The nation’s second largest multiple listing service, Bright MLS, will begin allowing listing agents to put in a blanket offer of compensation for buyer brokers of zero dollars or more, starting on August 9.
This change appears to possibly diverge from a National Association of Realtors rule, which states that listing agents must make an offer of cooperative compensation to buyer brokers in order to list a property on the MLS.
While Bright MLS, which serves clients in Delaware, Pennsylvania, Maryland, Virginia, New Jersey, Washington, D.C., and West Virginia and represents 42 Realtor association, acknowledges that this is a small change, as previously the lowest amount allowed was one cent, it says this is a large change in terms of transparency.
“We are making this small change to underscore the complete flexibility of Bright subscribers to engage in transparent negotiations with their clients,” the firm wrote in an announcement on its website. “Bright’s MLS supports the most efficient marketplace by making property information widely and transparently available, and by facilitating blanket offers of cooperative compensation available to all buyer brokers on an impartial basis.”
The MLS noted that this change does not impact its impartial system of offers of cooperative compensation, and that offers of compensation remain negotiable and at the discretion of the home seller.
“Bright has always offered flexibility and has never specified a cooperative compensation amount,” the announcement states. “Sellers could agree to have their broker enter as little as one cent in the compensation fields, which was as close to zero as one could get. With this update, a listing agent will continue to be able to enter the cooperative compensation amount agreed upon with their seller client, from zero and up, and continue to negotiate compensation at their client’s direction.”
In an email, a spokesperson for Bright MLS said the MLS does not anticipate this impacting its relationship with NAR.
“Bright is making an independent business decision responsive to the needs of our subscribers – and the consumers they serve,” the statement read.
In addition, NAR said it supports Bright MLS’ decision.
“Bright’s view is consistent with the purpose of NAR’s policies, which are designed to ensure information is efficiently distributed to facilitate the transaction of real estate to the benefit of buyers and sellers. So long as cooperating brokers are aware of the offerings made by listing brokers, that purpose is achieved. NAR has long said listing brokers and their clients are the ones who determine the amount and makeup of the offer to cooperating brokers,” Mantill Williams, NAR’s vice president of communications, wrote in an email. “Practically speaking, the difference between one penny and $0 is negligible, and regardless, those offers are always negotiable. These policies ensure brokers are efficiently sharing information they and their clients need through their local, independent broker marketplaces. Without these policies, brokerages would not know important information about listings and they would have to rely on piecemeal information collected in inefficient ways that could negatively affect their ability to serve their clients and ultimately the U.S. economy.”
With three class action lawsuits — Nosalek, Burnett, and Moehrl — currently progressing through the courts, buyer broker compensation has been a hot topic. Bright MLS is currently listed as one of the 20 MLS co-conspirators in the Moehrl lawsuit, named after its lead plaintiff. The Moehrl suit is the largest of the three cases and defendants include NAR, Anywhere Real Estate, HomeServices of America, RE/MAX and Keller Williams.
MLS Property Information Network (MLS PIN), which serves clients in the New England area, recently signed off on a settlement in the Nosalek lawsuit in which it agreed to pay $3 million and to stop requiring sellers to offer buyer broker compensation. Unlike Bright MLS, MLS PIN is owned by broker owners and does not have to adhere to NAR rules.
A multiple listing service settled a lawsuit challenging Realtor commission rules for $3 million, a possible harbinger for several ongoing actions by home sellers alleging listing requirements are anticompetitive.
The case, Nosalek v. MLS Property Information Network, had class action status and was filed in the U.S. District Court for Massachusetts. Only the MLS agreed to a settlement, according to a June 30 legal filing. Other defendants in the case, both franchisors and brokerages, were not part of the agreement.
Sellers, along with the Department of Justice, are pushing for a major change to the real estate industry’s compensation structure that both its proponents and opponents agree will affect every party involved in home buying.
“Life after all of this is gonna be quite different,” Dennis Norman, a real estate broker and owner of More, Realtors, said. “And I don’t know if NAR survives because we’re talking about massive, massive amounts of money.”
Rules by the National Association of Realtors and associated multiple listing services, which are databases real estate brokers use to list and search for properties, are at the crux of all three major lawsuits — Nosalek v. MLS PIN, Sitzer v. NAR and Moehrl v. NAR. All three cases cite the Sherman Antitrust Act.
The Nosalek plaintiffs didn’t sue NAR, although they did go after realty companies like Century 21, HomeServices of America and Keller Williams. Their initial complaint, filed in December 2020, cites MLS PIN rules on Realtor commissions that say listing brokers must include a fee for the buyer’s representation on each property.
This is because of a coupled compensation structure: most home sellers pay for both the buy-side and sell-side broker fees.
Sellers who don’t offer a fee on the MLS PIN can’t list their home on the service. The lawsuit says this complicates the selling process because buyer agents use the MLS to search for their clients and popular websites like Zillow also use it for their home listings.
Another complaint in the lawsuit says if sellers offer a lower-than-normal fee, buyer agents can see this on the MLS and will likely steer their clients away from the listing.
As part of the settlement, MLS PIN agreed to change its rules on the topic, eliminating the compensation listing requirement. They will also require brokers to inform buyers that they can negotiate the buyer-broker fee and inform sellers that they can elect not to pay it.
HomeServices of America and its affiliates recently filed for summary judgment on the case, arguing there’s no evidence the company conspired with the MLS PIN to inflate commissions.
Both the Sitzer and Moehrl cases contain similar complaints, but are focusing on the NAR as well because of its strong influence on listing service rules: 97% of regional MLSs are affiliated with the NAR and follow its code of ethics, according to by T3 Sixty, a real estate consultant firm.
If the Sitzer and Moehrl lawsuits compel NAR to uncouple with MLSs as some industry voices like Norman are expecting, on top of large damages, the organization and its local chapters would lose their major draw: member-only access.
“I think that’s almost the last bullet for the associations,” Norman said. “MLSs are gonna have their challenges too… but they still have what everybody wants and they’re good for the consumer.”
How Realtors get paid Coupled commissions have been around for a long time. With this system, home sellers pay their listing broker 5% to 6% of the final sale price after closing. That commission is then divvied up evenly between sell-side and buy-side agents, who interact with the customers, and their broker agencies. The majority of each half goes to the agent.
For example, after selling a $300,000 house, a seller pays $15,000 in Realtor fees. Agents receive $6,000 each and their brokers $1,500 each for the sale. The buyer doesn’t pay any fees.
“The whole compensation system doesn’t make a lot of sense,” Steve Brobeck, a senior fellow at the Consumer Federation of America and a self-described public interest advocate, said.
Why are Realtors compensated this way? It evolved from the original system used in 1908 when the first iteration of NAR, the National Association of Real Estate Exchanges, was founded, according to a report by T3 Sixty.
Back then, the industry relied on an exclusive representation system: sellers hired a single listing broker for a fee. Buying brokers were sub-agents of listing brokers, and both sides had a fiduciary duty to sellers. When property sold, listing agents gave their sub-agents a portion of the commission fee.
Eventually, the industry moved away from the subagency model to properly align fiduciary duties, but it didn’t move away from coupled compensations.
“It’s a weird system,” Ann Schnare, a former Freddie Mac executive who ran a study on the compensation structure, said. “Admittedly, it wouldn’t be the first to come to mind, but the fact is that’s what exists… changing it, I think, would be unnecessarily disruptive.”
The NAR has a similar outlook: it resists the lawsuits’ efforts to outlaw shared commissions because they say it’s optional and the rate is negotiable.
Critics of the system like Brobeck point to uniform commission rates despite this negotiability. Brobeck found that in 24 cities across the country, 88% or more of home sales had buy-side commission rates between 2.5% and 3% in a CFA report.
“This rate uniformity is striking evidence of the lack of price competition in the residential real estate industry,” Brobeck said in the report.
Other antitrust lawsuits Legal action over commission fees began in 2018, when a 10-year settlement between the DOJ and the NAR expired. Before crafting a new agreement, the DOJ and Federal Trade Commission held a joint workshop about competition in the real estate industry.
In 2020, the DOJ filed a new lawsuit against the NAR under the Sherman Antitrust Act and simultaneously settled with the association. The settlement required several changes to NAR’s code of ethics to provide “greater transparency to consumers about broker fees.”
The settlement banned buyer brokers from advertising their services as free unless they receive zero compensation from any source. It also prohibited these brokers from searching MLSs by filtering out properties with low commission fees and pushed for greater transparency on those sites.
Because of the settlement, many MLSs began to publicly post commission fees for each property. Redfin and Zillow followed suit. For the first time, homebuyers saw how much their agent would earn from each listing.
But then, the DOJ pulled out of the settlement in 2021 because it prevented them from investigating the association’s rules further.
The Moehrl and Sitzer lawsuits popped up around the same time as the DOJ’s initial workshop.
On March 6, 2019, Christopher Moehrl sued Realtor companies “for conspiring to require home sellers to pay the broker representing the buyer of their homes, and to pay at an inflated amount, in violation of federal antitrust law.”
Then, in April 2019, Joshua Sitzer and Amy Winger, Scott and Rhonda Burnett and Ryan Hendrickson filed a similar lawsuit in Missouri.
Both plaintiffs sued the NAR along with large national broker franchisors: Realogy (now Anywhere Real Estate), HomeServices of America, RE/MAX Holdings, and Keller Williams Realty, as well as HomeServices affiliates BHH Affiliates, HSF Affiliates and The Long & Foster Companies.
Real Estate Exchange, a real estate brokerage, also filed an antitrust lawsuit in 2021 against the NAR, Zillow and Trulia. The lawsuit alleges that Zillow’s search features prevent “transparent access to home inventory.”
Will cash-constrained homebuyers suffer? NAR argues in press releases about the lawsuits that the coupled compensation system fosters market competition because it frees up cash for buyers, allowing them to make a larger down payment.
A study funded by HomeServices of America, a defendant in all three suits, supports the claim. It declares that unless lending changes come in tandem with revisions to this commission structure, it would hurt “minorities, lower income households, and first-time home buyers” the most.
Consumer advocates argue that agent fees won’t hurt buyers because their cost is currently built into home prices. If sellers no longer pay both agent commissions, home prices will fall, and buyers will have the same net cost.
Schnare, one of the study’s authors, said because most finance their home with a mortgage, that’s not true.
“If everything was cash, it wouldn’t make a difference,” Schnare said. “What seems like a small adjustment can make a big adjustment on what they can afford to pay and, you know, potentially hurt the lower end of the market, but with ripple effects upwards.”
Brobeck says this concern is exaggerated, and that lenders will adapt accordingly: “the only reason that argument has any force at all is because the industry supports buyers not being able to finance their commission on the mortgage.”
But Schnare’s study found it’s not that simple.
In order to avoid hurting cash-constrained buyers, lenders would need to change underwriting standards, specifically the loan to value ratio, which represents the borrower’s equity position in the property. This is the most powerful measure of default, the study says, and including an “extraneous factor” like buyer agent fees in the ratio could decrease its predictive accuracy. Schnare says government-sponsored enterprises, the Federal Housing Administration and the Department of Veterans Affairs are unlikely to approve of this change.
Even if they did, it would “require regulatory approval and coordination across multiple parties along the mortgage supply chain,” so Schnare expects it to be a lengthy, expensive process. In the meantime, first time homebuyers would struggle to pay broker fees out of pocket.
“We have what we have, we’re not starting from scratch,” she said. “That’s a big ask for something where the benefits are not entirely certain.”
But the CFA and REX both dismissed the study, citing its funding and accusing it of a faulty premise.
Either way, the industry might be forced to change — both the Sitzer and Moehrl lawsuits are going to trial and many expect the plaintiffs to win. The Sitzer trial is scheduled for Oct. 16, and the Moehrl trial will likely begin early 2024.
“I would not be surprised if there was a settlement before them in both cases,” Brobeck said. “And then the question is, will this settlement really lead to effective price competition?”
Prosperity Home Mortgage based out of Chantilly, Virginia originally got started in the Carolinas back in 2006.
While that was probably the last good year for the mortgage industry before the Great Recession, the independent mortgage banker was able to weather the storm and come out bigger and stronger.
Today, they are one of the largest mortgage lenders in the United States, having originated roughly $6 billion in home loans in 2019.
They operate exclusively via the retail direct-to-consumer channel in 44 states (and D.C.) with 700 branch locations nationwide.
Interestingly, they are a wholly owned subsidiary of The Long & Foster Companies, which is a part of HomeServices of America, a Berkshire Hathaway affiliate, so they appear to have a strong connection to the real estate industry.
Let’s learn more about why Prosperity Home Mortgage could be a good choice for your next mortgage.
Prosperity Home Mortgage Quick Facts
Formed in 2006 in the Carolinas, currently based out of Chantilly, Virginia
More than 700 brick-and-mortar branch locations nationwide and 350+ loan consultants
11 regional offices that process, underwrite, and close loans
Closed roughly $6 billion in home loans during 2019 via retail channel
Also operate a family of local brands including Edina Realty Mortgage, FM Lending Services, DFW Texas Mortgage, and Long Mortgage Part of the HomeServices family of mortgage companies, a Berkshire Hathaway Affiliate
As noted, Prosperity Home Mortgage is a relatively young mortgage company, having been formed in 2006.
However, they’ve already managed to fund more than $6 billion in home loans in a single calendar year, which makes them one of the largest mortgage lenders in the nation.
A good portion of that volume came from lending in their home state of Virginia, which accounted for roughly 20% of that total.
They also did quite a bit of mortgage lending in nearby Maryland and North Carolina, as well as Minnesota.
PHM has several smaller, local mortgage brands, including Edina Realty Mortgage, which serves home buyers in Minnesota and Wisconsin, FM Lending Services, a mortgage banker located in North Carolina, DFW Texas Mortgage, and Long Mortgage based out of Tucson, Arizona.
Overall, their area of focus seems to be the Mid-Atlantic, Northeast and Midwest, though there’s a good chance they’ll expand further west as time goes on.
Roughly two-thirds of 2019 origination volume was conventional loans, and about 93% was 30-year fixed product.
The HomeServices family of mortgage companies includes Prosperity, HomeServices Lending, and Trident Mortgage Company, which collectively funded $10.2 billion in 2019
How to Get a Home Loan with Prosperity Home Mortgage
You can apply directly via their website’s digital mortgage application powered by Ellie Mae
Or download their smartphone app and apply from the palm of your hands
Also have 700 locations nationwide if you want to work with someone nearby
Currently not available in Alaska, Idaho, Iowa, Nevada, New Mexico, and New York
If you want to apply with Prosperity Home Mortgage, they’ve got an Ellie Mae-powered digital mortgage application located right on their website.
Simply hit the big “Apply Now” button and you can get started right away without any assistance from a loan officer.
Alternatively, you can use the branch locator on their website to find a brick-and-mortar location near you if you want to visit an office or speak to a human being.
The locator also lists the employees that work in a given branch, which allows you to go to their own personal website and apply.
So if you’ve been referred to someone, or know who you want to work with, this can be a handy tool.
Once you apply, you’ll be able to upload documents and link financial accounts for a faster and more accurate loan experience.
The company also has a free smartphone app that lets you apply, contact a loan consultant, use calculators, and upload key documents once approved.
You can also track your loan progress via the app as it advances through the process.
At last glance, they are licensed in 44 states and the District of Columbia, with the exceptions being Alaska, Idaho, Iowa, Nevada, New Mexico, and New York.
Prosperity Home Mortgage Loan Options
Home purchase loans, refinance loans, cash out refinancing
Conventional loans (those backed by Fannie Mae or Freddie Mac)
Government loans (FHA, USDA, VA)
Jumbo loans up to $3 million loan amounts
Interest-only loans
Fixed-rate and adjustable-rate options available
They are a full-service mortgage banker that specializes in both home purchase loans, thanks to their strong link to real estate agents, and mortgage refinance loans.
You can get financing on a single-family home, condo, townhouse, or multi-unit property. It can be a primary residence, vacation home, or investment property.
As mentioned, about two-thirds of their production was conventional loan lending. But they also did about 10% of volume each in FHA loans, VA loans, and jumbo loans.
So beyond stuff backed by Fannie Mae and Freddie Mac, including the 3% down HomeReady loan program, you can also get a government-backed home loan, a jumbo loan, or even a USDA loan if you live in a rural area.
Their more unique offerings include an interest-only jumbo loan – they offer loan amounts as high as $3 million, which should cover the majority of borrowers out there.
Most of the loans they close are 30-year fixed mortgages, though they also offer 15-year fixed mortgages and adjustable-rate mortgages.
You can get a 5/1, 7/1, or 10/1 ARM if you don’t plan to keep your property/home loan for that long and want to save some money.
Prosperity Home Mortgage Rates
At the moment, they don’t appear to advertise their mortgage rates on their website or elsewhere. So you’ll need to contact them to get pricing while comparison shopping.
The same goes for lender fees, which are not disclosed upfront on their website.
Be sure to inquire with a loan officer while mortgage rate shopping and get the APR, which factors in the both the fees and the interest rate.
It’s unclear what lender fees they charge, such as loan origination, underwriting, and processing.
As such, it’s impossible to know how competitive they are until comparing their rates and fees to other mortgage lenders.
Remember, the more quotes you receive, the better deal you’ll get, which is proven by real studies from Freddie Mac.
Prosperity Home Mortgage Reviews
They tout their 4.88 out of 5-star rating with SocialSurvey, which is based on a whopping 36,000+ customer reviews.
Clearly a large sample size there to have near-perfection, so they must be doing something right.
Similarly, they have a 4.97 out of 5-star rating on Zillow, which again is pretty much as good as it gets.
On Zillow, you can see individual loan officer reviews as well if you want to know how a specific individual has performed.
Most of the Zillow reviews highlight the fact that both the mortgage rate and closing costs were lower than originally expected.
Prosperity Home Mortgage has been an accredited business with the Better Business Bureau for many years and currently has an A+ rating.
Prosperity Home Mortgage Pros and Cons
The Good
Can apply directly online via digital application Lots of branch locations to choose from if you prefer a human touch Excellent customer reviews Plenty of different loan programs to choose from Free mortgage calculators and tutorials on their website Free smartphone app with ability to track loan progress
The Potential Not-so-Good
Not licensed in all 50 states Do not advertise their mortgage rates Do not disclose their lender fees on website
It’s official, there’s a new sheriff in town and his name is Glenn Sanford, founder of eXp Holdings and CEO of eXp Realty. The firm moved from number three to number one by transaction sides in the 2023 RealTrends 500 rankings, based on 2022 data.
Compass, headed by CEO Robert Reffkin, took the top spot this year by sales volume. A big initiative for Compass this year is to reinforce the importance of culture and encourage agents to go into the office, which is already a requirement at headquarters in New York City. “There’s an energy when agents get together in person,” Reffkin said.
As for eXp, in a recent interview, Sanford acknowledged that his firm wasn’t immune to the challenges of the current market. However, he said that they were in a position to “weather the market.”
After more than 20 years with the Anywhere Advisors entity of Anywhere Real Estate and the HomeServices of America entity of Berkshire Hathaway HomeServices consistently being number one or two in both categories on the RealTrends 500, eXp Realty and Compass rose to these positions and displaced the old guard in less than 10 years.
What this shows is that there is not one path to growth. “Their paths to such growth were very different in some ways and the same in others. Compass used its capital and a focus on high-producing agents and teams in high-end markets to achieve its results. eXp used a mixture of its own equity, revenue sharing and the virtual nature of its business to gain its position. Access to and use of capital, therefore, was key for both organizations,” said Steve Murray, partner of RTC Consulting.
It is noteworthy that eXp was the only one of the top four firms to grow both its closed transactions and its sales volume in 2022 when sales of existing homes were down significantly. Compass, for its part, declined at a slower rate than the two other giants of the industry. One thing remains true for these firms and all others in the residential brokerage business: Recruiting and retaining agents and teams remains the core driver of growth.
The full list of 2023 RealTrends 500 brokerage firms was released on March 24 and announced in The Wall Street Journal the same day.
HomeServices of America, Berkshire Hathaway’s real estate brokerage business, has increased its ownership stake in Title Resources Group, an underwriter currently partially owned by Anywhere Real Estate.
Terms of the deal were not disclosed.
Anywhere, a competing real estate franchisor formerly known as Realogy, sold 70% of TRG to Centerbridge Partners in October 2021 for $210 million in cash.
Then in May 2022, HomeServices purchased its first stake in TRG, but the size and price were not disclosed. However, Anywhere reported it made a sale that quarter of a 4% share of its portion of the title company to an unnamed purchaser for a $4 million gain in a Securities and Exchange Commission filing.
More recently, iBuyer Opendoor Technologies took an ownership interest during March in the title insurance underwriter, but again, details were not provided. But in the SEC filing, Anywhere reported a further 1% reduction of its stake for a $1 million gain during the first quarter.
Title Resources Guaranty, TRG’s business unit, finished 2022 as the eighth largest underwriter by market share, with 2.5% of the premiums generated according to American Land Title Association data.
Industry-wide, title insurance premiums generated totaled $21 billion last year. Among the independent underwriters — those not affiliated with Fidelity National, First American, Old Republic and Stewart — TRG only trailed Westcor, which had a 4.4% share.
During 2021, TRG had a 2.4% share of the $26.2 billion of total title insurance premiums written.
“The team and I are thrilled about HomeServices of America’s decision to increase its ownership stake in our company,” Scott McCall, TRG’s president and CEO, said in a press release.” Our expanded relationship with HomeServices of America speaks volumes to the value we create for our customers and our best-in-class solutions.”
Messages were left with TRG and HomeServices to get further specifics about the transaction but not returned by press time.
“Our partnership has already created value for our operations,” Gino Blefari, CEO, HomeServices of America, in the same press release. “We look forward to continuing our collaboration and the positive impact we will have on the industry over the years to come.”
Zillow has been doubling, tripling, and quadrupling down on its mortgage business – which continues to lose money.
Why it matters: Zillow Homes Loans is a key part of the company’s growth strategy, and an analysis of its current traction highlights the opportunities and challenges on a likely path forward.
Zillow’s mortgage business posted a $167 million loss in 2022, for a cumulative loss of $283 million since 2017.
Interestingly, while other mortgage businesses have enacted layoffs and race to cut costs, Zillow is keeping its mortgage operating expenses (OpEx) steady.
While revenue dropped in 2022, OpEx investment remained high – illustrating that Zillow is continuing to invest in mortgage without pressure to turn a profit.
To succeed, Zillow Home Loans must attach loans to the leads delivered through Zillow’s premier agent and flex programs.
Zillow reported that in Raleigh, one of its test markets, customer adoption of Zillow Home Loans increased from 15 to 20 percent.
This mirrors the progress of Redfin, which reported 21 percent mortgage attach in February compared to 17 percent in Q4.
Yes, but: Attaching mortgage is nothing new for traditional brokerages.
HomeServices of America and Prosperity Home Mortgage have achieved 25 percent attach rates at a national scale of over 45,000 funded loans annually – 10x the size of Zillow Home Loans.
Zillow and Redfin are both below the industry average, and may likely top out at 25 percent, something of a universal constant in the world of attaching mortgage.
Zillow’s next act, announced in early 2022 after Zillow Offers was shuttered, included plans for significant revenue growth through mortgages (adjacent services).
A key component of this strategy is integrating Zillow Home Loans into Zillow Flex.
Behind the numbers: Zillow generated about 75,000 Flex transactions in 2022 – if the company scales Zillow Home Loans to 50 percent of its markets with a reasonable 25 percent attach rate, it would close around 9,300 loans and generate around $84 million in additional revenue.
A possible end goal could include doubling Flex transactions and launching in 80 percent of Zillow’s markets, with a stretch 30 percent attach rate – leading to 36,000 loans and $324 million in revenue.
These are large numbers with equally large assumptions; scaling a national mortgage operation is hard (and expensive and people-intensive).
The bottom line: Zillow is experiencing some early wins in its journey to integrate Zillow Home Loans with its Flex program – but the path forward is uncertain, long, and expensive.
Even after years of investment, Zillow Home Loans (and Redfin) is still playing catch up to the tried-and-true mortgage attach methods of the nation’s largest real estate brokerages.
A multitude of factors need to go right for Zillow to hit its goals: doubling its Flex program, convincing thousands of Flex agents to promote Zillow Home Loans, and standing up a national mortgage operation to handle 10x the volume.
Virginia-based mortgage bank Prosperity Home Mortgage, LLC has acquired the assets of Arizona-based JFQ Lending, LLC to explore the direct-to-consumer channel.