Article courtesy of: Inman News
By: Jim Dalrymple II
NAR's landmark settlement bars sellers' agents from offering commissions to buyers' agents in the MLS. A batch of new companies are stepping in to fill the void
When the National Association of Realtors announced its landmark commission settlement earlier this year, it raised one huge question: How will buyers’ agents get paid?
The question arose because, among other things, the settlement stipulates that sellers’ agents will no longer be able to offer commissions to buyers’ agents within NAR-affiliated multiple listing services — which is how much of the industry had been operating. Now, more than three months later, the answer to that question remains unclear. Some have speculated that without offers of compensation in MLSs, concessions might be the answer. Others have floated the possibility of cultural changes, such as the expansion of dual agency.
But during a recent virtual open house, Keller Williams Head of Industry and Learning Jason Abrams argued that really, the sky’s the limit for commissions.
“Sellers can still decide to specifically offer cooperative compensation, and it can be marketed any place other than the MLS,” Abrams said. “This could include things like newsletters and text messages and carrier pigeons. Or a broker or agent’s own website.”
Carrier pigeons might be a stretch. But in recent months a host of industry professionals have apparently come to the same conclusion — and stepped in to fill a void.
Specifically, a collection of companies have emerged to offer what the MLS no longer can: Online locations for agents and consumers to share their offers of compensation.
The sites represent a particular philosophical understanding of real estate’s future. They’re an argument, essentially, that buyers’ brokers will still be paid by sellers and that compensation offers will still appear online.
Neither of those assumptions are foregone conclusions, but the people behind these offerings are forging ahead with the hope that consumers and industry members will see something they like — and that government regulators won’t get in the way. In other words, buyer beware.
Verified Commissions
Verified Commissions launched last month. The company described itself in a statement as “an open-source platform for agents to share offers of compensation,” with the goal to become the “largest database for verified offers of compensation to buyers’ agents.” The site is free and allows users to search listings by address to see if those listings have compensation offers attached.
In a conversation with Inman, William Schoeffler — who is part of Verified Commissions’ design team — said the company is building a database by sending out about 10,000 emails daily to listing agents asking them to register with the site.
“Basically we want to grow awareness and build out the number of listing agents that are using our platform, so that over time we can become the go-to platform,” he added.
CEO Cody Tuma told Inman that demand for the offering has been strong so far, and noted that as the August deadline for implementing the NAR settlement rules nears more agents are likely to be looking for a solution like Verified Commissions.
“All these agents, their phones are just gonna start lighting up and they’re just gonna be like, ‘Oh my gosh, there has got to be a better solution for this,'” Tuma said. “And there already is.”
Listing Split
Listing Split is the product of Steven Hattan, a long-time real estate broker, and Ed Ellingham, a software developer. The site went live last week. Unlike Verified Commissions — which markets itself as a tool for agents to use in the wake of the NAR settlement — Listing Split is geared toward consumers themselves.
“Sellers are at a disadvantage if they can’t offer a finders fee,” Hattan told Inman, adding that “our focus is completely on the homeowner; it’s completely on the seller.”
The site includes pages where sellers can offer commissions, as well as where buyers can search listings by address for “incentives” homeowners are providing. It also includes a page that aims to help Realtors introduce the site to their clients, though Hattan noted that Listing Split is “not for agents to use” directly.
The company charges users a one-time fee of $19.
Nesthook
Nesthook was the first company to garner significant attention as a kind of commission-sharing workaround and advertises itself on its website as a “compliant commission disclosure for real estate pros.” The orientation to industry members, rather than consumers, puts it in a category closer to Verified Commissions than Listing Split — though like both rivals it, too, includes an address-based search bar.
Speaking to Inman earlier this month, President Ryan Kelley characterized Nesthook as a direct response to the NAR settlement, adding that he believes the company complies with the new rules.
“I understand that changes could still happen [and] it’s all very unclear, and none of us really know, but we’re confident with what we built, [and that it] is something we’re going to move forward with now,” Kelley said.
Nesthook offers two pricing plans: Either $3.99 per month, or $39.99 for an entire year.
Gitcha
Gitcha markets itself as the “first ‘in search of’ marketplace,” meaning it’s a space for buyers and their agents to publicize what exactly they’re looking for in a deal. Founder Dan Cooper recently told Inman that the project was in the works for years, though the site does now reference the NAR settlement — the timing of which Cooper said was serendipitous. The general idea is that would-be buyers share what they need, including, but not exclusively, broker compensation. Homeowners can then more easily find the right people to buy their homes.
For consumers, Gitcha offers a free “lite” version, as well as a paid tier costing $13 per month. Consumers who sign up are given the chance to either create a “want ad” detailing what they’re looking for in a property, or to add a home they already own to their “inventory,” which can let them gauge demand.
Real estate professionals can sign up for Gitcha as either brokers, property managers or both. Industry members also have access to a free version of the site, as well as a paid version that costs $12 per month.
Unlike other offerings on this list, Gitcha is unique for including rentals on its site.
Payload
Payload is the odd company out on this list because it isn’t a website for posting commission sharing offers. Instead, the company — a secure transaction payment provider that has been around for years — is now offering invoicing tools for agents to collect fees directly from consumers.
The tools are among numerous offerings the company provides, but represent a kind of theoretical alternative to the sites above; instead of envisioning a world in which commission offers still appear online, Payload imagines one in which agents bill their clients directly. It’s still a kind of workaround, but one of a different flavor.
In a recent statement, the company nodded to the NAR settlement as the impetus behind the new tools.
“The industry is poised for a shift towards increased transparency and direct financial dealings, highlighted by the anticipated use of buyer agency agreements,” the company said in its release. “This shift is likely to see a reduction in standard commission rates, with agents and brokers exploring alternative fee structures, such as buyer retainer fees, hourly fees, showing fees and other service fees.”
Will any of these solutions actually work?
The big question looming over all of these workarounds is if they’ll survive the tumultuous and highly uncertain legal obstacle course that lies ahead. Attorneys Inman contacted for this story were reluctant to speak on the record, citing the ongoing nature of various lawsuits, though several did agree to talk on background. The gist from those conversations is that third-party sites with no relationship to MLSs do not appear to violate the terms of NAR’s settlement.
However, there are caveats.
For instance, in addition to barring commission offers in the MLS, the settlement also disallows such offers on sites supported by MLS data, either “directly or indirectly.” What this means in practice is that a portal that licenses MLS data, for example, could not step in and create a space for agents to make shared commission offers.
The above sites currently offering workarounds aren’t doing that. On the other hand, there is some ambiguity in language such as “indirectly,” meaning it’s conceivable that commission-sharing sites could eventually cross a line that has not yet become clear.
A bigger caveat, though, is what the Department of Justice might think of such workarounds. The department has indicated that it does not want sellers making preemptive offers of compensation to buyers’ agents. Instead, the DOJ wants buyers’ agents to negotiate directly with their clients for compensation.
The DOJ hasn’t yet weighed in on third-party commission-sharing sites, probably because such sites are still relatively new, but one attorney said the concept generally does seem to be at odds with the department’s overarching objectives and could eventually lead to some sort of litigation.
Or not. One of the primary reasons lawyers contacted for this story were reluctant to publicly speak out is because the future of commission workaround solutions is highly speculative and involves numerous unknown variables. Meanwhile, predictions abound that the DOJ will become more assertive, and back in February NAR President Kevin Sears suggested the agency could be a “bigger problem” for brokers and agents than the settlement itself.
Against that backdrop, debate about the issue has raged in online forums and message boards. Inman reached out to a handful of agents who have weighed in, though none of those who were strongly in favor of various commission workarounds called back. On the other end of the spectrum, though, Indiana team leader Patrick Harris, of the Harton Group, did tell Inman that commission-sharing websites are “an attempt to hold on to a past that no longer exists, and [according to] the settlement and by the DOJ, it can’t exist anymore.”
“People need to stop trying to find loopholes and just move forward,” he argued.
Harris’ sentiment is far from universal but does capture a viewpoint that many share — and which could complicate the rollout of any particular commission-sharing workaround.
The analog solution
Tech may ultimately be the answer to questions about how agents will get paid — or, communicate about pay — in the future. But in a case study of how other solutions still abound, Tracey Hicks has pivoted in an entirely different direction: analog.
Hicks is the owner of All Things Real Estate, a store that offers supplies to agents. She recently told Inman that soon after the NAR settlement, a member of the real estate community reached out to ask if Hicks had any resources. So she made some.
The result is a sign now available through Hicks’ store that reads “courtesy to buyer brokers!” It can be affixed to an agent’s normal yard sign, and Hicks said the idea is to use language agents are familiar with and to let them know there is a commission on offer.
Whether the sign catches on remains to be seen, and asked about commission solutions, Hicks herself said that “there’s going to be quite a few different ways of handling it.” But she also said that eventually the questions will be answered. People will keep buying and selling houses. The real estate industry will move forward.
“Like most things,” Hicks concluded, “the dust will settle.”