Compensation: ‘My Seller Must Offer More?’
Listing brokers determine cooperating compensation, either an amount or percentage. However, the issue has been a frequent topic of discussion in today’s market of thin listings and high buyer demand.
ORLANDO, Fla. – Dear Joey: I recently encountered a buyer’s agent who refused to show my listing unless I increased the amount of compensation I was offering to the selling broker. I was told to “tell my seller to raise the compensation.” – Curious One
Dear Curious One: We’ve been hearing your question more frequently in this historic market.
Compensation offered to a selling broker for properties listed in the MLS is determined by the listing broker, not the seller. However, the seller has the right to know what the compensation will be for a cooperating brokerage before entering a listing contract.
Standard of Practice 1-12 of the Realtor® Code of Ethics states: “When entering into listing contracts, Realtors must advise sellers/landlords of “the Realtor’s company policies regarding cooperation and the amount(s) of any compensation that will be offered to subagents, buyer/tenant agents, and/or brokers acting in legally recognized non-agency capacities …”
The MLS requires the offer of compensation to be entered into the MLS by the listing broker either as a dollar amount or a percentage of the sales price. It is an offer made by the listing broker to the selling broker. The compensation owed to the cooperating broker for being the procuring cause is conditioned upon a successful transaction.
An agent should not deliberately refuse to show a property based on the amount of compensation being offered to the selling broker. This could potentially be a violation of Article 1 of the Code of Ethics, which says when representing a buyer, seller, landlord, tenant or other client as an agent, Realtors pledge to promote and protect the best interest of their client.
With that said, Realtors are obligated to treat all parties in a transaction honestly. So, when working with a buyer, an agent cannot conveniently fail to inform the buyer that the agent found a property, where the compensation is low if the property checks the boxes on the buyer’s “wish list.” This would be promoting the agents interests above the clients. It boils down to self-dealing plain and simple.
If you want to make more money and you do not want to spend time on a particular listing because it doesn’t pay enough, make sure you share this information about the listing with the buyer as an option. You can let the buyer know that you are happy to refer him to another brokerage for purposes of seeing that listing.
Taking this scenario a step further: If the buyer’s agent shows the property and refuses to submit the offer unless the listing broker increases the offer of compensation, we could be talking about a violation of Article 16, more specifically, Standard of Practice 16-16, which clearly states Realtors shall not use the terms of an offer to purchase to modify the listing broker’s offer of compensation.
To sum up, it’s important to reiterate that, ultimately, the listing broker negotiates their compensation with the seller and then offers part of that as the cooperating compensation for the properties listed in the MLS. The amount offered to a selling broker can be more; it can be less; it can be equal to the amount the listing broker collects for services rendered. The listing broker decides, period.
We all want what’s best for our business and clients. It’s important to remember, regardless of which side of the transaction you work, as a member of a board of Realtors you must comply with the Code of Ethics and have a duty to cooperate and get the job done – a win, win for everyone!
Joey Sale is the Director of Local Association Services for Florida Realtors
Note: Advice deemed accurate on date of publication
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