ATTEMPTING TO CHANGE A COMMISSION IN A COUNTER-OFFER

BROKER RISK MANAGEMENT

WEEKLY PRACTICE TIP

ATTEMPTING TO CHANGE A COMMISSION IN A COUNTER-OFFER

Q:  I represent a buyer and presented an offer on a property not in the MLS. So, prior to sending an offer, I completed the CAR Cooperating Broker Compensation Agreement form (CBC). The listing agent (outside broker) signed the form and faxed it back agreeing to a 3% commission to my brokerage. I thereafter presented my buyer’s offer, and seller countered with a selling commission reduced to 2.5%.  What recourse do I have?

A:  The seller and buyer cannot enter into an agreement to reduce one or both broker’s commission.  This is because the agreement to pay a commission exists separately in the Listing Agreement between the seller and the listing broker. 

Also, if the listing agent instigated the attempted commission change to your office, it is an ethics violation for an agent to attempt to negotiate a commission in the transaction itself. 

However, if it is the seller who is telling the listing agent that they will only take the offered price if the commission is reduced to, say, 5% (that's the usual way this comes up), then the listing agent should contact you directly and attempt to negotiate a reduced commission with you on the side – NOT in the contract.  A buyer’s agent with an offer of compensation from the listing office, either in the MLS or in a separate written agreement, can agree to a requested change, or just say “No.”

If the listing agent can't convince the seller to take your buyer’s price at the agreed listing commission, that is not your problem.  If listing agent agrees to reduce the total commission to the seller to 5% to make the deal, and you choose to stand on the 3% CBC agreement, which you have every right to do, the listing agent has no choice but to complete the transaction for 2% to their office.

You can remind the listing agent that the seller and buyer cannot re-negotiate the commission in the contract without the written approval of the brokers, and that you intend to stand on your written CBC agreement.

You might also want to remind the listing agent that if the listing agent or his/her office allows the division of the commission to get in the way of a transaction that the parties otherwise want to make, it could constitute a violation of their fiduciary duty to their seller, a violation of their duty of good faith and fair dealing to your buyer, as well as an ethics violation and grounds for arbitration with your firm.

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