Do you have to pay compensation offered in the MLS to a nonparticipant?

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11/12/2015 | Author: Editorial Staff

My seller just entered into a contract with a buyer whose broker doesn’t participate in my MLS. The buyer’s broker says I must pay him the compensation I offered with my MLS listing when the sale closes. Is that true?

No. A listing broker’s offer of compensation in the MLS only applies to other MLS participants and cannot be enforced by a nonparticipant. You and the nonparticipating broker can negotiate other compensation using the Registration Agreement Between Brokers (TAR 2402) form.

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Categories: Legal
Tags: mls, legal faq, brokers, compensation


Comments

Irene Pence on 06/12/2016

I too will compensate any licensed Texas real estate agent for bringing a buying to one of my listings.  Aside from any rule governing the payment of such compensation,  it is just quite simply the professional thing to do and is in the best interest of my Seller Client.  As for whether MLS or Boards are discriminatory, or whether a licensed agent should be entitled to membership regardless of ability or willingness to pay to be a member, that’s just ridiculous.  Membership is open to ALL qualified licensed individuals, so it certainly isn’t discriminatory.  And MLS, TAR and NAR are Trade Associations that provide numerous invaluable and very costly services to their members.  These benefits and services are paid for with our dues.  I couldn’t imagine providing even the basic necessary services a Client expects of their Realtor without the benefits of our local MLS and certainly don’t expect those benefits to be provided for free or subsidized by other paying members on my behalf.  It’s a cost of doing business in THIS BUSINESS as a full time, fully committed Realtor.  If, or when, I can no longer afford or justify the cost of such benefits, I’ll find another vocation.  I’m happy to pay the dues and benefit from membership.

Mike McEwen on 06/12/2016

I will share a commission w/ anybody who procures a buyer for my listing and whom I may lawfully compensate.

David Davis on 06/12/2016

Raul, You can challenge all you and your wallet want.  You’ll go broke doing it!  The offer of commission to a buyer’s broker by a seller’s broker is contained in the listing agreement and unless you subscribe to the MLS how are you going to find out what the agreed amount was?

Raul Molina on 06/01/2016

Mls and boards is a form of discrimination, violates Anti-trust laws and I will challenge it in court. All Licensed Real Estate Brokers should be compensated if they are the procuring cause of a sale.
Let alone that it should be opened to all licensed brokers whether they can pay the fees or not!

Mary Jane Beisert on 11/19/2015

MLS and ZIPFORM is not free!
Cannot have ZipForm Plus without
Membership! Listing agreement
Should have stated listing commission fees to MLS
Members only or negotiate fee less
Cost of. Prorated membership fees
Of HAR/MLS, ZipForm,  eKey,  Supra!

eva lupe merritt on 11/17/2015

I agree with Melissa Williams (11/13/ ) comment.  We need statewide MLS .  Do away with “local boards”.  This is just an added expense for all concerned and creates an “we against them” attitude.

Brian Johnson on 11/16/2015

I don’t fully agree that the offer of compensation only belongs to MLS participants in all cases. With the emergence of data share agreements between local associations and/or MLSs I could see a situation where there was a reciprocal compensation agreement as well between the organizations.

Robert Shaffer on 11/13/2015

I do believe this may also apply to a REALTOR or agent from another MLS area.  If an agent from Austin sold a home in our MLS an offer of compensation had to be asked for prior to making the offer…This may have changed.

Mike McEwen on 11/13/2015

Excellent job of explaining, Dustin.  For some it’s all about the commission, which should be the last thing on the agent’s mind until closing.

Melissa McWilliams on 11/13/2015

In these days of technology it is refreshing to see it being used for good purposes - i.e., to allow Realtors the opportunity to discuss such things among ourselves and the extent of exposure we maintain.  The need for local Boards is thereby now obsolete, and way too costly to maintain.  HAR alone has four different locations, which we all pay to maintain in our dues, which just keep rising.  ONE statewide Board (TAR!) would be more than sufficient.  In doing so, a single MLS system could be very effective.  As I do business in Houston, Austin and the outskirts of the Texas hillcountry regularly, I personally see the need for this.  Share on!

Dustin on 11/13/2015

Alice Caron, you manage that many licensees at KW and you only believe filing complaints or having recourse is done through the local or regional based MLS?  How scary is that?  There are complaint avenues through TAR and/or TREC, depending on the issue one will handle.  MLSs do not hear complaints as they are managed through a local Realtor association. In North Texas we have many Realtor Associations all on the same MLS platform and the same MLS rules.  Complaints can easily be filed and managed through the local association of that licensee.  This is not a problem and the fact you think it is in your role is an embarrassment.  By the way, I am a broker and have represented a decent number of clients in other MLS coverage areas.  Almost all of those were in areas that were on borders between 2 different MLSs.  A few areas in Texas have licensees that become members of both local Realtor associations and both MLSs when they are on the edge or border of those MLS coverage areas.  In all of my transactions I operated as normal. One of the potential issues can be lockbox entry, depending on what’s used. Everything else I did as normal (inspectors had entry capabilities, etc).  I have a seller client in Dallas under contract right now from an agent in Houston, and neither me nor my client has been put out or “done all of the work”.  That Houston Realtor used local inspectors and a local lender and we are doing just fine. They used DocuSign for all signatures and the buyer saw the home during an open house.  The Realtor made the trip for final walk through yesterday and was on her way up when she realized the buyer was there at an open house.  No problems. You all overstate how much “extra” work you do. You have a fiduciary duty to your client and not working an offer due to this would be violating that fiduciary duty.  Completing the listing agreement and marking 0% for non-members without fully explaining what that means and does to a client is also a violation of your fiduciary duty. You must be given these instructions or authorization by the seller(s) or at the very least explain what a 0% means to them and get their authorization before arbitrarily putting 0% and running with it.  It may be annoying and I may grumble a little as well if I have to show a home for someone else, but come on, if that is truly enough for you to say no to a transaction not only are you in the wrong business but also possibly violating your fiduciary duty.  I’m not saying I advocate this as a normal occurrence, because if you are doing business in other areas often then find a broker that covers all of your desired areas or ask your broker to become a member in those areas as well, but if it is a rare thing then it should not be a problem, not to mention the “tons of extra work” argument is hollow in today’s tech filled society.

Mike McEwen on 11/13/2015

Another broker does not have to be a member of your MLS for you to file a complaint against him.  What do you think TREC and TAR are for?  You are just looking for ways to not share the commission 50/50.

Alice Caron on 11/13/2015

I’ll start this with I don’t sell or list anymore after 31 years. I manage 545 agents in compliance.  So when I see a situation where an agent outside of our MLS makes an offer on one of our listings with our listing agent, I ask them what does the Listing Agreement say?  The bottom line is to get the listing sold and the client taken care of appropriately.  However, should a situation on ethics pop up, we have nobody to go to complain.  They aren’t a member of our MLS so our MLS can’t hear a complaint on a non-member.  Therefore it is totally appropriate to reduce the commission if agreed to in a listing agreement.  It is not right for an agent to have to do all the work for both sides if an agent is outside our city and isn’t willing to travel to our city to represent their “client”.  Have a great weekend you guys!!

Erik on 11/13/2015

For non-MLS participants, meaning anyone who is not a member of our local MLS, I pay a 2% commission. If I am going to open the house and show the listing for someone else’s client, then I am doing the work of the buyer’s agent. Everyone’s time is valuable. So instead of 3%, I agree to 2% on the Listing Agreement for non-MLS members.

Shannon Jernigan on 11/13/2015

I am wondering why you discriminate between types of brokers if he/she found the buyer for you.  This would be a win/win situation for you, your client, and the other broker.
He might want to do business with you again sometime.

Mike McEwen on 11/13/2015

Why are people complicating this.  It’s a no brainer.  If a purchaser is being properly representing by another licensee, pay that agent half the commission.  I always share half the commission; I do not care where the other agent comes from.

THERESA AKIN on 11/13/2015

Most of the MLS listings I’ve seen state what a non-MLS agent will be compensated for bringing a buyer.  My listing agreements state what a non-MLS will be compensated. If I have a buyer for an out of town property of which I’m not a member of that MLS, I will either refer to an agent in that area or pull out the Registration Agreement Between Brokers (TAR 2402). Always grateful to get a property sold and bought.

David Davis on 11/13/2015

So much mis-information in these threads…. There is no NORMAL or STANDARD COMMISSION, unless of course you want to find yourself on the wrong end of an Anti-Trust lawsuit.  MLS has nothing to do with payment of a commission other than the fact that any commission that the listing brokeradvertises must be paid in accordance with the MLS rules.  While not an actual statewide MLS system, there already is system that shows many MLS systems listings.  I don’t believe it shows commission rates so if you are going to use it, you should call the listing broker and enter into an agreement about commissions if you bring a buyer that closes a transaction.  As for asking a listig broker to pay more than the advertised commission rate, that can be a violation of the local rules, as well as others.  This doesn’t stop us as an Agent from asking our Buyer principal (Client) to pay more than what is advertised in the MLS (this is generally done through a Buyer Representation Agreement).  Hip pocket listings are a huge injustice to our seller clients.  This is the beginning of (and the easiest part to prove) a huge professional mis-conduct, and incompetence liability lawsuit.  What possible defense could you raise to such an action?  Assume for just a moment that you win the lawsuit, would the legal fees outweigh that commission?  Now, what about all the time you would spend defending that lawsuit rather than helping other buyers or sellers.  Tell me again how good that “pocket listing” was….  Now that I have gone as far off topic as the rest of you, lets get back on topic.  The commission rate to a buyer’s broker is set by the listing broker and the seller in the listing agreement, not by what is in MLS.  MLS publication is enforceable but it does not establish the rate/price of the commission.  If you are in an area that has no MLS then use the registration agreement between brokers.

joe martins on 11/12/2015

Yay Judy…you are so right “just get the home sold and pay the other broker” .  And agents should know and understand the FEDERAL ANTI TRUST LAWS, especially if they plan on keeping their license.

Melvin Simpson on 11/12/2015

Hip pocket listings are bad for the MLS.  Agents using the HP listing system should not be allowed to use the MLS or the other Agents should not have to pay the same fee.  If this HP system is allowed to continue, the MLS will be rendered useless when it come to acquiring comps.

Some Agents feel that the HP listings is another form of discriminating against certain buyers and Agents

Dwayne Clark on 11/12/2015

There really needs to be a state wide MLS system.  But there is so much local politics that it probably will never happen.  We really don’t need a hundred or whatever MLS systems/areas in Texas.  Like the post above, we are licensed in the State of Texas.  BTW, Judy I didn’t know you were still out there!

Steven Crossland on 11/12/2015

How do you construe greed? I never even try to double dip a deal, which must be what you’re thinking.

In fact, we routinely encourage sign callers to get good representation because good representation by a competent agent is best for the seller.

My point is, it’s absurd to think that holding a real estate license entitles any agent to insert themselves, in a less than fully committed and competent way, into a transaction just to try to claim a commission when that agent cannot in fact handle the other side of the deal. To me, that’s where the greed accusation should be directed, toward agents who think that’s ok.

Bruce John Stracke on 11/12/2015

The answer is easy. I have never had someone grumble about paying my commission when I earned it.  Be a professional, get paid.  Just have a license, and maybe get paid-

Mike McEwen on 11/12/2015

Mr. Crossland’s comment reflect abject greed.

Mike on 11/12/2015

The decent licensee will split the commission.  It’s a no-brainer.  To do otherwise reflects greed and avarice.

Wallace Klekar on 11/12/2015

@ Judy, Maybe I didn’t phrase my comment correctly. What I meant to say was is there any way to require the listing agent to pay the commonly paid commission on a sale or rental?

Steven Crossland on 11/12/2015

@Robert

There are always exceptions to the rule. Sounds like your mom is lucky to have you.

I was thinking more of my personal experience and the “oh jeez, not another one” feeling you get when yet another Realtor from Houston or Dallas wants me to go meet his “client” and let him in my listing because he doesn’t have an Austin MLS key, and even if he did, isn’t even going to be in Austin with the client. These people are ALWAYS time wasters.

As a listing agent, I don’t even want my seller mixed up with that buyer and his “agent” because I don’t trust the agent to run a clean deal. I always tell agents like that “why don’t you refer your buyer to someone good you know in Austin so they can be better represented?”

Juan Lara on 11/12/2015

I agree with Irene Pence. Well said. I hope greed doesn’t get the best of us. If we divide and share, we can conquer more than by greed and selfishness. We owe it to our clients, regardless what City, State or Contry they come from.

Lidia Figueroa on 11/12/2015

In my opinion, I feel that is not right. Our license is for the whole state of Texas. If we as an agent are knowledgeable in more than one market, we should be able to make good use of our license rather than just a city/area. Not being a local MLS user does not mean I am not a MLS user at all. Therefore, technically since I am an MLS user in another market in the state, I should get compensated as agreed in a contract.

Judy McKee on 11/12/2015

Wallace, there is NO NORMAL commission. Have you read the Federal Antitrust Laws? OMG.I thought we as REALTORS were more informed on commissions.

Pamela Turlak on 11/12/2015

I always put 1%.  Problem solved.

Robert Griffice on 11/12/2015

@Steve Crossland

Steve, while I respect your experience and knowledge, your response here is off-base. I’m currently in a transaction where I’m representing my sister in a purchase of a house in a small West Texas town where there isn’t an MLS (I’m in Austin). The listing broker is so used to collecting 6% on transactions and not having any local competition that she was offended that I asked her to pay 3% via a broker registration agreement. She vaguely threatened to scuttle the deal until the seller stepped in and forced her to play nice (fortunately my sister and the seller were on better terms than he was with the listing agent…thank goodness for small towns). My concern for my sister was that without my representation, she was at the mercy of whatever the listing agent said (or didn’t).

So I’m not just one of those “idiots” from out of town being written in on a deal to collect a commission. There are valid reasons for an outside agent to get involved in certain transactions.

Wallace Klekar on 11/12/2015

Is there any way a buyer’s agent can force the listing agent to pay 3% on a sale or 50% commission on a lease if they advertise they pay less in the MLS?

Steve Crossland on 11/12/2015

Good comments. Agree that it starts with the listing agreement. I put “zero” to both sub-agent and nonMLS members. Sellers never even ask about it.  If one did, I’d say “we only cooperate with local members of our MLS, not outside agents who don’t even have MLS access her, or a lockbox key”.

My main beef is with idiot agents from other cities, sometimes other states, who, just because they have a license and are the sister-in-law of someone, want me to do all the work “write them in”. Seriously!? No. Ain’t gonna happen. It’s shameful to even ask, and I let them know, rather rudely at that. In other words, I chew them out for being so unethical and greedy.

If my own Mother was buying in another market, and because I love her, and I’m a professional, I’d refer her to a good Realtor in that market and stay out of it from there.

Sharon Hairgrove on 11/12/2015

I agree.  In the best interest of my seller I will compensate any buyers agent that brings an acceptable offer.

Winnie Stearns on 11/12/2015

We pay the dues, and support our professional organization.  I do not think someone who does not belong to MLS should be able to use MLS.

Judy McKee on 11/12/2015

If you are using the TAR listing agreement this should have all ready been addressed. If you are using a listing agreement that does not address non-member’s of MLS, you should discuss this with your seller when you are presenting the offer. To me what difference does it make. You were hired by the seller to get their home sold and if the seller likes and accepts the offer take it and pay the fee as per your listing agreement.

Irene Pence on 11/12/2015

The real question here, in my opinion, is how you EVER got to the point of actually entering into a contract without this issue being addressed?  Surely, the Listing Broker was vividly aware that the cooperating Broker was not bringing a Buyer without expectation of cooperative compensation.  But, both Brokers were negligent in not addressing this with the property documentation and agreement before involving their respective Clients.  As David so correctly pointed out, MLS is not the sole deciding factor.  The Listing Agreement addresses cooperation with other Brokers, as do our Ethics requirements.  What is provided in the Broker ratification paragraph in the TREC contract?  But absent all these resources, why wouldn’t you want to compensate another Broker who brought a willing and capable Buyer that resulted in both a contract acceptable to your Seller and a successful outcome of your listing commitment and efforts?  TAR, not MLS, mediates commission disputes.  As the Buyer’s Agent,  I would surely be pursuing a Procuring Cause action with TAR after closing,  and if the sole reason compensation wasn’t paid was that the participating Broker wasn’t a local MLS participant, I’m confident I’d prevail in my claim against the Listing Broker.  We need to be mindful that our first obligation and duty is represent the best interests of our Client, in this case the Seller, and not ourselves.  A Listing Broker has every expectation to cooperate with other Brokers in achieving a successful sale of a property when he lists it, and to try and shimmy out of cooperation on a basis this weak seems like a very poor and unethical business practice to me.  Again, just my opinion.

Lou Burns on 11/12/2015

Exactly right David

David Davis on 11/12/2015

Actually the correct answer is see the listing agreement. If the listing broker and the seller agreed to a commission in the listing agreement it must be paid otherwise the listing broker is in violation or breach of the listing agreement contract


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