Dear Anne: Don’t Use an Offer to Increase Your Bottom Line
Dear Anne: I received a showing request from “Buyer’s Agent Earl” the minute I entered my listing into the MLS. He said the property was ideal for his buyers.
After I confirmed the showing appointment, however, he asked if I could come up on the commission. He only works for a specific percentage and nothing less will do.
I told Earl the seller and I discussed the commission at length when I took the listing, and he made it clear he only wanted to pay X% to a cooperating agent and nothing more. But I did not tell Earl that the seller was being realistic: He believed that the final sales price wouldn’t be ideal because the property needs work, and a buyer would need money to make the repairs.
To be honest, my commission was less than preferable too, but a sale is a sale in my book.
As it turned out, Earl’s buyers saw a diamond in the rough and put in an offer within the price range we anticipated. What we did not anticipate was the terms of the offer: It stated that the listing broker would pay Earl a commission that was higher than offered in the MLS.
My seller went ballistic. He curtly reminded me he would not pay anything more than what was offered in the MLS. I explained he could counter the offer, remove the terms asking for a higher commission, and the commission would remain as stated in the MLS – and he did.
So next, Earl sent me a scathing email demanding that we pay up, saying his buyers would walk if we didn’t honor the terms in the contract.
The buyer walked alright – right into my office and I sold them the property. Now I want to take him to the Board for his underhanded tactics. And by the way, I paid old Earl the commission offered in the MLS because I believe it was the right thing to do even though I know I have grounds to argue procuring cause. Signed, Irritated with Earl
Dear Irritated: It’s possible an ethics hearing panel may find Earl in violation of the Code of Ethics. Why? Article 16 comes to mind, more specifically Standard of Practice 16-16, which says, Realtors shall not use the terms of an offer to attempt to modify the listing broker’s offer of compensation or make the submission of an executed offer contingent on the listing broker’s agreement to modify the offer of compensation.
Earl’s attempt to modify your offer of compensation could get him into hot water.
If Earl wanted to increase his bottom line, he had several options. He did start out on the right foot by asking if it’s possible to increase his commission before he showed the property. There is nothing unethical about asking the listing broker for a raise at this stage of the game.
Alternatively, Earl could ask the buyer to pay the difference in commission. If that failed, he could refer the buyer to another agent if he did not want to accept a commission that fell below his bottom line. He could then move on to a new sale and collect a referral fee.
There is another option, and this may sound familiar but it is different: The buyer can ask the seller in the terms of the contract to increase the commission as a concession. And no, I am not contradicting myself. It’s important to point out that the sales contract is between the buyer and the seller. And once again, the seller reserves the right counter back and remove the concession.
To be clear, the buyer is not asking the listing broker to modify the offer of compensation – he is asking the seller to kick in the additional funds as a concession to the actual sale of the property.
But what if Earl talks the buyer into this? Is it unethical?
In my opinion, no, because the obligation under the Code of Ethics is on Earl not to attempt to modify the listing broker’s offer of compensation. Ultimately, the buyer makes the decision to ask for the concession and sign the purchase agreement. I expect many may disagree; but, in the end, it is not my decision to make, the decision rests with a panel of Earl’s peers.
The final option is for Earl to accept the offer of commission as it stands, get paid and move on. The route he chose backfired. If he does go to hearing and is found in violation, his bottom line may take another hit if he gets fined. If you ask me, lesson learned.
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Anne Cockayne is Director of Local Association Services for Florida Realtors
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