A couple and a real estate agent look at a house as money rains down from the sky.
Illustration by Lanette Behiry/Real Estate News; Shutterstock

Commissions, steering and the MLS: Myths and realities 

During a livestream presentation, Bright MLS’s chief economist highlighted some of the most misunderstood topics or mistaken beliefs about real estate.

April 16, 2024
4 minutes

Key points:

  • Based on residential sales data, Sturtevant said there was no evidence that agents are steering buyers toward homes with higher offers of compensation.
  • Sturtevant also concluded that buyer agent commission did not meaningfully impact or lead to high home prices.
  • She emphasized that the MLS structure ensures an “open and fair” marketplace by giving all users access to the same information.

Big changes are in store for the residential real estate world, with a number of proposed rule changes included in the NAR settlement expected to go into effect later this summer. 

The crux of the class action litigation targeting NAR, brokerages and MLSs, as well as the ongoing DOJ investigation into the industry, is that cooperative compensation is at best unfair, and potentially in violation of federal antitrust law.

Some of the claims — collusion, conspiracy — conjure images of shady backroom deals. But where is the line between myth and reality in the residential brokerage business? 

Bright MLS hosted a webinar last week to lay out the facts and share new research findings, with chief economist Dr. Lisa Sturtevant discussing some common misconceptions about the industry. 

Steering claims not backed up by home sale data

According to Sturtevant, one of the big myths in real estate is the idea that agents "steer" buyer clients toward properties that list higher offers of compensation and away from those with lower commissions for the buyer agent. She said home sale data gathered from Bright MLS's extensive territory doesn't support this notion. 

"We would expect there to be a negative relationship between the offer of compensation and the days on market, right? As the offer of compensation is lower, the days on market is longer. So that implies there would be a negative relationship between those two things," she explained.

However, when looking at home sales, Sturtevant said she didn't see any significant difference in time on market between properties with higher offers of compensation and those with lower offers. 

"We looked at the same relationship across the six states that are in the Bright MLS service area," she said. "This is sometimes hundreds of thousands of home sales transactions, and we never see any sort of negative relationship that suggests there's this type of steering going on." 

Commissions are not driving up sale prices

Sturtevant also discussed the relationship between agent commissions and home prices, concluding that buyer agent compensation is not responsible for today's high home prices. 

"It is definitely tempting to try and figure out if there's a person or industry that we could blame for the housing challenges that are keeping a lot of people from buying a home," she explained. 

"There are a lot of factors that drive home prices, but when we looked at four years of sales data — those million transactions that took place in our market — we just can't see any relationship that suggests that the offer of buyer agent compensation is leading to higher home prices in the market."

The real culprit behind climbing home prices? Low inventory, said Sturtevant, combined with high mortgage rates, which have put a tremendous pressure on the market leading to affordability challenges. 

The MLS helps to ensure a fair and open housing marketplace

Even as many MLSs are embroiled in commissions litigation alongside NAR and brokerages, Sturtevant said the MLS structure is designed to ensure that consumers get the most accurate and consistent data on home listings.

That information from MLSs gets fed to the big real estate home search portals for consumers to see and review. If, in a future scenario, homes are regularly traded off of the MLS, that could be problematic, Sturtevant suggested.

"There are some pretty serious Fair Housing implications associated with the potential direction that the real estate industry might go," she said, adding that "pocket listings" or "office exclusives" could be marketed in a manner that targets one particular demographic — or withholds the information from another. 

"Researchers concluded that this practice increases housing inequalities, reinforces residential segregation and raises Fair Housing concerns," she said.

"As we think about how the MLS operates, it allows there to be a marketplace where everybody has access to the same information on all homes, and it doesn't matter who you know or where you live."

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