REALTORS®’ existing duty to inform clients about all relevant properties meeting their criteria.
5 Steps You Should Implement ASAP While Promoting Your Real Estate Services
- Remove the phrases “free” or “at no cost” from your marketing, advertising and communication unless you are truly not receiving any financial compensation from any source. Illinois REALTORS® provides an advertising check-up here to ensure you’re adhering to state law and the REALTOR® Code of Ethics.
- Discuss with your clients how you expect to be paid and by who as a buyer agent/cooperating agent in a transaction.
- Consider utilizing a Buyer-Broker Agreement to further define the terms of your relationship with your client and to discuss compensation.
- Earn your Accredited Buyer’s Representative (ABR®) Designation to elevate your skills and knowledge when representing buyers. Check out our affiliated school, the REALTORS® Real Estate School, to sign up for our course in November.
- Review and provide NAR references and information to your fellow brokers and clients on the facts of real estate commissions and the positive impact local broker marketplaces have on the buying and selling public. Visit competition.realtor and realestatecommissionfacts.com for more information.