Commissions coming back to MLS PIN?

Anthony Lamacchia:

 Remember the MLS PIN case that got put on hold, the stay got put on the case last June of 2024? Now that the national settlement has been approved back in early December, that case is going to start rearing its head once again. Late last week on Friday, both MLS PIN, who is the defendant, and the plaintiffs, the Nosalek, they each filed a response, a memoranda, or a statement of interest, basically again, saying, please approve our settlement.

Now, keep in mind, there is a stark difference between the settlement proposal and the MLS PIN case and what the actual settlement was for NAR. The NAR’s national settlement, they made an agreement that the offering of brokerage compensation in the MLSs would be evaporated, hence, why it’s gone. Even the possibility of doing that has been eliminated, stripped out of every MLS in the country, except for a select few that are operated privately and not realtor-owned. They do have a choice, but MLS PIN is in a very unique position. Since there was an open case that Judge Patti Saris put a stay on in June, MLS PIN is still allowing brokerages and realtors to continue to offer compensation if they want to through the MLS. The last time we did a little study a month ago about 30% of listings out there are still proactively offering compensation.

Now, I have to give credit where it’s due. MLS PIN, they are not backing down. They’re still fighting and still arguing and still pointing out that, hey, there’s no reason there should be some type of stop against the offering of compensation being argued. I talked about this for months on end last year. A year ago, I explained many things that I felt were an issue. Some of which the MLS PIN attorneys articulated very well in this document right here, Defendant MLS PIN’s Supplemental Brief in Support of Preliminary Approval of the Class Action Settlement.

Remember, this is the third time, the third time that both the plaintiff and the defendant have filed with the court saying, hey, we’re for the settlement, let’s get it done. Part of the settlement, remember, there have to be disclosures in the listing agreements. This is negotiable, not set by law. Seller realizes they don’t have to offer compensation, et cetera, okay? This is the third time. The boogeyman, the Department of Justice, keeps sticking their nose into the case, saying, we don’t like it, offerings of compensation shouldn’t be offered. Then they say, well, what don’t you like about it? They don’t have an answer.

As of yesterday, there’s a new president, and hopefully, the new president will follow through with what he said, which is getting some of these government regulators in check. Without a doubt, certainly in these real estate cases, the Department of Justice has gone way too far. They’ve demonized real estate, they’ve demonized realtors, and they keep sticking their nose in, but they don’t really answer what their issue is with real estate or with the offering of compensation.

I made the argument many times. It’s more transparent to offer the compensation if the seller or listing broker want to do that. I also talked many times going back to last May about fiduciary duties and how an agent has a fiduciary duty to explain different things and explain costs to buyers. The listing broker has a fiduciary duty to explain to a seller that, hey, if you don’t offer compensation, and others are offering compensation, it may possibly deter some buyers from your home. Remember, I talked about all that? There was a big to-do with someone in the industry or really not in the industry that tried to say I didn’t know what I was talking about, and then I obviously proved him wrong. It’s funny, they took the argument that I made last May and June, and they talked about it in here, which I’m happy to see.

I just want to point out a couple of things. Page 6 here from MLS PIN, “Brokers provide a valuable service and have to be paid somehow. And if they are not paid out of the final sale proceeds through a transparent and efficient exchange of compensation information, their services will be beyond the reach of many purchasers.” How many times did I mention that a year ago? I said, buyers cannot pay this stuff out of pocket. “A complete prohibition of compensation offers would also contradict state and federal authorities recognizing the legitimacy of those offers, create an antitrust problem where none existed, and restrict commercial speech that is entitled to the First Amendment protection.”

Let me keep going. I thought that was a great point by them, and they’ve brought that up before. “To eliminate free-market compensation offers,” page 9, “would harm home buyers. Many buyers, especially first-time buyers, would be excluded from the housing market if forced to pay broker commissions out of pocket.” I don’t want to pat myself on the back here, but folks, I’ve been talking about this for a year and a half.

Because truthfully, buyers are going to be hurt the most. He said, well, can’t they put it into the sale? He used some words like that. Don’t quote me, and I said, “Mike, Fannie and Freddie regulations don’t allow that.” He said, “Well, regulations can be changed.” Regulations can be changed? Michael, Fannie and Freddie went into the FHFA and into government conservatorship in 2008. Every year there’s talk about getting it out of government conservatorship, okay? It’s 15 years later, nothing’s changed. They’re not changing that regulation, and if they are, it’s not going to be easy and it’s not necessary.

I give them credit for putting it in. “That is why initial compensation offers play such an important role in promoting affordable housing: they provide an efficient and transparent way for buyer brokers to be paid out of the final proceeds.” Stay with me, folks. I’m going to recap what this means for realtors every day beating the street because if they win this argument, we’re going to be the only, when I say we, it’s our biggest MLS that we operate on MLS PIN. Those using MLS PIN will be on an island of our own, will be the only MLS in the nation that will continue to be allowed to do that.

I just wanted to mention that, but let me read a couple more points. Down here in the footnote, page 12. “Plaintiffs have never articulated any theory by which MLS PIN, as an intermediary, can be held responsible for buyer brokers steering customers based on compensation offers. If steering is occurring, that sounds in the realm of fiduciary duties and not antitrust law.” Then it goes on to say, if you’re steering, you’re not adhering to your fiduciary duty. I brought that up a ton in our great, brilliant, in-house counsel, Mr. Michael McDonagh, brought it up in the long write-up that he did late last summer or during the summer when he got into fiduciary duties in depth.

Our general counsel put out a phenomenal write-up about fiduciary duties, steering, and multiple other points that he made. Stay with me here. I want to point some of these things out. He put this right up out last week. It was named Fiduciary Duties and Steering in Real Estate. This gentleman, Mr. Michael McDonagh, was the past Massachusetts Association of Realtors general counsel. He was up counsel there for 20 years. This person is an encyclopedia of real estate information. Remember, I went over them a ton, and we’ll probably show you something on the screen or at least give you some links to go back and look at that.

It’s time that we go into what fiduciary duties actually are. The last this got updated was 2013. This morning, my general counsel and I compared it to the 1986 version, and it hasn’t changed. I don’t think what has happened will make it change, but let me walk you through it. Duty of loyalty, duty of confidentiality, disclosure, obedience, reasonable care, and diligence in accounting.

A couple of things I want to mention from the supplemental memoranda in support of the preliminary approval. Again, it’s so funny. You’ve got a defendant and a plaintiff both saying, please approve our settlement, okay? There’s some changes. Now I guess 3.9 million is going to the so-called class plaintiffs. That’s a joke. They’re so-called harmed. That’s a joke. That’s not real life. These people weren’t really harmed, but this is what happens in class action cases. Lawyers get rich, consumers get nothing. John Stossel did a great segment on it on YouTube. You should check it out.

I’m going to read a little bit of this, not every part. Page 12. Now this again is the Nosalek plaintiff’s response. Remember, these go to the judge. Now the DOJ has 90 days to respond to these, and then that Judge Patti Saris will make her final determination whether she gives a damn what the DOJ says or not. Her decision is going to be in the national spotlight because if she approves this settlement as each side is proposing, literally, it will be shocking because the whole country will say, wow, that’s the one MLS in the country that you can still offer compensation. Competitively speaking, I think that’s going to be good for MLS PIN.

I’m going to read here. “Similarly, the Greater Boston Association of Realtors posted an article about the growing number of private subscription websites being set up as clearinghouses for cooperative compensation information that no longer be posted directly in MLS.” All right, the point that they’re getting here is they’re pointing out how now since August 17th or earlier in some states like New Hampshire, now that compensation cannot be offered in the MLSs, there’s other websites that people are using. There’s all kinds of means of communication that brokers are utilizing to communicate compensation offerings, whether it’s from seller or listing broker.

In the statement, the Department’s only, now they’re talking about the DOJ, only specific suggestion is a hypothetical rule that altogether prohibits offers of buyer-broker compensation by MLS participants. It’s lunacy, folks. The DOJ saying that is completely insane. I can only hope that the new hierarchy that’s coming into the new DOJ or the existing DOJ, but a new hierarchy, I can only hope that they are more business friendly and have a better understanding of how the real world works. Because the DOJ that’s been in for the last four years, they just go after businesses all the time. We shall see if that will occur.

I love what they say here. “Plaintiffs respectfully question whether such a restriction,” this is the plaintiffs talking, “whether such a restriction–which is itself a restraint of trade–is a proper injunctive remedy. Plaintiffs here represent a punitive class of sellers that legitimately may want to offer to pay a buyer’s broker in order to advance a transaction, including, for example, a simple desire to move quickly and get a deal done.”

They’re basically saying, hey, don’t restrict us sellers who are the plaintiffs from being able to offer compensation. I have to give both sides credit, even though I don’t love the plaintiffs here, and I think that their case is essentially a money grab, and the lawyers, you can hear that, and the plaintiffs, you can hear that. I don’t give a damn, because it’s the truth. I have to commend them for saying, hey, this is stupid that you’re stopping the offer of compensation being done.

What is going to happen? Next steps. As of right now, MLS PIN, as you can see, they have taken the attitude that they’re going to allow brokers to offer compensation in the MLS as long as they want to, but they’ve changed the language in the screen or in the offering of compensation where it says from seller. Remember last summer when I said, when possible, we’re no longer participating in broker to broker compensation. Instead, we wanted to go seller to broker, and there were people that were confused, and some of my competitors said, oh, he doesn’t want to pay realtors, and I know some of them were sending it around, and then I put out clarification videos. I drew on the board, go ahead, show it.

This was the old way of doing business. Seller had the commission. Seller had the money. Seller paid listing broker. Listing broker shared a portion of that commission when the seller wanted to, which was most of the time with the buyer broker or buyer brokerage. All I’m proposing, ready? It’s magic. This stays. Take this out. Go directly from here to here.

See that? I described it great right there. I know that that caused a little bit of competitive friction, but many companies have followed suit nationally. Some of the larger ones like eXp and some of them, they’re all doing that. Next steps. Here’s the deal. Between now and the next 90 days, if you or your seller wants to offer compensation, whatever wording I should use there, then there will still be an option to do that in MLS if the seller wants to do that.

Within 90 days, the DOJ is going to be filing whether they agree with this or not. That one, the whole country will be looking for their statement of interest. After that, once we get past that, the judge will have to make a decision. If she decides to go with the existing settlement, MLS PIN would be on an island of its own. It would be the only place in the country where the compensation offers can continue to be offered. I’m not convinced she’s going to do that because the more she learns, the more she’s going to say, do I want to create the only market in America where the proactive offering of compensation can be offered? I don’t know. I don’t know this judge, but I do know she’s very well thought out, and she’s a very legitimate judge unlike the one in Missouri.

We shall see what happens. If they put it along with the national settlement, then by summer, likely, you will see an evaporation of any possibility of the offering of compensation in the MLS. I hope that makes sense. Realtors keep doing what you do, representing buyers, representing sellers, tenants, landlords, doing what’s best for your clients. I will keep you informed. Stay tuned in the Crush It In Real Estate, and for little updates along the way, my own personal Instagram. I’ve actually stepped up my game on Twitter. Thanks, folks. Good luck. Happy home selling.

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