Why Removing the Co-op Commission from the MLS Enhances Consumer Transparency

The real estate industry has significantly shifted towards greater transparency and consumer empowerment in the recent months. One of the most impactful changes due to the proposed settlement has been removing the co-op commission from Multiple Listing Services (MLS). This development is more than just an adjustment in how real estate transactions are displayed and conducted; it is a crucial step forward in promoting consumer transparency and fostering trust between buyers, sellers, and real estate professionals. 

What is the Co-op Commission?

The co-op commission is a fee typically offered by the seller’s agent to the buyer’s agent as compensation for bringing a buyer to the transaction. Traditionally, this commission is included in the MLS listing, making it visible to all agents but not necessarily to consumers. This practice has been the norm in the industry for years, but it has also led to confusion and a lack of clarity for buyers regarding who pays what and why.

Enhancing Transparency: A Win for Consumers

By removing the co-op commission from the MLS, the real estate industry is taking a significant step toward enhancing consumer transparency. Here’s how this change benefits buyers and sellers:

1. Clearer Understanding of Costs

When co-op commissions are not disclosed upfront, consumers are often left in the dark about the actual costs of their transactions. Many buyers may not realize that their agent’s commission is being paid by the seller (via the buyer), which can create confusion and a potential conflict of interest. By discussing terms and payments directly with consumers, real estate professionals can ensure that buyers and sellers fully understand the financial aspects of the transaction. This clarity helps consumers make more informed decisions and feel more confident.

2. Empowering Consumers to Negotiate

Removing the co-op commission from the MLS encourages buyers and sellers to discuss and negotiate payment terms directly. This change empowers consumers to be more active in determining how much they are willing to pay for services and what value they expect in return. As a result, consumers can choose the best real estate professional for their needs based on merit, experience, and the quality of service provided rather than feeling locked into a predetermined commission structure. For those of us who have always done this, it is business as usual. For those who have not had these conversations with buyer-clients during their career, practice, role play, seek guidance from your broker or favorite real estate educators. 

3. Reducing Potential Conflicts of Interest

One longstanding criticism of the traditional co-op commission model is that it can create a conflict of interest for the buyer’s agent. Since the seller pays the agent’s commission, there is a potential incentive for the agent to steer clients toward properties that offer higher commissions. Yes, this does happen. I experienced it myself when buying property in a market I wasn't licensed in and I ended up firing the agent and representing myself in the transaction. Removing the co-op commission from the MLS minimizes this potential conflict. Agents can focus more on representing their clients’ best interests without the influence of commission-based incentives.

4. Fostering Trust Between Consumers and Agents

Transparency is critical to building trust in any professional relationship. When consumers clearly understand who is paying for what and why, they are more likely to trust their agent and feel confident in their decisions. This trust leads to a more positive experience for all parties involved and helps to build long-term relationships between agents and clients. Yes, I have had buyer-clients pay me directly.

5. Fostering Better Commuication and Professionalism between Agents

Don’t hesitate to pick up the phone and engage in a real conversation with the agent on the other side of the transaction. Ask thoughtful questions, build rapport, and establish a collaborative relationship from the start. This proactive communication is invaluable when writing and presenting an offer, as it enables you to better understand the seller’s priorities, tailor your offer strategically, and significantly increase the likelihood of a successful negotiation. Unfortunately, too many agents shy away from making that call because so much of our work has become automated, but nothing replaces the effectiveness of a personal touch.

The Path Forward: A "New" Era of Real Estate

As the real estate industry evolves, removing the co-op commission from the MLS marks the beginning of a new era of consumer-focused practices. By prioritizing transparency and empowering consumers to have a more active role in the transaction process, real estate professionals can help foster a fair, open market based on mutual trust.

In this new landscape, real estate professionals must embrace these changes and adapt their practices to meet the needs of today’s informed and empowered consumers. This may require a shift in how agents communicate with clients, structure their services, and approach negotiations. However, the benefits of enhanced transparency and consumer trust are well worth the effort.

By discussing terms and payments directly with consumers and removing the co-op commission from the MLS, we can create a more transparent, equitable, and consumer-friendly real estate market. This change is not just about adjusting to new industry standards—it’s about leading the way toward a better future for all involved.