Dear Anne: The Listing Agent Got Paid More Than Me!
ORLANDO, Fla. – Dear Anne: I’m sick and tired of listing brokers who believe they deserve the lion’s share of the commission while the cooperating broker ends up working for peanuts. It’s not fair!
Who does all the work? It’s not the listing broker, it’s the cooperating broker. The cooperating agent finds the property, schedules the showing appointment, shows the property (sometimes more than once), writes the offer, negotiates on behalf of the buyer and more. I work hard for my money, and when I find out I’m getting short-changed it ticks me off.
If they’re going to keep a disproportionate chunk of the commission, they’re supposed to check the dual/variable rate box in the MLS. It’s an MLS rule and a violation of the Code of Ethics. I’m so angry, I’m going to start filing complaints if this keeps up. MLS participants have a right to know the total commission on the listing contract.
This is becoming more and more prevalent in my marketplace, and it’s got to stop! Tell me you don’t agree with this practice or I’m going to stop reading your articles. Because quite frankly, I don’t agree with your advice half the time. – Not Fair
Dear Not Fair: Well, it looks like I have lost another reader. Obviously, you are way off course on this one and you may want to revisit the MLS rules. First and foremost, the total commission in the listing agreement is none of your business. The listing contract is between the listing broker and the seller, not you. In fact, NAR Policy says, and I quote:
The association multiple listing service shall not have a rule requiring the listing broker to disclose the amount of total negotiated commission in his listing contract, and the association multiple listing service shall not publish the total negotiated commission on a listing which has been submitted to the MLS by a participant. The association multiple listing service shall not disclose in any way the total commission negotiated between the seller and the listing broker.
Furthermore, NAR Policy says, and I quote:
The listing broker retains the right to determine the amount of compensation offered to other participants (acting as subagents, buyer agents, or in other agency or nonagency capacities defined by law) which may be the same or different.
It’s not about being fair; it’s a business decision. The listing broker tells the seller that this is what he wants to be paid and how much he’ll pay a cooperating broker who is the procuring cause. If the seller signs the listing contract, that’s it. It’s obvious you do not understand what dual variable rate means.
Dual available rate commission is a simple concept. It’s easier to explain by example:
When listing broker Sam took a listing, he and his seller agreed that if Sam brings in the buyer without the assistance of a cooperating broker, he’ll reduce his commission by half – in this case he is eliminating the cooperating side of the commission by X%. (The percentage can vary depending on what Sam and his seller agree on.)
Sam checks the dual variable rate commission field in the MLS and discloses X% as the difference. By checking the dual variable box, Sam is flagging his listing so Lucy can tell Buyer Lola that if she decides to submit an offer, she may want to take this into account. If Sam comes in with a competing offer at the same time as Lucy, it’s possible the seller may find Sam’s offer more appealing because he saves money on the commission.
Lucy’s job is to help Lola come up with a strategy that will make her offer more appealing. I’ve said this before, and I’ll keep saying it: It’s all about leveling the playing field. If Lola’s offer is successful, Lucy is paid what is offered in the MLS at the time the offer was submitted.
In short, by disclosing the existence of dual variable rate commission arrangement, a competing buyers’ chances to submit a successful bid may increase.
I like to call a dual variable rate a sliding scale that only affects the listing side – not the cooperating side. Sometimes, this type of arrangement may occur during the heat of negotiation, and, if so, the listing broker is obligated to disclose as soon as practical per Standard of Practice 3-4:
REALTORS®, acting as listing brokers, have an affirmative obligation to disclose the existence of dual or variable rate commission arrangements (i.e., listings where one amount of commission is payable if the listing broker’s firm is the procuring cause of sale/lease and a different amount of commission is payable if the sale/lease results through the efforts of the seller/ landlord or a cooperating broker). The listing broker shall, as soon as practical, disclose the existence of such arrangements to potential cooperating brokers and shall, in response to inquiries from cooperating brokers, disclose the differential that would result in a cooperative transaction or in a sale/lease that results through the efforts of the seller/landlord. If the cooperating broker is a buyer/tenant representative, the buyer/tenant representative must disclose such information to their client before the client makes an offer to purchase or lease.
However, there are times when there is no “as soon as practical” scenario. It all depends on the how-and-when the arrangement came about, so I’ll leave that up to an ethics tribunal to sort out.
As you can see, a dual variable rate commission has nothing to do with how much commission a listing broker keeps and how much he shares.
On a final note, it’s time you cut listing brokers some slack. There is a lot of work that goes on behind the scenes to prep a listing and its seller for market, not to mention guiding them through the selling process. If you primarily work on the buyer’s side of the deal, you may be the one short-changing the listing broker. They work hard for the money, too.
Anne Cockayne is Director of Local Association Services for Florida Realtors
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