First, the Arizona Regional MLS board decided to ignore the National Association of Realtors’ incomprehensible ruling that Google was a scraper site and prohibiting agent and brokerage sites from allowing Google to index listings (which I happen to do on several of my sites.)
And now ARMLS has reversed an earlier decision and eliminated the ability for agents listing short sales to not offer a firm commission as part of the co-brokerage agreement and rather offer 50 percent of whatever the bank decides to allow.
Translated into English … in 99 percent of all situations, buyers agents are compensated by the seller through the listing agent as part of the MLS’ cooperation agreement. As part of that agreement, listing agents must specify what that compensation will be … it needs to be an unconditional offer.
On short sales, it’s not uncommon for the lender to reduce the amount of commission it will allow when approving a sale. Some listing agents decided the solution was to add in the comments that the commission wasn’t what was stated but rather would be 50 percent of whatever the bank decided to allow.
Here’s the basic issue … the bank isn’t a party to the listing agreement and shouldn’t be able to alter the commissions being paid. If a listing agent isn’t able to hold their ground against the bank, at least to my mind, they should take the hit and not suddenly reduce what was supposed to be an unconditional offer of compensation.
ARMLS apparently agrees:
Many MLS organizations have already adopted rule 5.0.1 and depending on the local market situation they may not see the need to reconsider this rule. ARMLS believes that opening this door to allow lenders first, and possibly others later, to influence the business relationship established by and between our participating brokers and their clients is a dangerous precedent to set.
We believe that the unconditional offer of cooperation and compensation is a cornerstone of MLS structure and purpose, and to allow anything less erodes the very foundation upon which this cooperative institution was established. But we do not pretend to tell other organizations how to run their business. We only want the option to conduct business in our market according to the principles to which we and our participants subscribe.
Making adoption of the latter part of rule 5.0.1 optional, rather than mandatory, would allow MLSs like ARMLS, who believe in the sanctity of the unconditional offer of compensation through the MLS, to NOT adopt the latter part of the rule. We would not be forced to allow, much less forced to facilitate, lenders who want to bludgeon agents at the closing table with the club of commission reduction. Anything less than the removal of the mandatory rule is an open invitation to banks, lenders, and other non-Participants to interfere in the real estate brokerage business through the back door, now that the front door has been slammed in their faces.
That was from ARMLS’ motion to allow local MLS to make their own decision regarding the offer of compensation. Local MLS boards since have been given that leeway, leading to ARMLS’ decision:
The outcome of the appeal resulted in the NAR commission rule becoming an optional rule rather than a mandatory rule. As a result, the ARMLS Board of Directors voted in May 2009 to return to the original policy of not allowing any conditional commissions to be offered through the MLS. This includes any field, Remarks or otherwise, as well as any media or attachments to the listing.
A Brief Word on Divorced Commissions
This is the point in the debate where those who favor divorced commissions- sellers paying their agent, buyers paying theirs out of pocket – usually enter the discussion to continue what to date has been almost exclusively an academic debate.
And I’ll dismiss this argument with the simple statement … when the public cares enough to pay for their own representation as buyers out of pocket rather than go without any representation, then I’ll resume the debate.
ARMLS decision does in fact help protect those buyers who have signed buyer broker agreements and agreed to ensure their agent is compensated a certain amount in as much as it takes the guesswork out of the equation. There will be no need to wonder whether the cost of the house is going to rise ever further because of the need to come out-of-pocket even though the listed compensation is the same in the MLS as on the buyer broker agreement. What’s there is there. End of story.
Which makes sense, as there seem to be few businesses where people are expected to work and only learn later what they might earn for their effort.
Kudos to the folks at ARMLS … now if we only could get Active to mean Active 100 percent of the time.
[tags]Phoenix real estate[/tags]