By: Brendan Aldrich, JD Candidate, with assistance of Paige M. Bellino, Esquire
If you have ever been involved in a real estate transaction as a buyer, seller, real estate agent, et cetera, chances are you have heard of the MLS. The MLS stands for Multiple Listing Service and is a private database that real estate agents and brokers use to share information about properties for sale in a given area. In the wake of the recent National Association of Realtors Settlement, the MLS policies and model MLS governing documents have been reviewed and updated. Beginning August 17, 2024, Participants, Subscribers, and their sellers may not make offers of compensation to buyer brokers and other buyer representatives in the MLS. Furthermore, the MLS may not set up, point to, or help with any other system, like a website, for Participants, Subscribers, or sellers to offer compensation to agents who are working with buyers. Use of MLS data or data feeds to directly or indirectly establish or maintain a platform to make offers of compensations from multiple brokers to buyer brokers or other buyer representatives is prohibited and will result in the MLS terminating that Participant’s access to any MLS data and data feeds. In New Jersey, failure to comply will result in a $1,000.00 fine.
In addition, MLS Participants and Subscribers must now: (1) Disclose to prospective sellers and buyers that broker compensation is not set by law and is fully negotiable. This must be included in conspicuous language as part of any listing agreement, buyer written agreement, and pre-closing disclosure documents (if any); and (2) Conspicuously disclose in writing to sellers, and obtain the seller’s authority, for any payments or offer of payment that the listing Participant or seller will make to another broker, agent, or other representative (e.g., real estate attorney) acting for buyers. This disclosure must include the amount or rate of any such payment and be made in writing in advance of any payment or agreement to pay.
Notwithstanding the coming changes, there are still ways for real estate professionals to negotiate and communicate offers of compensation. One potential option for the listing broker or seller to offer compensation to buyer’s brokers is through their own marketing materials, unconnected to the MLS listing. Brokers can also show compensation offers for their own listings on their websites. An additional option to communicate offers of compensation is through the seller’s concessions to buyers, and depending on the local MLS, these concessions may be listed in specific fields on the MLS. Lastly, compensation could be included in the terms of the written agreements that are required to be entered into before a buyer begins viewing homes with an agent. See Melissa Dittmann Tracey, Communicating Offers of Compensation, Realtor Magazine (June 5, 2024). The attorneys at M&B Law stand ready to consult with real estate professionals, buyers and sellers to ensure they are able to effectively navigate the changes taking place within the MLS and the real estate industry as a whole.