Guidelines for Offers of Cooperative Compensation Outside the MLS
QUESTION: As a listing agent, I am wondering how to advertise and negotiate cooperative compensation now that we know the new MLS rules will be effective no later than August 17, 2024. Do we have any guidance yet?
ANSWER: Yes. NAR has released a series of FAQs on the new MLS policies, which you can read here. There are 95 FAQs in total that address many topics. As to your question, there is one overarching focus in these FAQs: compensation information will not be allowed the MLS. As to how REALTORS® communicate offers of cooperating compensation outside the MLS, the FAQs provide some helpful guidance to the following questions.
Can the seller offer concessions to the buyer in the MLS? Yes. See FAQ 33. Cooperating compensation can be negotiated outside of the MLS between the buyer and seller, and buyer concessions will continue to be allowed within the MLS as they are now.
Will Article 16 and Standard of Practice 16-16 prohibit the negotiation of buyer agent compensation as part of a buyer’s offer to purchase? No. See FAQ 43. Buyers may ask their agent to make an offer to the seller that is conditioned on a request that the seller pay compensation to the buyer’s broker. The FAQ makes clear that SOP 16-16 “prohibits a REALTOR® from attempting to modify the terms of a listing agreement through the terms of an offer because the listing agreement is a contractual matter between the seller and the listing broker. However, the seller and the listing broker may independently choose to amend the listing agreement or take any other action they deem appropriate based on the seller’s negotiations with the buyer.” A listing agent and their seller may make that choice at a buyer’s request.
You might be asking yourself, “Wait, I thought a buyer agent cannot withhold an offer or make an offer contingent on cooperating compensation under SOP 16-16?” You are correct. SOP 16-16 states that “REALTORS®, acting as subagents or buyer/tenant representatives or brokers, shall not use the terms of an offer to purchase/lease to attempt to modify the listing broker’s offer of compensation to subagents or buyer/tenant representatives or brokers nor make the submission of an executed offer to purchase/lease contingent on the listing broker’s agreement to modify the offer of compensation.” Buyer agents cannot put their interests and payment for their services ahead of their fiduciary duty to their clients. If a buyer wants to make an offer, then the buyer agent must follow their client’s direction.
So, what is the catch? The catch is that the buyer is in control of their offer, and the buyer can condition their offer on whatever terms the buyer wishes, including payment of their agent’s commission. In other words, a buyer agent cannot make an offer contingent on an agreement for cooperating compensation, but the buyer can.
In 2019, NAR issued two FAQs on this topic, which you can read here. In one of the FAQs, NAR states: “If your [buyer] client so wishes, he or she could make the decision to condition the offer to purchase the property on an agreement by the seller to pay an additional specified amount [of buyer agent compensation]. The buyer and the seller are the parties to any contract to purchase the listed property. They can negotiate the terms of that contract as they see fit. Just make sure that your client completely understands the pros and cons of submitting an offer with that type of contingency, and make sure not to pressure your client in any manner that is inconsistent with your fiduciary duty to that client.”
As a final note, the requirements of Article 16 and SOP 16-16 must be facilitated in compliance with Rule .0112(b)(1) of the License Law. The North Carolina Real Estate Commission has recently restated that this rule “bars a broker from using a preprinted offer or sales contract form containing any provision concerning the payment of a commission or compensation to a broker or firm.” REALTORS® must be very careful to negotiate cooperative compensation as part of an offer to purchase in compliance with both the License Law and Article 16, but it can be done.
Can the MLS have a “Yes/No” field as an option to communicate that cooperative compensation is available? No. See FAQ 45. No information about compensation is permitted in the MLS, including a “yes/no” field on the listing.
Can listing agents make offers of cooperative compensation on their brokerage website which has an IDX or VOW feed? Yes. See FAQ 46. MLS participants will be permitted to augment MLS data or data feeds with offers of cooperative compensation for only their brokerage’s listings on their brokerage’s website. Offers of compensation on a brokerage’s website must be accurate, truthful, and approved by the seller after full disclosure. It is also strongly recommended that this language be drafted in consultation with legal counsel. As will be discussed in more depth in future Q&As, Form 220 has been re-drafted to make sure that agreements as to cooperating compensation can easily be reduced to writing.
Firms should understand that the MLS provides a robust legal framework for facilitating compensation, and that framework will no longer be available once the new policies are implemented. Any offer of compensation on a firm’s website should therefore be carefully written in order to avoid disputes with clients and cooperating brokers and firms.
Can MLS participants use or share MLS data to establish or maintain another platform with multiple brokers to make offers of compensation to buyer agents? No. See FAQ 47. The FAQ states that the “use of MLS data or data feeds to directly or indirectly establish or maintain a platform of offers of compensation from multiple brokers to buyer brokers or other buyer representatives is prohibited.” Aside from the guidance in the FAQ, there are other reasons to avoid setting up another system, or joining another group of brokers, for the purpose of sharing cooperative compensation. As the result in the Burnett case shows, any system that is similar to the MLS is subject to antitrust claims, and may create exposure not only for the system, but also for any firms and brokers using the system.
Can I still arbitrate or mediate a dispute concerning an offer of compensation? Yes. See FAQ 49. REALTORS® must continue to arbitrate or mediate pursuant to Article 17 of the Code of Ethics. MLS Participants who are non-REALTORS® are also bound to arbitrate or mediate pursuant to their MLS’s local rules.
Release Date: 5/16/2024
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