MLS extending push for transparency to referral fees
New disclosure forms will help buyers and sellers understand who is getting paid — and how much — during home transactions, Northwest MLS says.
One of the nation's largest multiple listing services is moving toward "complete transparency" in home transactions by surfacing information about brokerage referral fees.
The new Referral Disclosure form from Northwest MLS — which covers much of Washington state and part of Oregon — provides details about the referral fees brokers pay or receive when homes are sold.
Its forms are optional but used by the vast majority of NWMLS brokers, the MLS said.
It's not the first time the MLS has taken a decisive stance on transparency. It has been at the forefront of the private listings battle, advocating for an "open, fair, transparent, and comprehensive marketplace" while prohibiting off-market listings — a policy that prompted Compass to file a lawsuit against the MLS in April.
Why NWMLS is pushing for fee disclosures: Broker-to-broker referral payments are a detail that is often unknown to the consumer, but important to the industry. The most recent data from NAR: 4% of sellers and 5% of buyers found their agent via another agent's referral.
"Buyers and sellers should have complete transparency regarding all fees paid to a real estate brokerage firm, including referral fees paid to another firm," NWMLS President and CEO Justin Haag said in a press release.
The industry standard for agent-to-agent referrals is 25%. However, "some referral fees can be as much as 50% and may impact a buyer's or seller's decision about which broker to engage," Haag said.
When the disclosure occurs: The forms enable the disclosure of a referral fee by the referring broker at the time the referral is made, the MLS explained. The information includes the referral, the identity of the new broker and firm, and the referral fee amount. If the referral is not disclosed right away, it will show up in the brokerage services agreement.
"Disclosure of referral fees at the outset of the broker's engagement with a buyer or seller, rather than at the closing or sometimes not at all, is essential," Haag said.
Both buyers and sellers "should have complete information when hiring a broker regarding any fees paid to the firm, including any referral obligation of the firm," Haag added.
A benefit for consumers? The change is a good way to educate consumers about the transaction's real cost impacts, T3 Sixty Senior Vice President of Organized Real Estate Clint Skutchan told Real Estate News. (Note: Real Estate News is an editorially independent division of T3 Sixty.)
Any tool that "makes the consumer more aware of the financial complexities for real estate agents is a good thing," Skutchan said, especially "in an environment that has vilified commissioned sales agents."