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Dwiggins’ warning on commission workarounds: Prepare to be sued

Taylor Anderson for Inman Intel

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NextHome CEO James Dwiggins has a strong warning for brokerages whose agents might plan to use any of a growing list of websites that were set up to advertise seller offers of compensation to buyer brokers: Prepare to be sued.

Dwiggins has been one of real estate’s reform-minded leaders in an era of tumult, offering his thoughts on social media and his podcast about what he sees as the best moves ahead to protect real estate professionals.

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This week, he flagged one of the lingering questions about how buyers’ agents might find out what commission a seller might be offering for a property. And he took aim at the new websites offering “commission workarounds,” after offers of compensation are removed from multiple listing services across the country on Aug. 17.

James Dwiggins | NextHome CEO

“If you or your agents are using one of these portals to share commissions after August 17th, be prepared to get sued at some point,” Dwiggins wrote. “If you are a member of NAR when the class notice is issued next month and are benefiting from the settlement (which is basically almost all of you) you are bound to follow the release terms.”

Violating those terms means potentially facing another lawsuit after the reforms outlined by the settlement agreement take effect on Aug. 17.

The statement homes in on an area of division in the industry — if offers of compensation can’t be communicated via the MLS, where can they be communicated, if at all? 

A wave of upstart companies has quickly emerged to offer agents and their clients ways to communicate offers of compensation outside of the MLS.

Those companies are in line with what some brokerages and franchises believe is allowed under the settlement agreement. Keller Williams educated its agents at a recent town hall meeting that they were able to market offers of compensation everywhere but the MLS.

“Sellers can still decide to specifically offer cooperative compensation, and it can be marketed any place other than the MLS,” Keller Williams Head of Industry and Learning Jason Abrams said. “This could include things like newsletters and text messages and carrier pigeons. Or a broker or agent’s own website.”

Dwiggins disagrees, pointing to settlement paragraph H.58.v. He said such marketing would attract the watchful eye of attorneys ready to file lawsuits.

“The plaintiffs’ lawyers are watching all these websites pop up, and writing down all the names of agents who are using them and compiling their next list of defendants to sue, which will include the brokerage since the agents work for you,” Dwiggins wrote.

Lead plaintiff attorney Michael Ketchmark previously told Inman as much.

Michael Ketchmark | Attorney

“If brokers and agents are trying to find ways that they can continue to violate the law and continue to conspire, we’re going to hold them accountable,” Ketchmark said. “Violation of the law is not allowed. If that happens, we’re going to get in there and actively shut that down.”

And it may not just be plaintiffs’ attorneys who are playing watchdog. 

In a court hearing in May, an attorney for the Department of Justice’s Antitrust Division said that the agency didn’t want to see offers of compensation made “anywhere.”

“We believe offers of compensation should not be made anywhere, but certainly not on the MLS,” DOJ attorney Jessica Leal said.

Some of the companies offering ways to market offers of compensation are geared toward agents. Others were created with sellers in mind.

“Sellers are at a disadvantage if they can’t offer a finders fee,” real estate broker Steven Hattan, who helped create the website Listing Split, told Inman. He added that “our focus is completely on the homeowner; it’s completely on the seller.”

Another company offering a way for real estate professionals to advertise offers of compensation is Nesthook. President Ryan Kelley told Inman he knew the future was still uncertain.

“I understand that changes could still happen [and] it’s all very unclear, and none of us really know, but we’re confident with what we built, [and that it] is something we’re going to move forward with now,” Kelley said.

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