Opinion: Deep Dive into Proposed NAR MLS Changes
By Dawn Pfaff
Every year, the National Association of Realtors (NAR) converge on a major city. Other than the keynote address, the MLS policy meeting is usually standing-room only, because every year the MLS Policy Committee makes some new, earth-shattering, life-changing policy that ends up dividing the industry and the room. There are some key MLS changes being proposed this year.
Two years ago, before the pandemic had us all attending virtually, the committee passed the Clear Cooperation Policy. That policy was controversial because it requires an MLS member to enter a listing into the MLS within 24 hours or face a $2,500 fine. Many brokers spoke out against this policy as it could conflict with the wishes of their clients.
The meeting discussing MLS changes is very much like a town hall, where the audience stands up and makes their case for or against a policy and then the board votes the way they were going to vote before the meeting started. But this doesn't deter people from standing up and offering their opinion. Usually policies that get proposed, and are on the agenda, have already been debated by the committee prior to this town hall, but we keep showing up and giving our opinion anyway.
This year the list is long, but seemingly not provocative except for a few hot items that predictably cause the room to erupt on both sides of the argument.
Listing broker attribution on IDX listings
The biggest item is listing broker attribution on IDX listings. The proposal is that the listing broker's contact information will be included on all IDX listings and that the displayed information be at least as large as any other broker listed on that page. Realogy, specifically Coldwell Banker, is asking for this change. This is curious as they are a large broker and their websites generate a lot of traffic, so it would seem that they wouldn't want to put that burden on themselves.
But, I understand why they are pushing this proposal. Zillow and Redfin are brokers, and their websites use IDX feeds. They would have to live by these rules, too. This rule would force Zillow to go back to prominently display the listing broker and their contact information.
DOJ investigation drives some policy changes
This year, the MLS policy meeting may also have to deal with the issues the industry is facing from the U.S. Department of Justice (DOJ) lawsuit and the settlement that the DOJ pulled out of, as well as the pending investigation. What is obvious is that the DOJ wants more transparency, so that may drive some of the policy changes this year.
The DOJ wants more transparency in the way buyer brokers are compensated. They want to ensure that there is no price fixing to keep commissions artificially high. Right now, the co-broke amount is considered a private field in the NAR MLS and is not advertised to the public.
In theory, the co-broke is always negotiable; however, the amount offered is usually set by the listing agreement between the listing agent and the seller. The seller agrees to a certain commission given for the entire transaction and then agrees that a portion of that total commission will go to an agent that brings a ready, willing and able buyer to the deal.
The sticky part of this equation is that the broker who brings the buyer oftentimes represents the buyer's best interest, not the seller's best interest. The DOJ seems to think that this co-brokerage arrangement is keeping commissions artificially higher than they should be in a market with fair and open competition.
Their contention is that NAR, through the use of their MLS policies, keeps commissions higher than they would be if the buyer broker was not compensated through the co-broke. The co-broke amount is agreed to by the seller and is always negotiable. I don't know of any MLS that has a rule that requires a broker to split the commission at a fixed rate.
Buyer's agents advertising "free" services
The MLS Policy Committee will also take up rules regarding buyer's agents advertising their services as "free." Buyer's agents who are compensated out of the deal only get paid if a deal goes through; but that doesn't mean they work for free. They are working for the chance to make a commission if and when their buyer buys a property.
Search filtering by commission amounts
Another issue under consideration this year is prohibiting the NAR MLS from allowing a search of listings with a filter by commission amounts. I personally don't know of an MLS that has this kind of filter built into their software, although I have heard that some systems may have this ability.
As long as the data can be downloaded into a spreadsheet, agents can still sort using the commission field. There doesn't seem to be a real way to stop this practice; however, I don't believe this practice is very prevalent. Most agents who want to be compensated at a certain rate negotiate that rate regardless of the compensation offered in the MLS. Plus, it's hard to explain to your buyer why you can't show them a particular property when you base a showing on the co-broke amount.
Lockbox access for buyer agents
The next big proposed MLS change coming from the DOJ lawsuits is lockbox access for all buyer agents regardless of MLS affiliation. Electronic lockboxes that don't have a combo keypad can only be opened with the app or a one-day code. Not all the NAR MLSs are opted into one-day code access with Supra, as that is an extra feature of the Supra Lockbox. Sentry boxes have keypads, which make it convenient for one-day codes to be set for buyer agents that don't have a key. All agents should have access to lockboxes to sell a property.
Showing commissions on public websites
The most recent report is that the NAR MLS Policy Board will take up the a proposed MLS change concerning the showing the commissions on public websites but will not tackle the lockbox issue at this meeting. I believe that the MLS Policy Board should take up both issues, because increasing cooperation with buyer brokers is necessary to keep brokerage relevant. Our job as brokers is to represent our clients and to get them the best possible deal. That happens when each party in the transaction is adequately represented by the fiduciary of their choice.
Other agenda items for MLS changes include that all NAR MLSs should offer a broker back-office feed of all listings with all statuses. Most MLSs already have this option, but I guess we need this rule for the ones that don't offer this yet. They will also require a standard on data feeds and offer all data feeds as one type of data transmission, instead of one feed as a Real Estate Transaction Standard (RETS) and then another as FTP, XML, API, etc. NAR is trying to streamline data feeds for website tech vendors.
And then, of course, NAR will have some policy about fines and discipline, because most of the MLSs have fines for everything. Not all, because I happen to be the CEO of an MLS that has no fines; but some believe fines are the only way forward.
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