Compensation, Co-Op & Bonus, Offerings In MLS

Karen Schlosser From: Sent: To: Subject:

MLS of Greater Cincinnati, Inc. <membership@cincymls.com> Tuesday, April 22, 2014 11:40 AM soldbykarenschlosser@gmail.com Bonus Offerings in MLS - Please Review

Bonus Offerings in MLS – These are NAR Rules (not just from Cincinnati) If you have Bonus or Incentive offerings on your listings, please carefully review these MLS Rules and make any necessary adjustments to your listings immediately.

I know it may seem like we put up walls when all you want to do is communicate and sell your property. In a perfect world, we wouldn’t need all these rules.

Unfortunately, we hear 10 sides to every situation, we evaluate all the sides of the situation and then come up with what we hope is the most fair or, in many cases, most protective of you.

In this situation, the rules are in place to be most protective of you. On the surface, it may not look like it, but they are.

Here is the official rule: The listing broker shall specify on each property data form submitted to MLS (if listing is entered by MLS) and in the computer system under the feature names, a) "Sub‐Coop" the compensation it will pay a subagent, and/or b) "Buy‐Coop" the compensation it will pay a buyer agent, as either: 1) a percentage (%) of the gross selling price, or 2) a definitive $ dollar amount which is applicable to such listing.

If the listing broker chooses to cooperate and compensate one but not the other, a number "0%", “$0” or “0” shall be designated in the "Sub‐Coop" or "Buy‐Coop" feature of the Agency choice that is not to be compensated.

Any entry (including no entry) other than a dollar amount, percentage or “0” is considered inappropriate and will result in an incomplete / inaccurate information fee.

Offers of compensation (e.g. bonuses), in addition to the amount offered in the required compensation fields, may be included in the Agent remarks only and are considered an unconditional compensation offering.

Any compensation offerings entered into the Agent remarks shall not reduce the amount entered into the required compensation fields; shall be without conditions; and shall not include offers of compensation by non‐members of MLS (e.g. “Seller will pay bonus”).

Bottom Line: Any specific offering of compensation must be offered by the MLS Member (not a builder, not a seller, not a lender ) Why? If non MLS Members decide to default on their offering, ultimately, it would fall to the broker to pay that compensation since it was offered in the MLS. The MLS is for MEMBERS ONLY. All the members have read and agreed to play by all the rules. Non Members do not read and agree to play by all the rules.

What should you do? Do not list any specific incentives or bonuses and direct the buyer agent/broker to the provider to obtain the information.

Examples: Excellent – nothing specific, information will come directly from the provider and you are removed from the middle.

Please contact <builder><seller><lender> for available incentives or bonuses.

Acceptable, but adds some gray area. It does not say who is offering the bonus, so one would have to assume it is the broker. $1000 selling broker bonus offered.

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Not Acceptable – these contain a condition (which is not permissible) $1000 selling broker bonus for accepted offer by xx/xx/xx.

Must be owner occupied for $500 bonus.

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Not Acceptable – offer of compensation is by a non‐member of MLS and is being offered directly to the agent – commission may only be offered to brokers.

Seller offers $1000 bonus to buyer’s agent

Not Acceptable – Everything is wrong with this statement: a) timeframe condition, b)agents are not allowed to receive compensation directly, c) it is being offered by a non‐member of MLS and d) what if the deal falls through… it only states the offer has to be accepted – not closed.

Any offer written by xx/xx/xx, if accepted, will receive an agent bonus of $1000 by seller.

I hope this helps explain the reasoning behind the rule. Please update any listings that are in violation of this rule. If they are not corrected, you may be fined for rules violation

Q & A Seller Bonus Shown in the Marketing Remarks Portion of the MLS The scenario: A listing broker includes information in the MLS listing Marketing remarks that the “seller” will pay a dollar amount bonus to the selling broker.

Then, when the purchase contract is written, the “seller” will not agree to pay the bonus amount indicated in MLS. Sometimes, they refuse to pay any; other times then refuse to pay the entire amount offered.

Questions and Replies: 1) Should compensation directly from a seller be allowed in MLS, since they are not bound to the regulations related to payment of compensation offered in that way?

NAR: No, a seller has no authority to offer a "bonus" directly to MLS participants.

2) Is the listing broker accountable for any compensation they include in MLS, even when it is stated that it is coming directly from the seller?

NAR: Yes. If a seller "bonus" to a cooperating broker is not paid to the listing broker, it does not absolve the listing broker of his or her obligation to compensate a successful cooperating broker who procures a buyer for the listed property.

3) Can MLS prohibit offers of compensation coming directly from a seller from being offered through MLS? NAR: Yes. See Answer #2. A seller is not a licensed broker and is not a Participant of the MLS and, therefore, has no authority to offer to pay a 'bonus" to a cooperating broker.

4) Can MLS require that the listing broker be the one to make all offers of compensation (including bonuses) that will be offered to cooperating brokers through MLS? NAR: Yes. It is the listing broker, as an MLS Participant, who has the only authority to make a blanket unilateral offer of compensation in the MLS including any bonus which the seller is willing to pay to the listing broker to encourage more cooperation in the finding a buyer.

5) In what policy does it state that if the seller wishes to offer an incentive to the cooperating broker, that the listing broker is prohibited from putting the offer in the marketing or agent remarks?

NAR: The definition of an MLS Participant, appears in the MLS Handbook in the Part Three - Model Governance Provisions, D. Model Association Provisions Authorizing a Multiple Listing Service as a Wholly - owned Subsidiary Corporation of the Association, in italics, below: "Section 4 Participation Any Realtor® of this or any other association who is a principal, partner, corporate officer, or branch office manager acting on behalf of a principal, without further qualification, except as otherwise stipulated in these bylaws, shall be eligible to participate in multiple listing upon agreeing in writing to conform to the rules and regulations thereof and to pay the costs incidental thereto.* However, under no circumstances is any individual or firm, regardless of membership status, entitled to multiple listing service membership or participation unless they hold a current, valid real estate broker’s license and are 4

capable of offering and accepting compensation to and from other participants or are licensed or certified by an appropriate state regulatory agency to engage in the appraisal of real property.** Use of information developed by or published by an association multiple listing service is strictly limited to the activities authorized under a participant’s licensure(s) or certification and unauthorized uses are prohibited. Further, none of the foregoing is intended to convey participation or membership or any right of access to information developed by or published by an association multiple listing service where access to such information is prohibited by law.”

Let's establish that the listing broker, as a REALTOR® principal of a real estate brokerage or appraisal company, is the person who qualifies as an MLS Participant. It is the listing broker who makes a blanket unilateral offer of compensation to other MLS Participants for their successful efforts to find a buyer for the seller's property. The listing broker can indicate in the "remarks" portion of the property data sheet that the listing broker is offering to pay a "bonus" to a successful cooperating broker who procures a buyer for the property.

It is not appropriate for an MLS to publish information shown in the "remarks" portion of an MLS data sheet which indicates that a seller will pay a "bonus" to a cooperating broker in the MLS. Such a "seller paid bonus" cannot be published in an MLS. 6) If the offered incentive is in the remarks sections of the listing and the seller chooses not to pay it later, couldn’t it be argued that the listing broker is only obligated to compensate the co-op broker the unconditional amount in the compensation fields? In what rule does it state that the listing broker is obligated to carry out the offerings of the seller?

NAR: When a bonus is offered by a listing broker to other Participants of an MLS, it is appropriate that the information concerning the bonus be included in the MLS compilation of listing information. Section 1, Information Specifying the Compensation Upon Each Listing Filed with a Multiple Listing Service of an Association of REALTORS®, page 27, of the MLS Handbook, provided, in pertinent part, that: In filing a property with the multiple listing service, participants make blanket unilateral offers of compensation to other MLS participants and shall, therefore, specify on each listing filed with the service the compensation being offered by the listing broker to other MLS participants. This is necessary because cooperating brokers have the right to know what their commission will be prior to commencing their efforts to sell.

If the listing broker fails to pay offered compensation to a successful cooperating broker, the matter may be deemed arbitral. In other words, a grievance committee may determine that there is a contractual basis relating to the compensation that arose out of a contractual relationship between REALTORS® However, an MLS is not an advertising vehicle nor is it a mechanism for sellers to contract directly with cooperating brokers, purchasers, or others.

For example, while listing brokers offer cooperating brokers compensation for cooperative services as either a percentage of the gross sales prices or a flat dollar amount, and they may also pay bonuses or additional amounts to cooperating brokers to induce cooperation, sellers may not use the MLS in the same way.

Information about seller-offered bonuses should not be disseminated through the multiple listing service because the multiple listing is not intended to create a contractual relationship between sellers and cooperating brokers.

Another point of interest with respect to participants who offer bonuses to cooperating brokers is that because compensation offered via an MLS is shown as either a percentage of the of the gross selling prices or as a flat dollar amount, an MLS is not obligated to accept a bonus that takes a different form. For example, a trip to Tahiti, a cruise to the Bahamas, a new BMW, or a steer would, technically, not fall within the parameters of Section 1, Information Specifying the Compensation on Each Listing Filed with a Multiple Listing Service of an Association of REALTORS® because the offer may not be sufficiently specific. In other words, would the individual who performs be staying in a grass shack or in a five star hotel in Tahiti; would the BMW be a 325 model or a 5 series model; would the cruise be for three days or for ten days; would the steer be two years old or twelve years old. It is useful to remember that an essential element of contractual formation is specificity of consideration.

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Further, listing brokers who offer bonuses to other participants via the multiple listing service need to be mindful of Standard of Practice 16 - 15 which provides: "In cooperative transactions, REALTORS® shall compensate cooperating brokers (principal brokers) and shall not compensate nor offer to compensate, directly or indirectly, any of the sales licensees employed by or affiliated with other REALTORS® without the prior expressed knowledge and consent of the cooperating broker."

7) So, the MLS is permitted to create a rule blocking any offerings of incentives from the seller. Today, we do not have such a rule.

NAR: No new local MLS rule is necessary. Current MLS policy established by the National Association already precludes seller paid bonuses from being communicated through a Board or Association owned Multiple Listing Service.

When a bonus is offered by the listing broker, it is the listing broker who becomes responsible for payment of the "bonus" because it is the listing broker, as an MLS Participant, - same definition as above - who offered to pay a "bonus" to encourage other MLS Participants to cooperate in the sale of the listed property.

Sharon Chard Manager - MLS of Greater Cincinnati, Inc. 14 Knollcrest Dr, Cincinnati, Ohio 45237 Direct Line: (513) 842-3032 MLS Office: (513) 761-8833 MLS Fax: (513) 761-8860 Contract-Document E-mail: MLSDocs@cincymls.com Click here for MLS Rules and Regulations

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