Northwest Multiple Listing Service, a listing service through which thousands of Western Washington real estate agents share information about properties for sale, won’t take part in a national settlement proposal that drew new attention to real estate agent commissions this year.
Following a series of lawsuits alleging that the National Association of Realtors inflated commissions, the association agreed to a $418 million settlement agreement in March that will make important changes to commission practices in many parts of the country and protect the national trade association from certain future lawsuits.
The agreement covers the many real estate brokerages that are members of the association, but independent brokerages, like Washington state’s NWMLS, get to choose whether to join and agree to the same terms.
The real estate brokerage, which serves 26 of Washington’s 39 counties, including King, Pierce and Snohomish counties, announced Tuesday that it would not be part of the settlement. The organization said its existing practices already provide “an open, fair and transparent marketplace for consumers and agents.”
At the heart of the lawsuit against NAR was the way it commonly paid real estate agents.
Home buyers don’t usually pay agents directly. Instead, home sellers pay a commission to the agent, who then splits it with the buyer’s agent. Home listings often include information about the amount of commission the seller’s agent plans to offer the buyer’s agent. While the seller’s agent can theoretically offer the buyer’s agent any commission rate they like, the total commission is split between the two agents and has remained relatively stable for years at around 5% to 6%.
Critics argue that this payment structure allows buyers’ agents to scare homebuyers away from properties offering lower commissions, stifling competition.
Some have argued that the two real estate agent fees should be separated entirely, but many real estate agents who represent buyers argue that doing so would make homeownership even more expensive for their clients.
In a March settlement, NAR agreed to ban sellers’ agents from quoting commissions on multiple listing services affiliated with NAR starting in July. Agents can still quote commissions over the phone or through other means. The association will also require agents to have written contracts with clients.
To agree to the settlement, Northwest Multiple Listing Service, which is independent of NAR, was required to make similar changes in exchange for protection from similar lawsuits.
NWMLS announced its decision not to participate in the settlement, arguing that removing broker fee offers from home listings would reduce transparency and could lead to “deceptive practices.”
“This change is a step in the wrong direction and will be harmful to consumers and brokers alike,” the group said in a statement.
“NAR’s removal of compensation transparency from the MLS encourages consumers and brokers to conduct transactions in secret, outside the MLS, inviting deceptive practices, discrimination and unfair housing,” the statement said. “By depriving buyers of information about their transactions, we risk harming buyers, especially those who are already at a disadvantage, such as first-time homebuyers and protected buyers.”
Prohibiting sellers from including in their contracts compensation offers to buyer’s agents “would unnecessarily restrict the seller’s option and absolute right to offer compensation to brokers representing the buyer,” the statement said.
NAR is a powerful presence in the industry and owns the Realtor trademark, but legal issues and internal turmoil have shaken some real estate agents’ confidence in the group. At least two Seattle-based real estate companies, Redfin and Coldwell Banker Danforth, have left the group. NAR did not immediately respond to a request for comment Tuesday.
This isn’t the first time NWMLS has gone its own way.
NAR has made various reforms in recent years amid mounting legal troubles, likely an attempt to avoid the same kinds of liability that national associations have faced.
Local real estate brokers began disclosing commission rates for real estate listings and eliminated the requirement for sellers to pay compensation to buyer-side agents in 2019. Still, these changes haven’t significantly lowered commission rates in Seattle, according to a 2022 analysis by the Consumer Federation of America, which found that most Seattle listings offer buyer-side agents commissions between 2.5% and 3%.
Since the beginning of this year, Washington state law has required real estate agents to enter into written contracts with clients that include details about agent compensation, similar to the requirements of the NAR settlement.
NWMLS said these reforms in Washington have already “established more consumer-friendly intermediation relationships.”
“The seller negotiates how much to pay the listing agent and decides whether and how much to cover a portion of the buyer’s agent’s commission. The buyer can agree how much to pay his or her agent at the start of the transaction and then negotiate for the seller to cover that cost as part of the purchase.”
Stephen Brobeck, a senior researcher at the Consumer Federation of America who studies real estate brokerage fees, disagrees that local changes have gone far enough.
“The NWMLS ‘reforms’ have not had a visible impact on consumers,” Brobeck said in an email Tuesday, adding that Washington’s fee rates “remain relatively high and uniform.”
Brobeck argues that instead, commissions paid to buyer’s and seller’s agents should be completely separated and lenders should allow homebuyers to include agent payments in their mortgages.
The Seattle-King County Association of Realtors, NAR’s local affiliate, did not take a position on the NWMLS decision. “As a broker-owned MLS not affiliated with NAR, we continue to respect their independence,” association President Michael Orbino wrote in a letter to fellow board members on Tuesday.
Orbino wrote that he believes “our region will serve as an example for the most effective practice of real estate both nationally and internationally.”
