The end of an era came on Tuesday, but you probably didn't notice.
It was a big step toward implementing new rules and business practices among Realtors and MLSs. Something new is growing.
Bye Bye, Buyer Agent Comp
Starting early Tuesday morning, our regional MLS, known as CRMLS, ceased publishing "offers of compensation" from listing brokers in the MLS.
The fields where previously "Buyer's Agent Compensation" (BAC) was displayed are now blank. Soon, they'll be deleted entirely.
For as many years as most can remember, this little slot next to the "BAC" was where agents would go in their MLS systems to find out how much they'd get paid for selling a listing (representing the buyer). Often, you'd see a percentage there, maybe 2.0%, 2.5%, 3.0%. (Technically, it could have been 0.)
The same data has been published on many websites for 3-4 years, including MB Confidential. All of that is over now.
Going forward, while listing brokers may continue to offer commission-sharing with buyers' brokers, the MLS will no longer publish that information, or get involved in commission-related disputes.
However, there are two places where our MLS will display information that is sort of/maybe/possibly/sometimes relevant to how buyers' agents are ultimately compensated in home sales.
1) Are Sellers Open to 'Concessions?'
One is "forward looking," in active listings.
There, the MLS will present a simple YES/NO answer as to whether sellers are willing to advertise, in advance, that they are open to "considering" offers that include a request for seller "concessions."
This is NOT compensation. It's not a specific offer or promise of compensation, or anything, to anyone. It's not binding. It's merely a statement that the seller is open-minded on the topic of seeing requests from a buyer.
A buyer's offer could be presented with a price and terms, along with some kind of request for seller concessions. Any such concessions will be evaluated as part of the whole deal.
"Concessions" by the seller might be used by a buyer for anything – to pay down a loan rate, to pay escrow fees, to make repairs, to buy a hot tub (well, maybe not), or, perchance, to direct some of the seller's sale proceeds to the buyer's agent, so the buyer does not need to pay their agent out of pocket.
The new MLS field exists in part to facilitate what might become one of the standard practices over time – a buyer's agent's fee could be "built into" an offer, in the form of a request for "concessions" by the seller. There are slots in our newest offer forms to request concessions, and a new addendum as well, to orchestrate "Seller Payment of Buyer's Broker" through the transaction.
Even while buyer's agent fees seems like the focus – because of our changes in commission rules – it could be valuable to sellers in many situations to advertise a willingness to provide "concessions" like this.
Think about buyers who may be totally maxed out just gathering 3%, 5% or 10% down payments, and who can't pay escrow costs, impoundments for insurance or property taxes, and so on. These are the kinds of closing costs that help to make homes more unaffordable for average folks.
A seller can basically say, "for the right price, don't worry, I'll cover some of your transaction costs, and you can finance them as part of the deal." This may help a lot more buyers than only those who want their agent to get paid.
Interestingly, during a brief early-rollout period, the MLS had a couple of additional data fields to go with this declaration of "willingness" to consider seller "concessions" – one for a percentage, one for a dollar amount.
Those fields were little-used, and the California Association of Realtors decided to remove from its brand new forms any references to "concession" percentages or dollar amounts. Soon, MLS authorities decided to drop those fields.
Maybe the overall look appeared too much like replacing one system (binding offers of compensation) with another (specific-looking offers of "concession" amounts). When you've just lost a big lawsuit, don't make it look like you're doing what you were doing before...
2) What 'Concessions' Were Given?
There's another place in the MLS where "concessions" info will emerge, and this may prove useful over time to consumers, appraisers and real estate professionals.
On closed sales, there will be detailed reporting on what kinds of concessions were granted by the seller to the buyer, both by category and by dollar amount.
The blank field labels are shown here. Listing agents will be required to report, with dollar amounts, any concessions given for:
- (Buyer's) Closing Costs (escrow and title fees)
- (Buyer's) Financing Costs (loan origination and discount points)
- Buyer Broker Fee (amount the seller paid directly to the buyer’s broker)
- Property Improvements (repairs and upgrades)
- Other Costs
They can add a comment, where needed, to explain what went down.
This detailed reporting is a huge change. A previous "concessions" field was used in about 40% of sales, but without many rules or guidance on how and what to report. Frankly, it was the Wild West.
Now it's mandatory to follow this new format to accurately report details from a sale.
Over time, we'll develop a much richer database about transactions that will help with more accurate appraisals, for instance. And we'll see, over time, how buyer agent compensation evolves – at least compensation directly from a seller to a buyer's agent.
It's still TBD how much of that info will appear on consumer-facing websites, but we'll make an effort to get the data into the MB Confidential database as it begins to fill out.
-----------------------------------------------------------------
Nerdy notes: Your blog author and local broker, Dave Fratello, is a longtime member of the CRMLS Rules Committee, past chair of the local South Bay Association of Realtors' MLS Committee, and a current member of the Board of Directors of the California Association of Realtors, serving on the MLS Policy Committee, among others. As such, Dave has been involved in discussions, planning and rule-making related to all of the topics referenced in this post.
Deep Dive Opportunities: Want to get more background on changes in broker compensation and MLS rules? See:
How Buyers' Agents Are Paid... For Another Week
Why and How Buyers' Agents Are Paid... And How It's Changing
