Part 2: Offers of Compensation No Longer in MLS: What It Means for You
This is part 2 of a 3-part series of blog posts. In this part, we’re focusing on a significant rule change: the prohibition of offers of compensation on MLSs.
What’s Changing?
Traditionally, when a home was listed on an MLS (Multiple Listing Service), the listing agent would specify how much commission they were offering to the buyer’s agent. This information was visible to other agents but not necessarily to you, the consumer. Going forward, the field for offers of compensation will no longer appear on MLS platforms. Although it may initially seem counterproductive and less transparent, this change actually means that conversations about commissions will be more intentional and upfront, thereby increasing transparency.
Important Clarifications
It’s super important to understand that this change does not mean sellers will no longer pay for buyer agent commissions, nor does it mean buyers are now responsible for their agent commissions. Commissions have always been negotiable, and this change simply moves that conversation off the MLS.
What This Means If You’re a Seller
More In-Depth Conversations: You will now have more detailed discussions with your listing agent about how much commission you’re offering in total and to the buyer’s agent, but most importantly, the repercussions of not offering compensation. Buyers will now ask if compensation is being offered prior to touring a property and will decide to see or skip properties based on that alone. That decision will be made by buyers, not their agents.
Transparency: Although the offer of compensation won’t be listed on the MLS, it’s still crucial to be transparent about it during negotiations. Your agent will guide you on how to best communicate this to potential buyer agents. There will be additional paperwork, like compensation agreements that buyer agents will request prior to setting up showing appointments. Since MLS no longer shows compensation, these compensation agreements will ultimately become part of the purchase contract to verify compensation being offered.
Negotiations: Commissions have always been negotiable by all parties and will continue to be part of the buying and selling process. Parties will request documentation of compensation during negotiations, ensuring all terms are clear and agreed upon.
What This Means If You’re a Buyer
Understanding Compensation: You will need to have a conversation and hopefully a buyer consultation with your agent upfront about their service offering and their compensation—the amount, who pays it, and where it comes from. Your agent should request compensation information from listing agents so you know which sellers are offering compensation and which are not.
Informed Decisions: Knowing the commission details beforehand allows you to make more informed decisions about which properties to view or how to budget accordingly. You can discuss with your agent different strategies to negotiate offers, which include not only compensation for your agent but may also include seller concessions and other considerations.
Transparency: This rule enhances transparency in the transaction process. You’ll have a better understanding of the financial arrangements and can ensure that your interests are well-represented.
What’s Next?
Stay tuned for Part 3, where we’ll explore the requirement for a written agreement with buyers before touring homes. We’ll dive into what this means for both buyers and sellers and how to navigate this new requirement effectively.
to read other parts: