Sellers wanting their properties included on the multiple listing services (MLS) must list the property with a broker who is a member of the local MLS. This enables potential buyers from all over the globe to see the listing by logging into Realtor.com or other websites that post MLS listings. Typically, a real estate agent is able to post listings on the local MLS when she is a member of the local Realtor association and a member of the local MLS. Membership fees vary by each association or MLS database.
MLS is a privately owned database. Initially, the system was a way for brokers to offer compensation to competitive brokers, bringing qualified buyers. Typically, a broker would offer a percentage of his fee to the cooperative broker. The seller paid the seller’s agent, and the selling agent paid the buyer’s broker. When MLS listings moved from paper books to online listings, consumers as well as agents sought the information contained within the listings.
The real estate agent or licensee listing your property may or may not be a licensed broker. Yet all real estate licensees must work under a licensed designated broker. When the sales licensee gets a listing agreement from a seller, the broker must sign the listing, and, technically, it is the broker’s listing, even if the seller never meets the broker. Whatever fee the seller agrees to pay goes to the broker, and the broker pays the listing agent and buyer’s broker from these fees. Listing fees and or commissions are negotiable.
When hiring a real estate broker, the seller typically signs a listing agreement or employment contract with the agent. One common form of payment agreement is the commission, where the seller agrees to pay the broker a percentage of the final sale price, at the close of escrow. From those funds, the selling broker pays a portion to the buyer’s agent. If the property does not sell before the listing contract runs out, the seller owes nothing. However, there are other commission and fee agreements, such as upfront fees or fees for specific services, payable even if the property does not sell. All fees and commissions are negotiable, and for a real estate agent to discuss “average” commission rates is considered within the industry a possible violation of antitrust laws.
Another way for a broker to receive a broker’s fee on an MLS listing is to have a brokerage buyer agreement with the buyer, prior to looking for real estate. This is an employment contract where the buyer agrees to pay the agent a commission, even if the broker does not qualify for the commission offered on the MLS or a for-sale-by-owner.