Can a cooperating broker unilaterally change the compensation amount?

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A toy house on top of a stack of $100 bills

11/11/2016 | Author: Editorial Staff

A cooperating broker wrote an amount of compensation in the broker-information section on page 9 of the residential contract that's different than the compensation amount I, as the listing broker, offered in the MLS. When I called the matter to her attention, she said that she has always been paid that amount and would neither change the amount nor alter her practice. Can she do that?

No. According to MLS rules, listing brokers must specify the compensation being offered to cooperating MLS participants. These offers are unconditional unilateral offers. The unilateral offer becomes an enforceable agreement between the brokers when a seller and a buyer execute a purchase contract and the cooperating broker is the procuring cause of that sale. Although the brokers can mutually agree to modify the cooperating compensation, neither broker can unilaterally change the compensation as stated in the MLS.

In addition, 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.

Categories: Legal
Tags: legal, legal faq, contracts, compensation


Comments

Rick Chumsae on 11/25/2016

Lawrence,
I am waiting to see if anyone can support Stuart’s HAR comment (commissions may be negotiated before an offer is submitted) or if it is as I believe, a commission may be negotiated before a property is shown.

If a buyer’s agent tries to negotiate a commission before showing, that to me is fine.  I am unlikely to make any adjustment, but it is okay with me if people call and make a try at it. Failing to negotiate a better deal, the buyer’s agent has two choices: don’t show the property or show it and live with the lower commission of a contract is written.  The buyer’s agent should never write in a higher commission on page 9 without permission from the listing brokerage.

Lawrence Sotoodeh, Broker-San Antonio on 11/25/2016

Gentleman and Ladies, it’s tough to read all these different comments and interpretations. What happened to us?  Listing agents post commission offered, PERIOD. If one is trying to negotiate the commission with your counterpart;  you ‘re working the wrong end of the deal.  Negotiate with buyers and sellers, not other practitioners. I respect the fact that a listing agent has produced the listing and is offering the best compensation possible. Why are we talking about this?

Stuart Scholer on 11/25/2016

If I am not mistaken… HAR ethics state that any commission negotiations between Realtors must take place before an Offer it tendered.

Rick Chumsae on 11/25/2016

We need to be clear on this: All commissions are negotiable. Between client and brokerage, YES.  Between agents, YES, but only if the Buyer’s Agent calls before the initial showing.  The result of that negotiation is up to the agents and their their brokers.  Between agents after the first showing, NO. 

Per Realtor rules, a Buyer Agent request to negotiate commission after a showing is subject to disciplinary action.

Judy McKee on 11/25/2016

Commissions are negotiable between Clients.
Commissions are not negotiable between License Holders (Broker and Sales Agent).

Mike Smith on 11/18/2016

In multiple offer situations, I once saw a Buyer’s agents offer to take less commission than what is offered in MLS, then offer that difference back to the Seller as a way to make their Buyer client’s offer more attractive. I think this is an example of interfering with another Broker’s exclusive relationship when you do this which is a COE violation.

Stacy Manuel on 11/18/2016

Frank and Lawrence, I agree completely.  If an agent brings me a buyer I am more than happy to split the commission 50/50.  I am currently working a deal that’s in my area but listed by an agent from another MLS area.  I am being penalized because I’m not a member of the other agents MLS, even though the listing is not in they’re MLS.  It should be if you are a member of AN MLS the commission should be split. We pay enough fees.

Stuart Scholer on 11/17/2016

Frank,

You effectively made a $12K contribution to the Seller! That was nice.

Jarod Marcus on 11/17/2016

It really IS quite simple…. what is published in MLS is the amount, period!  Any attempt to “negotiate” more IS a violation of MLS rules, and the Code of Ethics.  There is a reason paragraph 8 says that Broker’s Fees are in separate agreement, and that is to prevent the Realtor’s compensation from interfering with the Principals’ transaction. 

If the co-broker’s fee is ridiculous (and we ARE seeing $ 1 co-brokerage fees on MLS), then shame on the buyer’s agent if they don’t have a Buyer Rep Agreement (also a violation of the Code of Ethics, Article 9).  The Buyer Rep Agreement addresses this exact situation so that it should NEVER be an issue should there be a deficient co-brokerage fee.  And demanding an earned paycheck is NOT putting yourself before the clients interest, it is simply having one’s client live up to THEIR contractual obligation.  When properly explained upfront, buyers do not tend to object.  We do this to earn a living, and responsible home buyers should not need or ask for charity from us.

Not to get off the original question, but the last time my fee was shortchanged, I was dealing with an impossible FSBO who not only refused to pay me (her prerogative), but also told my buyer that he could not have me involved with the sale.  I quietly lied low during the negotiating, advising my buyer how to proceed, then re-appeared after the papers were signed.  Assuming my buyer had limited funds being used for his down payment, I instructed him to pay me what he thought was fair, whenever he could.  Imagine my shock when he handed me an envelope as we walked into the closing.  What’s more, ironically there was a problem at the closing table (not to mention several problems during the escrow).  We received the HUD at the last minute, and there was a $ 2,000+ mistake…. the seller somehow had an over-65 tax exemption even though she was about 30 years old.  She told everyone that she would not sign off on the correction and wasn’t going to sell my buyer the house.  My client was more than happy paying my fee since I was the one who found the error, and made the phone call threatening to report the seller and her aunt, potentially sending both to jail, and jeopardizing the aunt’s exemption on her roughly $ 1,000,000 home in Mira Vista.  My buyer agreement protected me and my buyer, and I most certainly kept my clients interests represented.

My point is that if we all were getting our buyer agreements signed, the problem of agents asking for different co-broker fees would not exist.  It will be a happy day for Realtors everywhere when co-broker fees go away completely, and everyone will negotiate their paychecks directly with their client, instead of passively accepting what another agent negotiates for them.  If a listing agent cannot convince their seller of their value, that should be the listing agents problem, not a problem that is visited on the buyer’s agent.

David Mozingo on 11/17/2016

It is quite simple. “Commissions are negotiable”.  Need I remind you, watch what you say or you might end up in court.

Don’t all buyers and sellers want to save money? Can you blame them?  Learn how to negotiate price, commission, repairs, and all terms if your building a career in sales.  We work hard for our fees, and most people don’t realize it. Don’t give up so easy when a buyer or seller wants to “cut” your commission. Play their game. “Since we are negotiating the fee now, after we had an agreement, I would like to propose a 4% bonus”. See how fast they change the subject. If your not good at poker, you probably give up $$ in commissions when you don’t have to.

As for looking out for your clients best interest; if that is true why don’t you work for free? It would be best for your client. I learned a long time ago to look out for my families best interest & I always try to protect my fellow agents fees as well.

Rick Chumsae on 11/17/2016

Frank (and all Realtors),

Your story paints an awful picture.  I am sorry for you.  I work commercial at times and in every case I check the commission offered as is is common to see $0 offered as BAC;  you’re expected to get your commission from your client, the buyer. 

Thanks for your entry as I will be looking at the offered BAC on EVERY transaction from now on.

Juan Lars on 11/17/2016

Thank you Fred! You answer my question perfectly and on top of that you advise on how to do it right. I had the rational that it was legal, but you clarify it for me (and I’m sure for many more). Appreciate!
  It happened to me before where the seller didn’t wanted to pay and buyer did great fully. They comprehend that they will save more with me.

Fred Buchholtz on 11/17/2016

The Buyer Broker is not required to accept compensation from the Listing Broker. The Buyer Broker can set his/her buyer broker fee and include it in the purchase price. An addendum is required. The Listing Broker is charging a listing fee and the Buyer Broker is charging a buyer broker fee without control by the other Broker . This procedure was approved by NAR Legal Council in 1994.

Larry Sotoodeh, Broker-San Antonio on 11/17/2016

Hey Phil-You are right. This agent is a jerk and gives great Realtors everywhere a bad name. I’m sorry you made the adjustment, I would report his pathetic rump to TREC!
Your Broker should have called this for what it is-NONSENSE!

Phil Amodeo on 11/17/2016

I currently have a listing that specified a 2.5% BAC because the total commission was reduced. The buyer’s agent had the nerve to pu in Special Provisions that the Seller would offer a .5% “concession to the Buyer. His rationale was that he had signed a Buyer Rep agreement with his client specifying a minimum 3% commission, so he was going to require his client to pay him the difference!! The seller was anxious to sell, so we increased the BAC to 3%, which reduced my commission by the same amount. I thought we were supposed to put our client’s interest ahead of our personal financial gain!

Juan on 11/17/2016

What if, you have a buyer representation agreement,  paying you 3% and the seller is only willing to pay 2%. Can it be rolled in if the appraisal value permits? It should.

Lawrence Sotoodeh, Broker, San Antnio on 11/17/2016

There’s far too many things threatening our commissions out there ,and, “each other” ,should not be one of them.  I’ve always been proud of the term “cooperative brokerage”, and thought if only we could extend it past our profession. How about “cooperative living”! What a wonderful world we could build if this was a core value!
To my fellow brokers and agents, it’s easy if you remember the golden rule!

Frank Gray on 11/17/2016

Last year I found a home for my clients. When I wrote up the contract and submitted it to the seller as instructed in the MLS, the seller informed me that he was not paying a co-op commission. I looked in the MLS, and sure enough, the co-op commission offer was exactly $1. I had a B.R.A. with my clients and could have insisted that they pay me, but if they had, they wouldn’t have had enough money for the downpayment. I ended up withdrawing from the transaction and the buyers bought the home directly from the seller. It cost me what should have been a $12,000 commission. The MLS should require that any selling broker using the service provide some minimum commission level that provides a base line level of fairness.

Tim Brown on 11/17/2016

This discussion is for MLS members. With the increased use of RPR and other, non-MLS member platforms we are seeing agents submit offers from outside the MLS area, not being members, and being upset when the offered commission is different.

Not being a member is going to be an issue since the buyer’s agent probably won’t have access to local scheduling or access (Supra, etc). The listing agent then will have to open the house for inspections, showings, etc. Or make other arrangements for the non-member to service the buyer.

Another modern issue….

Arnold Celis on 11/17/2016

Recently one of my agents had a buyer’s agent offer “contingent” on a certain fee paid to him!  LOL…...

crazy!

Sam on 11/11/2016

I have been Realtor in Austin since 1975.
I have seen ABoR take position that Broker can send a letter to another company stating that in spite of what is stated in MLS they would only pay X% to agents in the other company.  That was is late 70’s.
At that time listing agreements did not include the commissions that would be offered in MLS and paid. ABoR position was it was important for the owner/seller to know what was being paid.
ABoR has evolved over time. That is a good thing.

Another peculiar past practice was to say additional contracts did NOT need to be presented to the seller.  One accepted, sometimes only verbally. No subsequent offers submitted to seller.

Rick Chumsae on 11/11/2016

Randy,  I have seen a few “unapproved bonus” attempts (or errors?) over my 20 years as a Texas Realtor.  None have ever come to this, but I would simply send the title company a copy of the MLS full agent display (redacted to remove confidential information), a copy of the listing agreement page showing the commission split, and of course, the purchase agreement with the page 9 commission corrected.  The title company, I am sure would pay the correct, agreed commission. 

And, if the recalcitrant agent and broker uttered one more word of objection, woe, or grief, I would happily take the time to bring them before the Professional Standards committee for final dismemberment (or castration, as the situation demands.)

Jeanette Shelby on 11/11/2016

I had an agent do that to me years ago and when I called to tell them that was not the amount of commission offered in the mls his response was that “It is not worth my time to come out to THAT area for less than that”.  My response was “then don’t come out here”.  I immediately called his broker to report it.  The seller didn’t take his offer anyway. smile

Randy Selby on 11/11/2016

What do we do if a stubborn broker won’t comply?


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