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How does the lack of transparency around commissions and offers hurt brokers?

Reflecting on the DOJ/NAR case

Recently, NAR reached an agreement with the Department of Justice (DOJ) regarding MLS rules. The rules in question were considered to be anti-competitive by the DOJ (see details below). According to some, the MLS has a monopoly on everything related to a transaction prior to it going under contract, and some say that has not been healthy for the real estate industry as a whole. 

One of the first examples of transparency was Redfin, which started displaying commission amounts almost a year ago in an effort to bring more transparency to consumers. Another example is Propy with Propy Offers, which focuses on transparency and ease of use for all parties involved. However, honesty, transparency, and ease-of-use for the end consumer’s transaction process have been in very few companies’ core values. It’s time for the rest of the industry to catch up, and this agreement with the DOJ will be a good starting place. 

Brokers are liable for lack of transparency 

It boils down to this simple fact: Brokers are liable for the actions of the agents in their office.  In the highly competitive market that many areas of the country are experiencing, this lack of transparency on these rules can easily lead to buyers opening up an Ethics complaint with their State licensing authority regarding Fair Housing violations or other agency complaints.

For example, let’s say we have a Caucasian agent working with a Latino buyer. The buyer feels that his agent has discriminated against him based on race and did not present his offer to the sellers in a predominantly white neighborhood. Or perhaps a buyer is talking with a seller a few months after a property transacts. The buyer casually mentions they were really interested in buying that home, but the seller said they never saw an offer from them.  What really happened in these scenarios? Did agents actually discriminate or drop the ball on presenting an offer? It will be up to the Ethics Board to determine whether that happened or not, and the broker-in-charge has to be prepared to defend his agent and his company.

While State Boards will tell you otherwise, they really do operate on a “guilty until proven innocent” basis—and the Broker-in-charge is “guilty” right along with the agent until they can prove that the agent did indeed present that offer. Penalties for violations of the Fair Housing Act are hefty and could result in the agent and broker losing their licenses. While we may not have seen this example in the news recently, it’s only a matter of time until formal complaints of this nature are being made.

Solving the problem

Brokers need a way to limit their liability in the marketplace. While they can’t physically supervise an agent every minute of the day, brokers must have a way to know that their agents are acting with integrity and presenting all buyer offers, regardless of commission amounts or other factors.

Propy is able to solve these issues for brokerages. Built on a completely secure and transparent platform, Propy takes offer management to a new level. Propy takes the guess-work out of offer management and provides agents with an easy-to-use platform to streamline the transaction experience for their sellers and buyers. Providing this technology to agents can give brokers the peace of mind they need knowing they can easily track when all offers were made—and received—by the seller. Providing these real-time statistics to the Ethics Board in the case of a wrong-doing allegation will significantly bolster the broker’s position.  

Details of the DOJ and NAR case

The industry rules in question, which were considered to be anti-competitive by the DOJ, are as follows:

  • Prohibiting the MLS system affiliated with NAR from disclosing the commission the Buyer Broker will earn.
  • Allowing Buyer Brokers to misrepresent to buyers that the broker services are free.
  • Enabling Buyer Brokers to filter MLS listings based on the commissions.
  • Limiting access to lockboxes that provide licensed brokers with access to those who work with NAR-affiliated MLS.

While NAR has a strong Code of Ethics, when it comes to the MLS, it takes the position of “here is what we advise” rather than a strong statement of what an agent can and cannot do. 

We applaud NAR for reaching this agreement with the DOJ and believe that greater transparency in the industry is a tremendous benefit for consumers.

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