Dear Anne: I Was Promised a Bonus – Why Don’t I Get It?
Dear Anne: I found a listing for my buyer in the MLS, and, in the broker remarks, the seller offered a bonus. This listing was perfect – exactly what my buyer described as their “dream home.” They fell in love and we submitted an offer.
However, the seller stipulated that he would only pay a bonus if the offer was at or above at his ideal sales price, and, after reviewing the comps, we decided the list price was well above market value. The offer I submitted was below the seller’s dream sales price.
The seller made a counteroffer, and within that counteroffer, the seller made it clear that I did not qualify for the bonus posted in the MLS. Both the buyer and the seller agreed to the terms of the counteroffer, and just like that my bonus was gone. After the signing, I turned to listing agent and asked about the bonus. He claimed he has nothing to do with it, and I was not entitled to it anyway.
Now I’m confused. I’ve talked to agents in my office, and everyone has a different opinion on how bonuses work. I thought if you were offered compensation in the MLS, you were entitled to it with no conditions except to be the procuring cause of the sale. Now after listening to different opinions, I am beginning to wonder. – Signed, Bewildered
Dear Bewildered: In 2008, the National Association of Realtors®’ NAR MLS Cooperative Compensation Work Group concluded that NAR Policy does not prohibit listing brokers from supplementing cooperating compensation offered in the MLS in the form of a bonus.
Only MLS participants (brokers) can offer and accept offers of compensation through the MLS, and a bonus is considered compensation; therefore, the listing broker assumes responsibility for that bonus once it is entered into the MLS. So, once you check the bonus box, the football has been passed to you.
In Section 1, Multiple Listing Service Defined, of the NAR Handbook on Multiple Listing Policy, an MLS is defined as a means by which authorized participants [brokers] make blanket unilateral offers of compensations to other participants [brokers] meaning there are no conditions on commissions – and yes, I know this rhymes.
Please note, there is no delineation between bonuses and commissions. They are viewed as one and the same based on the conclusion of a NAR work group that concluded bonuses are supplemental compensation.
This section further states, and I quote, “Entitlement to compensation is determined by the cooperating broker’s performance as procuring cause of the sale (or lease).”
When a bonus is withdrawn after the offer is submitted, the Code comes into play, Standard of Practice 3-3, says the listing broker and cooperating broker can enter into an agreement to change compensation (and this includes bonuses). In short, it requires the cooperating broker’s consent – and it may be a good idea to confirm this in writing.
If necessity dictates the withdrawal of a bonus, the ideal time to do it is before the submission of the offer per Standard Practice 3-2, which says any change in compensation [remember a bonus is additional compensation] must be communicated to the other Realtor prior to the time that Realtor submits an offer to purchase/lease the property. This doesn’t always happen because transactions tend to morph during negotiations. Often the agents brokering the deal use whatever means is necessary to get the buyer and seller to the closing.
While the seller believes removing a bonus in the counteroffer does the trick, it doesn’t. In a sense, all he is doing is conveying his wishes to the buyer and putting the brokers on notice. The contract for purchase is between the buyer and seller, not the brokers. Therefore, the listing broker is still left holding the football (bonus) because he offered it in the MLS (the contractual connection between MLS participants), and it was in the MLS at the time you submitted the offer.
The listing broker could argue before an arbitration tribunal that the seller withdrew the bonus during negotiations, the money was not paid at closing, and no doubt he will argue the fact that you knew going in the seller had an ideal price point and the bonus was off the table once the offer came in below his price point.
The arbitration tribunal decision could be affected by:
- Local customs – if bonuses with conditions are the norm in your area, it’s possible the panel could decide in favor of the listing broker
- The listing broker made a good faith effort when he offered the bonus in the MLS but it’s financially impossible to collect the money from the seller.
- A panel that sees it your way and awards the bonus to your broker
In short, it’s anyone’s guess where the tribunal will land on this one. This is why informal dispute resolution through mediation could resolve this issue. It’s quicker, saves time, preserves relationships, and the brokers decide the outcome rather than taking their chances at arbitration. While you may be confident the MLS rules are on your side, it does not guarantee you will score a touchdown at arbitration.
But what about the seller’s desire to offer a bonus as an incentive to cooperating brokers? If the seller wants to offer a bonus with conditions, this can easily be accomplished outside the MLS and save both brokers a lot of grief – especially the listing broker and this way the seller gets to keep the football.
Anne Cockayne is Director of Local Association Services for Florida Realtors
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