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When it comes to commissions, broker-owned multiple listing service Northwest MLS has typically gone its own way, and this week, the nonprofit revealed the National Association of Realtors’ proposed settlement is no exception.
On Tuesday, May 28, NWMLS announced it would not be taking advantage of a provision that would have allowed the MLS to opt into NAR’s deal and thereby be released from potential antitrust claims that could be lodged against the MLS for its commission rules.
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NAR’s proposed settlement, which has received preliminary but not final approval from the court, would have required NWMLS to make rule changes that Realtor-affiliated MLSs will have to make, including banning offers of compensation from listing brokers to buyer brokers through the MLS but not outside of the MLS. That rule appeared to be the main sticking point for NWMLS in choosing not to opt in to the deal.
“NAR’s proposed settlement agreement largely duplicates the rules and practices in place in NWMLS’ service area for several years — with one notable exception: The settlement agreement eliminates compensation transparency for buyers and restrains sellers’ choice by prohibiting sellers from making offers of compensation through the MLS,” NWMLS’s announcement reads.
“Instead, the settlement agreement allows for offers of compensation ‘off MLS,’ where that information is hard to find and not available to all buyers and brokers. That change is a step in the wrong direction and is detrimental to consumers and brokers alike.”
‘Secret’ deals? Or the fox guarding the chicken house?
According to NWMLS, eliminating compensation from the MLS would hurt both buyers and sellers by restricting choice and encouraging “secret deals” that could potentially violate fair housing laws.
“NAR’s removal of compensation transparency from the MLS pushes consumers and brokers to make secret deals off MLS, inviting deceptive practices, discrimination and unfair housing,” NWMLS said.
“Depriving buyers of information about the transaction risks harming buyers, especially those buyers who are already disadvantaged, including first-time home buyers and members of protected classes.
“Prohibiting offers of compensation in the MLS also unnecessarily restrains the seller’s choice and absolute right to offer compensation to a brokerage firm representing the buyer.”
Michael Ketchmark
Lead plaintiffs’ counsel Michael Ketchmark of Ketchmark & McCreight told Inman it wasn’t a surprise that NWMLS went its own way since 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 as a rule, I am always suspicious when the fox says it is guarding the chicken house, and that is what is happening now in Washington.”
How much NWMLS would have had to pay
Under the settlement’s “Appendix D — Non-Realtor MLS ‘Opt In’ Agreement,” non-Realtor MLSs are not automatically covered by the deal and have two options if they want to be covered:
- Option 1: Within 120 days after the NAR settlement is preliminarily approved by the court, deposit into an escrow account an amount equal to 100 multiplied by the number of the MLS’s subscribers in calendar year 2023 as reflected in the T360 Real Estate Almanac for 2023. For NWMLS, which had 33,121 subscribers as of Dec. 31, 2023, this would have meant the company would be required to pay $3.31 million.
- Option 2: If an MLS has a “good faith belief” that it does not have the ability to pay the amount required under Option 1, the MLS agrees to participate in a non-binding mediation with the plaintiffs’ attorneys within 110 days after preliminary approval of the settlement — at the MLS’s cost.
Open to litigation
Had NWMLS opted into the deal, the MLS would have been immunized from any lawsuit where a homeseller sold a home through the MLS starting on Oct. 31, 2019, and alleged that MLS rules requiring listing brokers to make offers of compensation to buyer brokers are a violation of federal antitrust law.
Justin Haag | Northwest MLS
Asked whether NWMLS is concerned that not settling will leave the MLS vulnerable to such litigation, NWMLS President and CEO Justin Haag told Inman, “NWMLS has been directly addressing opportunities to better serve consumers with industry-leading changes since 2019. The proposed settlement agreement largely duplicates rules and practices that have been in place in NWMLS’s service area for years.
“NWMLS expects the future will afford more opportunities for innovation that will benefit both brokers and consumers. For these and other reasons, NWMLS has decided not to participate in a settlement that removes transparency and consumer choice. Instead, NWMLS has elected to maintain its independence and ability to continue to innovate unimpaired by the limitations imposed by the settlement agreement.”
NWMLS’s rule changes since 2019
On Oct. 1, 2019, Northwest MLS changed its rules to allow the public display of buyer broker commissions and removed a requirement that a seller offer a buyer broker commission when listing a property for sale, in contrast to the practices of the nation’s other 600 or so MLSs at the time.
On Oct. 3, 2022, NWMLS eliminated commission-sharing between listing brokers and buyer brokers as a default and specified that, when offered, compensation to the buyer broker would come from the seller directly rather than the listing broker.
Most recently, on Jan. 1, 2024, a new law promoted by NWMLS went into effect in Washington State which requires brokers to sign written services agreements with buyers in order to represent them, not just with sellers as previously required.
“All services agreements must be entered into at the outset of the parties’ relationship and comprehensively address broker compensation and the details of representation,” NWMLS said.
“NWMLS’ rules and forms, together with the revised Agency Law, provide for consumer-friendly brokerage relationships. Sellers negotiate how much to compensate the listing firm and decide whether to offer to contribute toward the buyer’s broker compensation and the amount of any such offer.
“Buyers agree how much to pay their own brokers at the outset of their relationship and can then negotiate for the seller to help cover that cost as part of the purchase.”
NAR’s proposed settlement contains a similar provision which would require brokers to enter into written agreements with buyers they are working with before touring a home.
“NWMLS’ rules and forms broaden, not limit, consumer choice and do not favor any brokerage service model or compensation structure,” the MLS said. “NWMLS allows the market to operate unimpeded by MLS rules.”
The DOJ doesn’t agree with either NWMLS or NAR
MLSs, whether Realtor-affiliated or not, as well as brokerages not automatically covered by the settlement have until June 18 to opt in to the deal. MLSs that opt in will have until Aug. 17 to implement the changes the deal mandates, though the deal itself is not scheduled for a final approval hearing until Nov. 26.
Whether that final approval happens is an open question. Last week, an attorney for the U.S. Department of Justice said, “We believe offers of compensation should not be made anywhere, but certainly not on the MLS,” indicating not only that the regulator disagrees with NWMLS’s stance on keeping compensation in the MLS but also the NAR settlement’s authorization of making offers of compensation outside of the MLS.
The DOJ declined to comment for this story. However, in a statement of interest in a commission case known as Nosalek, the DOJ called for “an injunction that would prohibit sellers from making commission offers to buyer brokers at all,” which the agency said would promote competition and innovation between buyer-brokers because buyers would be empowered to negotiate directly with their own brokers.
In the filing, the antitrust enforcer pointed to NWMLS’ rule changes and said they appeared not to have had a meaningful effect.
The agency said the changes didn’t lead to a decrease in buyer-broker commissions, “had no apparent effect on either the portion of listings for which a buyer-broker commission offer was made or in the number of offers with zero compensation,” and did not lead to a decline in buyer broker commissions in large metro areas in NWMLS’ region relative to such commissions in other large metro areas where there were no similar changes to MLS rules.
At NWMLS, between October 2019 and March 2022, 99.2 percent of NWMLS listings continued to offer a buyer-broker commission (flat from 99.3 percent before the rule was eliminated). Virtually all, 94.5 percent, offered a cooperative commission above 2 percent.
NWMLS contended that the DOJ’s study of the NWMLS changes was flawed, including using transaction data from only one brokerage in NWMLS’ footprint for its analysis. According to a separate analysis, the NWMLS 2019 and 2022 rule changes led to an average reduction in commission on the sale of a $750,000 home of more than $1,000.
An upcoming rule change
According to NWMLS, the company will revise its forms and listing process to make sellers aware of an already-existing option to advise buyers that the seller may be willing to pay compensation to the buyer’s broker but may not be willing to offer a specific compensation amount in the listing itself.
“Thus, NWMLS’s listing forms and process will be revised to give sellers a convenient way to invite buyers to include any requested compensation for the buyer’s broker in the buyer’s purchase offer,” Haag told Inman.
“NWMLS is working on those revisions and plans to release them in mid-August.”
Haag declined to specify which forms and listing processes will be revised, in what way, what the text of the changes will be or by what date in August the changes will be made.
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