Can a Sales Agent Negotiate Commission Directly With a Client?
No. Commission negotiations should only occur with a broker’s knowledge and consent.
If a commission negotiation comes up between a sales agent and her client, she should tell the client that all negotiations are subject to her broker’s approval.
In addition, the Real Estate License Act says a sales agent may only accept compensation for a real estate transaction from her sponsoring broker or a broker who previously sponsored her at the time she earned the compensation. This would preclude a sales agent from negotiating directly with a client without the broker’s knowledge and consent if those negotiations are to receive compensation without her broker’s involvement.
I agree w/ the law, but I do allow my agents to set the commission w/ his/her client.
Another aspect is negotiating commissions between brokers. We have a deal where the buyer’s agent said they wanted to reduce their commission by X to make the deal work. I told them we needed an agreement from their broker to pay them less since we had offered Y in the MLS. The broker of the other company told me that since her agents keep 100% of the commission no agreement from her was necessary. (sigh)
The knowledge and consent is usually given in the independent contractor agreement or spelled out in policies and procedures from the broker to to LRESA at time of hire
Not sure this was thoroughly thought through. Many agents are now charged a flat fee by their broker based on contract price and not on commission.
Seems logical that when there is a split between Broker and Agent, an agreement is advised. However, for those agents that have no split – it is unreasonable to have these discussions as this decision is typically made while speaking with a client. It would seem to make more sense, to request that a Broker address this issue as part of their contract depending on the structure of the compensation package.
Concerning Rick Snow’s scenario: It seems that the Buyer’s Agent could have dealt directly with the Buyer for the necessary amount of commission to have been shared with the Buyer and not even bother the other parties with this private (and authorized) negotiation.