by Teryn Bonime www.teryndowntheroad.com
When a listing agent procures a buyer for his or her listing there is sometimes an agreement with the seller to pay a different commission. Often this is a reduced amount of commission (e.g., 7% to 6%).
The reason for this is because the listing agent would be representing both the seller and the buyer and would not split the commission with a buyer’s agent (i.e., the listing agent keeps the entire commission).
The listing agent is required by the REALTORS Code of Ethics to disclose the existence of the agreement. It is displayed in the MLS data along with all of the property information.
If the arrangement is made at a later time, the listing agent is required to enter the data into the MLS “as soon as practical.”
Because the net proceeds are impacted by any reduction in commission, this information is important for buyer’s agents to know when submitting their clients’ offers. If you are competing against an offer that puts more money into the seller’s pocket wouldn’t you want to know? Wouldn’t you also want to know what that amount is?
What most listing agents aren’t aware of is that when asked they are required to “disclose the differential that would result”.
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. (Amended 1/02)
