Whether and How to Implement The Seller Concession Exception in the NAR Settlement

Apr 9, 2024 Michael Wurzer

This is the second post in what likely will become a series of posts about how MLSs can think about, interpret, and implement the required Practice Changes in the recent NAR Settlement Agreement. The first post was about MLSs implementing the option in Paragraphs 58(v) and 58.xiii(a) for brokers to make offers of compensation on their own web site for their own listings only. This second post is about the exception in Paragraph 58.xiii(b), which says:

[T]he Practice Changes in Paragraph 58 of this Settlement Agreement shall not … prevent … sellers from offering buyer concessions on a REALTOR® MLS (e.g., for buyer closing costs), so long as such concessions are not limited to or conditioned on the retention of or payment to a cooperating broker, buyer broker, or other buyer representative.

There are two related questions here: (1) whether an MLS should do anything right now to implement the seller concession option; and (2) if so, what data fields an MLS may already have or want to add to enable this option.

Let’s take the first question first, but do so in two parts. First, does an MLS need to implement anything related to the concession option by July, when the NAR expects NAR-affiliated MLSs to implement the Practice Changes? No, Paragraph 58.xiii(b) says seller concessions are allowed but MLSs are not required to add them. Waiting very well may be the most prudent thing to do as it has the advantage of allowing you to learn more about how the practice in your local market evolves in the years ahead from these changes and you also can learn from others that choose to move ahead to see what works best. Perhaps more to the point, if you’re wanting to mitigate risk, doing nothing with concessions at this time likely is the most pragmatic approach to lower the risk that concessions will be treated in your market as some sort of new commission field, which clearly is prohibited by the Settlement Agreement.

That being said, there also are reasons an MLS may want to move ahead with this option now. (1) If the local market already has a common practice for sellers to offer concessions, standardizing how that’s done in the MLS system is a good idea. (2) Given that the option exists in the Settlement Agreement, providing a clear mechanism in the MLS for brokers and agent to take advantage of the option might make compliance easier, because otherwise agents might be tempted to use open text fields like remarks that would then have to be monitored for compliance. (3) An MLS may want to implement this option as a comprehensive set of changes all at one time along with implementation of the other Practice Changes.

Okay, so let’s say you’re an MLS that wants to implement the seller concession option, how would you go about it? First, let’s look at the fields the RESO Data Dictionary has regarding concessions. There are three fields and, importantly, they all are directed at tracking concessions from the closing rather than when the listing is active:

  • Concessions — Indicates whether or not there are concessions included in the sales agreement (i.e., Yes, No or Call Listing Agent).
  • ConcessionAmount — The dollar amount of the concessions. If the concessions are made by the seller, some may subtract this value from the sales price as a means of calculating their own true price. If concessions are made by the buyer, some may add this amount to the sale price to create their own true price. Concessions made by both buyer and seller should be subtracted from each other, providing a net value. Details of this calculation should be added to the Concessions Comments field.
  • ConcessionsComments –The comments describing the concessions made by the buyer or the seller.

There are several reasons these fields don’t quite fit the bill for an MLS wanting to implement concessions:

  • Active vs. Closed — The RESO fields are all directed at tracking data from closed transactions rather than active listings.
  • Net vs. Buyer vs. Seller — The field ConcessionAmount doesn’t says it’s to track the net amount of concessions from the buyer and seller, and doesn’t distinguish between the two.
  • Open Text Field — The ConcessionsComments field is just an open text field, which would require a lot of monitoring given the condition in the Settlement Agreement that “such concessions are not limited to or conditioned on the retention of or payment to a cooperating broker, buyer broker, or other buyer representative.”

Given these issues, it’s pretty clear the existing RESO fields don’t meet the needs for active listings and they may well need to change for sold listings, as well, which is a good reason for me to prompt interested readers to join RESO to provide your expertise and input on issues like this. I know the Data Dictionary Workgroup is already receiving a lot of interest in this topic.

Given that the current RESO fields don’t meet the need, what’s next? First, as advised above, waiting to add such fields is a good option. However, if you’re really wanting to get going on this, here’s what FBS would recommend currently. We’re engaging in multiple conversations with our customers and others in the industry on this and so this may change, but here’s what we recommend currently if you don’t want to wait.

First, we recommend only adding two fields to active listings:

  • Concession Offered to Buyer Amount — A numeric field tracking the amount of the concession being offered by sellers to buyers.
  • Concession Offered to Buyer ($/%) — A select list with values of $ or % to specify whether the amount is expressed as a dollar amount or percentage.

Importantly, there is no open text field here, because of exactly the concern mentioned above, namely that it would be very difficult for MLSs to monitor such an open text field to ensure it complies with the condition that “such concessions are not limited to or conditioned on the retention of or payment to a cooperating broker, buyer broker, or other buyer representative.” Not only should an MLS not have any open text field related to these fields, the MLS should include the clear language from the Settlement Agreement that such concession amounts cannot “limited to or conditioned on the retention of or payment to a cooperating broker, buyer broker, or other buyer representative.”

Next, let’s look at concession fields for when a listing closes and the actual concession amounts and types are known. This latter point is important. On an active listing, no one knows what the actual concessions are yet, it’s just an offer being made by the seller to the buyer. Once the listing is closed, however, the actual concessions are know and those are the amounts that should be recorded in the MLS. In other words, you need additional fields for concessions at closing than what you have for active listings. Accordingly, FBS recommends adding the following four fields to closed listings:

  • Concession to Buyer at Closing
  • Concession to Buyer ($/%)
  • Concession to Seller at Closing
  • Concession to Seller ($/%)

These fields do not conflict with the current RESO DD fields that “net” the concessions, because separating out the amounts is more granular or specific than what RESO provides. Of course, you also could provide the net amount if you want, but there’s no RESO requirement to add a field if you just want to have the two more specific fields.

In terms of naming these fields, we also recommend you pay particular attention to how your market uses the terms “buyer concession” or “seller concession,” because we’ve been in multiple conversations where people use these terms interchangeably without realizing that each actually mean the opposite of what the other intends because the “from” and “to” are omitted. For example, standing alone, in some markets a “seller concession” could mean a concession from the seller and in other markets that phrase may mean a concession to the seller. Whatever label you use. make sure you’re being clear about who the concession is “from” or “to.”

I’ve also heard from some MLSs that want to provide more detail regarding the type and amount of concessions at the time of closing. If you think agents in your market will include additional detail, that’s great. There’s always a balance as to how much detail people will enter, but, if the data can be collected accurately, more is often better than less. That being said, if you do collect more detailed types and amounts of concessions, we’d also recommend having the aggregate fields mentioned above to make it easier for appraisers and others to use the amounts in CMAs or other valuations in a consistent manner.

That’s a long post but I hope you’ve found or will find it valuable. I’d love it if you could share below whether your MLS will be adding fields for concessions and, if so, what fields you’re adding.