The New Commission Model Simplified

Yesterday I attended a zoom webinar hosted by CRMLS, the largest MLS in the country, about the changes that are taking place in industry. The subject was “Your New World” about the changes for brokers and office managers and there were over 1000 of them on the call. The webinar lasted about an hour and while the information was good, I found it quite boring as it basically just talked about the changes on the forms released back in July. The same forms that we’ve already been using for 4 weeks, so as valuable as the information was it would have been far more valuable in July. But there were two key takeaways I got from the call. One is the reminder that commercial real estate listings haven’t published a cooperating broker compensation historically and that a buyer’s agent would simply request a Commission in the LOI or in the offer. So, the elimination of cooperating broker compensation for realtors simply aligns residential real estate with how commercial real estate already operates. If you think about buyer’s agent compensation from the standpoint that the buyer’s agent just needs to write in their commission as part of the offer it makes this transition a lot less intimidating. My other observation from the call was about the questions I saw being asked in the Zoom Chat and Q&A section. I should have promoted this YouTube channel on there because most of the questions on there would have easily been answered by a number of the videos on this channel. The recurring theme that surprised me was the how much the brokers on the call were struggling with wrapping their head around the concept that cooperating brokers compensation is eliminated. It’s gone. Ancient history.

I mean, this is not a hard concept to grasp:

Compensation for seller’s agents and buyer’s agent must be billed separately. In other words, The seller’s agent can share their commission with the buyer’s agent.

But as they say, old habits die hard. And since the MLS won’t publish buyer’s agent compensation the brokers on the call were asking about creative alternatives, like putting the cooperating broker commission on a sign rider on the sign post or on flyers for the property. Of course, this is nonsense because the new listing agreement does not provide for the seller’s agent to charge enough to compensate a buyer’s agent. So, loopholes are pointless. There is zero cooperating broker compensation because agents can’t share what they charge. Think about this, independent real estate agents are not subject to these rules that only apply to realtors. An independent agent can charge a 5% commission and offer 2.5% to a cooperating broker on a non-realtor MLS. Right now, they can do this right now. But I don’t recommend it. I’m against it. I think this new commission model should be adopted universally, here’s why: The Sitzer Burnett lawsuit. The snowball that started the avalanche. I know why the lawsuit happened, but I don’t know why NAR lost. I don’t know if the plaintiff’s attorneys were geniuses, if NAR’s attorneys were lame, if the jury was gullible, or some degree of all three. I really don’t care either. It was all based on a misconception, a misunderstanding, and phony narrative, and the verdict made it real. Then the settlement etched it in stone. Historically a broker charged a commission and at their discretion shared some of their commission to another cooperating broker. That concept has been twisted to overcharging. It’s villainized. Wrongly, yes, but you won’t win the war of perception. So, this is why I’m embracing the new commission model. A seller pays the seller’s agent. A buyer’s agent charges a buyer their commission and can still ask for recompensation for their buyer in the offer. This dispels the myth of overcharging and real estate agents get paid all the same.