Question:
I just closed on a property and found out that the listing agent did not split the commission evenly. This has happened to me several times. I just want listing agents to give me "my fair share"? I worked just as hard with my buyer as the listing agent showing many properties. Do I have to accept what is offered in MLS or can I ask the listing agent to split the commission evenly with me?
Answer:
First of all, there is no such thing as "fair share" in commissions. All "good" agents work very hard for their pay whether they are representing a buyer or a seller. By showing a property and writing up an offer, you agree to the compensation offered in MLS.
Standard of Practice 16-16 under Article 16 of the REALTOR® Code of Ethics states that a REALTOR® acting as a buyer's representative may not use the terms of an offer to attempt to modify the listing broker’s offer of compensation or make the submission of an offer contingent on the listing broker agreeing to modify the compensation.
So, if, as Realtors and buyer agents, we adhere to the Ethics Standard of Practice, do we have to accept the co-broke % offered out in MLS?
The short answer is no, we don't have to accepted what is being offered, but there is a "But".
You cannot ask the listing agent to change to offer of compensation that is listed in MLS because that WOULD be a violation of the REALTOR Code of Ethics. The listing agent has a contract with their client, the seller of the property. If you are asking the listing agent to change the compensation offered, then you are considered interfering with the contract that the listing agent and his/her client has, which not only violates the Code of Ethics, but could also have legal ramifications with contract law.
The listing agent MUST have the same offer of compensation in MLS as (s)he has in the listing contract. You can't have a 50/50 split in the contract (for example only - 5% total and 2.5% to buyer agent) and turn around and offer a lower split in MLS (such as 2% on a 5% total commission). THAT would be a violation of the contract by the Listing Agent. Unfortunately, there is no way to prove that because the Listing Contract is private between the Listing Agent, his/her broker and the client.
The listing agent MUST have the same offer of compensation in MLS as (s)he has in the listing contract. You can't have a 50/50 split in the contract (for example only - 5% total and 2.5% to buyer agent) and turn around and offer a lower split in MLS (such as 2% on a 5% total commission). THAT would be a violation of the contract by the Listing Agent. Unfortunately, there is no way to prove that because the Listing Contract is private between the Listing Agent, his/her broker and the client.
Then how do you get more compensation if you don't like what is offered in MLS without violating the Code of Ethics and/or contract law? What you have to do is at the time the offer is made (or before) give a letter (or form) to the listing agent rejecting the compensation in MLS, and asking the Seller to pay your fee directly to you at closing from the seller's proceeds. The compensation is then paid directly from the seller (via the closing attorney) to your brokerage. Now technically, the listing agent would still have the right to get his/her full compensation from the seller as per the listing contract, so the seller would end up paying 7 1/2 percent if you asked for 2 1/2% using the above example. Of course, in that case a reasonable & fair listing agent should reduce his/her compensation from the seller by the amount of co-broke compensation contained in the listing contract (5% minus 2% = 3% for example, for a total of 5 1/2% paid by the seller).
You do have to explain to your buyer client why you are asking for more compensation than what is offered in MLS (because you're worth it!), and have then sign the letter/form agreeing to it. The drawback is that if you are in a multiple bid situation, you could hurt your clients chance of getting his/her offer accepted because the seller could receive slightly less proceeds from the sale.
Of course, you could have your Buyer sign a contract before showing any properties and avoid the situation in the first place.
Of course, you could have your Buyer sign a contract before showing any properties and avoid the situation in the first place.
Disclosure: All percentages and offers of compensation contained in this article are used as examples only. Check with your own broker or your company policy for more information. Avoid any possible anti-trust violations by never discussing commissions with another agent/broker.
Questions/Comments?
Jim Armstrong
Broker/President
Armstrong Field Real Estate
Broker/President
Armstrong Field Real Estate
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