Recent Real Estate commission explained

You’ve heard about the recent commission compensation, here’s what it means

As a member of both NWMLS and ARMLS, let me attempt demonstrate the difference between the approach to “opt-in” and “opt-out” of the NAR recent settlement regarding commission compensation. There has been much reporting including some media representations that your home purchase costs “were just cut in half.”

Let’s do a deep dive into these MLS’s positions:

In the evolving landscape of real estate, Multiple Listing Services (MLS) play a critical role in facilitating transactions by providing a centralized database of property listings. The Northwest Multiple Listing Service (NWMLS) and the Arizona Regional Multiple Listing Service (ARMLS) are two significant MLS organizations in the U.S., each with distinct policies and governance structures. Their positions on the National Association of Realtors (NAR) settlement, a pivotal issue in the real estate industry, highlight their differing approaches to transparency, consumer choice, and broker compensation.

Overview of NWMLS and ARMLSNWMLS: The Northwest Multiple Listing Service (NWMLS), operating primarily in Washington State, is a member-owned organization. This structure ensures that its policies reflect the interests of its real estate broker and agent members. NWMLS is known for its commitment to transparency and consumer choice. In 2019, NWMLS eliminated the requirement for sellers to offer compensation to the buyer’s broker and made the compensation amount public. By 2022, they had further enhanced transparency by decoupling broker compensation and prominently stating it on the first page of the purchase and sale agreement. Additionally, they revised Washington’s  “Agency Law” to require brokers to enter into written service agreements at the outset of their relationship with buyers or sellers.

ARMLS: The Arizona Regional Multiple Listing Service (ARMLS), serving the state of Arizona, is one of the largest MLSs in the country. Unlike NWMLS, ARMLS is governed by a board of directors that includes representatives from various brokerages and real estate organizations. ARMLS is known for its advanced technology platform and comprehensive services. It provides extensive property listings, market data, and tools designed to enhance the efficiency and effectiveness of real estate professionals.

Positions on the NAR Settlement:

The NAR settlement addresses several antitrust concerns, including the transparency of commission structures and the accessibility of MLS data to consumers. NWMLS and ARMLS have taken different stances on this settlement, reflecting their distinct philosophies and operational frameworks.

NWMLS’s Position: NWMLS has chosen not to opt into NAR’s proposed settlement agreement, believing that its existing rules and forms already provide for consumer-friendly brokerage relationships and do not limit consumer choice. NWMLS argues that the settlement agreement largely duplicates the rules and practices already in place in its service area, with one notable exception: the settlement agreement eliminates compensation transparency for buyers and restricts sellers’ choice by prohibiting them from making offers of compensation through the MLS.

Instead, it allows for offers of compensation “off MLS,” where such information is harder to find and not available to ​all buyers and brokers. NWMLS sees this change as detrimental to consumers and brokers alike, inviting deceptive practices, discrimination, and unfair housing. By depriving buyers of information about the transaction, it risks harming those who are already disadvantaged, including first-time homebuyers and members of protected classes.

ARMLS’s Position: ARMLS, as an MLS owned by REALTOR® associations, was compelled to opt into the NAR settlement to reduce future liability for its subscribers and the MLS itself. ARMLS views this as the best path forward. NAR maintains that cooperative compensation and its current policies benefit buyers and sellers, particularly lower- and middle-income buyers who struggle to save for a down payment.

The settlement allows for offers of compensation to be made outside the MLS if specified in the listing agreement, although any written agreement must include specific disclosures about the compensation amount and prohibit receiving compensation exceeding the agreed amount. ARMLS supports these changes, emphasizing the need for written agreements but without specifying a particular form, leaving it to brokers to follow their own requirements.

In Conclusion: The contrasting positions of NWMLS and ARMLS on the NAR settlement underscore their different approaches to transparency and consumer protection in real estate transactions.  NWMLS advocates for maintaining and enhancing transparency and consumer choice, while ARMLS supports the NAR settlement as a means to reduce liability and continue benefiting buyers and sellers. These divergent views will shape the future of real estate transactions in their respective regions, influencing how brokers and consumers interact within the market.

Bill Cole is with Realty ONE Group, Scottsdale/Seattle | Associate/Managing Broker. You can reach him at 206-949-1372 or web site at  www.foregolfproperties.com.