Dispelling Myths About Commissions and the MLS

Editor’s note: The following ‘Myths vs Facts’ were excerpted from recent research, “Dispelling the Myths About Real Estate Commissions and the MLS,” released by Bright MLS. Bright MLS President and CEO Brian Donnellan offers context on the analysis below the comparisons.

Myth: Agents steer clients to homes with higher commission rates.  

Fact: Our analysis of over 1 million home sales from 2020 through 2023 shows no relationship between sales activity and commissions. If agents were steering buyers to homes with higher buyer-agent commissions, then we would expect to see homes with lower commissions take longer to sell and homes with higher commissions to sell more quickly. Instead, our analysis shows effectively no relationship between the offer to pay a buyer’s broker and the days a home took to sell. 

The research cited by others to suggest that steering is occurring is based on transactions in one state that occurred from 1998 to 2011—long before online searches became ubiquitous to the home-buying process. Most buyers now find their home online, and use their real estate advisor to help them finalize their decisions and then negotiate the purchase. It would be very difficult for buyers’ agents to keep their buyers from touring a home. It simply is impractical for a buyers’ agents in today’s market to engage in the type of systematic steering being suggested. 

Myth: REALTOR® commissions are driving up home prices.   

Fact: Home prices are driven by a variety of factors, and our analysis confirms that commission rates are not one of them. Using a multivariate regression approach that controls for a range of factors impacting home prices between 2020 and 2023, we confirmed that it is the the property characteristics (e.g., number of bedrooms, age of the home, and others) and mortgage rates that are the most significant determinants of a home’s price. The offer to pay a buyer’s broker has a weak relationship with home prices and the direction of the relationship is opposite of what has been reported in the media—offers to pay the buyer’s broker tend to reflect lower percentages as the list price of similar homes increases, not the other way around.  

In the current housing market, home prices are rising as a result of historically low inventory. Existing homeowners are reticent to sell as they hold on to sub-3% mortgage rates. New construction activity is working off a decades-long deficit. Lower real estate commissions are not going to lower home prices for buyers. Only an increase in supply will have a meaningful impact on home prices.  

Myth: The MLS is a closed network of self-interested agents and brokers who profit unfairly off homebuyers and sellers. Consumers can now simply look online to buy or sell their property.  

Fact: Public real estate websites and apps, where buyers and sellers browse for homes (and see advertisements), rely on the nation’s local MLSs to get their data. The MLSs set rules to support the accuracy and breadth of the information about homes for sale, and then feed the information to hundreds of thousands of websites and apps to make sure that consistent, accurate information is widely available to consumers.  

Listing a home on the MLS supports an open and fair housing marketplace. When brokerages hold listings off the MLS to sell as “private” or “office exclusive” pocket listing properties, they are keeping information about available homes for sale from a lot of prospective buyers.  

There is substantial evidence that private marketing—holding a property’s information off the MLS and marketing it in secret—results in poorer sales performance for the seller and reinforces residential segregation patterns that create an unfair housing marketplace. A 2018 study of the real estate market in Houston found that listings marketed off the MLS as a pocket listing resulted in discrimination in the housing market, with minority homebuyers much less likely to get information about homes available for sale.  

Our analysis of sales in the Mid-Atlantic between 2020 and July 2023 found that pocket listings were more likely than MLS-marketed properties to be in neighborhoods with higher shares of white residents, and were more common in higher-income neighborhoods. Our analysis also found that homes marketed through the MLS obtained a significantly higher sales price and sold faster. 

We want to be sure the pro-consumer market remains. The terms of NAR’s proposed settlement seem intended to bring additional transparency to real estate payments. But there are potential negative outcomes if MLSs and brokers do not take care to keep consumer protection and fair housing in mind. Buyers who cannot afford to pay out of pocket for a real estate professional to guide them through the process stand to be the largest unintended victims. Without the transparent and impartial offers that have been the norm, we could see greater opportunities for discrimination. 

Coming up with a downpayment is already the biggest challenge for first-time homebuyers. These folks— young families, veterans and minorities—will need sellers to offer to cover what the buyer has agreed their agent should earn. Without that, they could be unable to afford a home if they have to come up with additional upfront costs to protect their interests during the biggest financial transaction of their lives. And more protections will be needed as well. Otherwise, we could be looking at further widening the wealth gap in the U.S.  

Unless real care is taken by the industry, we have the potential to have an inequitable system of real estate where homes exchange hands based on who you know and what you look like.  

Let’s keep focus on making sure we have an open, equitable and fair housing market that supports all Americans’ opportunity to enjoy the benefits of homeownership. 

To view the full report, click here

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