From the Legal Hotline: The Wrong Place for Commission Negotiations
We sometimes get callers who ask whether they can put a commission amount on Page 9, Broker Information, of the One to Four Family Residential Contract (Resale) (TAR 1601, TREC 20-14) to bind the other broker to that amount. However, the blank space on Page 9 of the contract regarding the commission is there to serve as authorization to the title company to pay the buyer’s broker directly from the listing broker’s commission.
Commission discussions or negotiations between brokers should have already been completed. Furthermore, the contract is between the buyer and the seller, and thus is not binding on the agents or brokers.
The commission offered by the listing agent in the MLS becomes binding when the buyer’s agent submits an offer. When a property is not listed in the MLS, the listing broker and buyer’s broker should enter into a separate written agreement, like the Agreement Between Brokers for Residential Lease (TAR 2002) or the Registration Agreement Between Brokers (TAR 2402) offered by TAR, about how much commission will be paid to the buyer’s broker upon successful closing.”—Iman Ali is associate counsel for the association.
Thank you for this comment. …But some of the logic here does not make sense. If the contract (Page 9) is simply between the buyer and the seller, then it makes no sense to say that you can use it to send instructions to a 3rd party (title company) from one or both Brokers. Why is it that we don’t have a really good form to use when a Broker needs to send instructions to the title company…? Or, …why don’t we require the Listing Broker to send the title company a copy of the Listing Agreement which then shows… Read more »
I guess you are just clueless on all topics of the contract, not just the conveyance of refeigerators.
My understanding is that Page 9 is the receipt page to the contract and is not part of the contract.
That’s page 10 now (since last May)
The contract ends with the parties’ signature. Page 9 is a courtesy page and is not a part of the contract.
Thank you very much for identifying Registration Agreement Between Brokers (TAR 2402) for use to eliminate questions about commissions without entering the Buyer and Seller into a discussion about the Realtor fees. This is a VERY logical and easy way to keep commissions straight and between the Brokers. Thank you for this very useful explanation.
And if a FSBO buyer and seller agree to split 3% to only agent involved?
Buyer rep agreement covers commission for agent if seller doesn’t want to pay. Use TAR-2401 (Registration Agreement Between Broker and Owner) to cover any commission due from the seller.
Why does the 1-4 Residential denote commission information on pg 9 that does not require buyer/seller signatures, yet pg 9 of the Farm & Ranch requires signatures by buyer/seller that verify commission to realtors for the buyers and sellers? A paragraph in the 1-4 just like the Farm and Ranch would eliminate any question of commissions and serve to direct title company easily at the same time. Is the Farm and Ranch pg 9 signatures still not binding on buyer and seller? Too many realtors in my area wish to negotiate the fee at the eleventh hour above what is… Read more »
Then you should at least give 3%. Or are you a discount Realtor that makes things harder on us that do this full time. It’s easy when you have a full time job and just make extra money…..but then again, you get what you pay for. Discount Realtors……keep me busy!
Amen preach on! I’ve worked as a full time agent in this business for 21 years. I’m sick of these new agents who have other professional jobs deciding they need a little extra money to fly to Vegas for the weekend and so they decide to start listing homes at 4 or 5 % to get the listing and expect me to work for that.
John Dough and Denise Whiddon- stop whining about what others pay. I don’t like it any less than you. However, if we would all start getting our Buyer Rep Agreements signed, the point would be moot. Then everyone is free to negotiate their own paycheck and no one else’s. It’s high time we removed compensation from the MLS.
What really annoys me is when realtors get listings by offering a discounted commission to the seller’s and expect the buyer’s agent to take the commission cut because that is how they got the listing. I don’t show these properties unless it is unavoidable.
And you would be directly in violation of TREC ethics in refusing to show a property simply because it is listed at a lower commission.
So the take away is ALWAYS have an Exclusive Listing Agreement to Sale/Lease and ALWAYS put the listing in the MLS.
Frankly, that’s the best way to go!
I appreciate the information. Still have some concerns. How do we know the MLS commission is actually what the seller agree on? Many Brokers are reluctant to let anyone see their listing agreement. It should be fair to have the listing agent submit a copy of the listing agreement, only when there is a dispute in below average fees. I understand we have a fiduciary duty, but not been honest about the commission the seller offers ,should also be address. Maybe, the listing agreement needs to uploaded in the MLS.!? Or have seller and buyer initial page 9 to make… Read more »
Listing Agreements are between seller and listing agent. Buyers and buyers agents have no need in knowing what commission is agreed upon between seller and broker. Splits are not always 50/50
This is my question exactly. Are splits always 50/50? And is it an ethics violation if the commission offered to buyers broker is less than commission being received by sellers broker? My wife’s broker just terminated her sponsorship saying she was being unethical because the commission offered to the buyers brokerage was 2.5% and her brokerage would be taking 3.5%. Listing agreement clearly states sellers would pay a 6% commission with 2.5% going to MLS participants (which her broker initialed every page on). MLS clearly stated that commission being offered was 2.5%. Who can help clarify who is in the… Read more »
What about a form for when the
listing isn’t in the MLS and it’s a FSBO that agrees to pay commission?
I believe the Agreement Between Broker and Owner covers that situation.
I called a FISBO and asked for a one time showing for 3% commission. He agreed. My client put in an offer and it was executed. The seller was constantly calling me asking what he needed to do. I told him that is why he needed his own agent.
What happens when the buyers agent does NOTHING including not providing a offer to the listing broker? I have had 2 deals that the buyers agent never submitted a offer. I did both and then they got paid????????????????????????????????
I hope you wrote the offer to heavily favor your client. That’s what I did. Buyer paid for the title insurance. My sellers were happy. The hour or so it took for me to write up the offer clearly was worth it for them.
Shame on them. Things will eventually catch up with them, and probably run them out of the business.
So you showed your listing, wrote an offer, and included a buyer’s agent based on what? Did you ever speak to the buyer’s agent prior to writing the offer? If you did, why write the offer? If not, why include a buyer’s agent on the offer? If the buyer said they had an agent, you should have told them their agent needed to show them, negotiate and submit their offer. It is possible the buyer met an agent who offered them a rebate if they included his/her name on the offer. There are all kinds of problems that can arise… Read more »
The Buyer Agent get paid for doing nothing! That’s what happens. Thank goodness for silly Listing Agents who think that their Fiduciary Duty goes way beyond.
Can You Say “Dual Agency” …. I wouldn’t admit it to TREC
So the question posed by the author has not been answered. We are left in “limbo.” Clearly, an amount / rate belongs in the blank space on page 9. As written, this article leaves more questions than answers.
You are absolutely right. I’m definitely confused now.
What about when an out of area agent isn’t a member of local MLS? How do they verify or even know what the commission split is. What if the amount given to nonMLS members is different? I have that discussion all the time being in a college town where it’s common.
I always put “TBD” in the non-MLS broker spot on the listing. That allows the percentage to be negotiated.
That pretty much voids any split. “TBD” is not an amount!
I thought the 1-4 Family Residential contract between the buyer and seller ended on page 8 where both parties sign and the contract is dated. I was taught that page 9 is called the broker-receipt page. The only signature for a seller is the receipt of option money (if applicable). But then the listing broker can sign and receipt the option money in lieu of seller signature. So page 9 is outside the agreement between buyer and seller.
This… All day long!
It is pretty clear that Page 9 is not a part of the contract. The bigger question is why is any mention of commissions – Buyer or Selling Broker – even an issue. These are private contractually relationships entered into by Buyers, Sellers, and their respective Brokers. Most, if not all, Real Estate Companies communicate commission amounts to the Title Company through a CDA. Since there is no open record of the Listing Agreement, that is the only means I am aware of, to disseminate this information.
I had a very unpleasant situation regarding commission and an TREC investigator got involved. I put 2.5% xommissionnro selling agent on the MLS. When the selling agent still put 3% on the page 9, I crossed and changed to 2.5% with my initial, and executed contract. I sent the contract to the title and the selling agent. The problem appeared and the agent started arguing via email including the buyer, the buyer’s lender, and her broker. I replied with the screen print of the MLS when I listed -it had date stamped – and the page of the listing agreement.… Read more »
I don’t see how TREC would be involved here. Commission agreements are part of a unilateral contract agreement once the property is listed in MLS. TREC does NOT regulate MLS. That is done by the REALTOR board & MLS operator.
YEP David… Absolutely correct!!! Suky should have gone over the head of the TREC investigator. No signatures or initials are ever used on page 10. I believe Suky could and should still take this matter to her Board of Realtors (if is not too late) to get a decision and an order that the Selling Broker return the 1/2% commission to Suky AND a reprimand for allowing ALL of those other parties to get involved. This one is not for the money but to set things straight with these Agents that want to negotiate AFTER the initial offer has been… Read more »
So what goes on the blank space? Why does it even exist? And finally, why not rephrase it?
The timing of this article is perfect. I recently had a ”discussion” with a relatively new agent who had specified that a Bonus to the selling agent would be paid, in Special Provisions! I explained to her that neither she or I were a party to this contract, and that our commission should not be mentioned as a business detail of his contract. I directed her to the blank on page nine where it should be specified & explained that our agreement was solidified in the MLS. She responded that her broker had instructed her to put it in Special… Read more »
What about the commission to buyers broker on a for-sale-by-owner? Where can that % be noted?
Registration Agreement Between Broker and Owner
what if theres a realtor bonus? where would that go and if theres one in MLS but the contract is negotiated perhaps reducing the bonus amount how is that addressed
Thank you for this comment. This is helpful information.
Can the listing agent charge the buyer (signed agreement to sell) a higher commission than he listed on the MLS? Our signed agreement is for 6% and the MLS states 5%. How does this work?