BrokerBryant.com: Why do Buyer's agent rely on listing agents for their compensation?

Why do Buyer's agent rely on listing agents for their compensation?

Wah! wah!.....and then complain about it! Today I want to talk briefly about co-brokes and the "ole' 50/50 rule". In my area it is quite common for short sale listings to have verbiage in the MLS remarks stating that what ever commission is received will be split 50/50 with the selling agent. Then of course they offer a ridiculously high co-broke so the uneducated Buyers agent believes he will get that x% co-broke when most of us know the short sale lender will rarely allow more than y%.

I don't handle my listings that way. I offer z% percent as a co-broke and I guarantee it. No matter how much the lender allows me to get paid I honor the co-broker offer. I do this because I completely disagree with changing co-brokes after the Buyers agent has already shown and negotiated a deal on my listing. In my opinion it's playing dirty pool.

BUT....I'm also not an idiot. I offer a co-broke that is in line with my market conditions but one that still leaves me a little bit of room for play. This means that if the lender allows y% I end up making more money than the selling agent. If the lender reduces the commission I make less than the selling agent. It all works out in the end and I feel it's a fair way of doing business. There are no surprises for the selling agent. They get what's offered in the MLS with no exceptions.

Today I had a selling agent upset at me because they saw I was making more than them on the HUD statement. He wanted to know why? I explained my company policy to him but he just didn't get it and started going off about the 50/50 rule. Finally I just had to tell him that what I get paid is really none of his business. He hung up on me.

So I sent him this email:

Dear agent,

I want to clarify the co-broke on my short sale listings. It is always z% Even if the bank comes back and reduces the commission to h% or j% I still l pay z% to the selling agent. Your commission is guaranteed.

In fact I am the only broker that I know of in this area that does not reduce the co-broke when the lender reduces the commission on a short sale. It was z% when you showed the property and it's still z%.

My commission agreement is between me and my seller. I'm sure if I were getting less than you there would be no issue. On this particular short sale the lender allowed me to get y% so I made out better. That is not always the case.

There is no such thing as 50/50 rule. That is a figment of your imagination.

Thank you for your hard work with getting this transaction closed. I hope we can do more in the future. End of email.

Is this really that difficult to understand? What say you?

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Comment balloon 43 commentsBryant Tutas • February 22 2010 06:52PM

Comments

Reserved for TLW

Posted by Bryant Tutas, Selling Florida one home at a time (Tutas Towne Realty, Inc and Garden Views Realty, LLC) about 9 years ago

Broker B, there will always be that misconception regarding an equal split. The buyer's agent has no liability for costs if the listing expires and you've spent money for promotion, sign placement, etc. They scour the listings looking for what pays them the best, not necessarily what is best for their clients. In the end, deal with it.

Posted by Ed Silva, Central CT Real Estate Broker Serving all equally (RE/MAX Professionals, CT 203-206-0754 ) about 9 years ago

Excellent policy!  I have always stood by the fact that the commission I am being paid by the seller is mine and whatever I decide to offer to selling agents is up to me.  That is an indisputable fact.  If the buyer's agent wants to be guaranteed a fee of x% then he needs to have a contract with his client just as I have with mine.  If he doesn't, the only way he can guarantee he receives the fee that he desires is by steering his client towards those listings that offer what he wants to make.

Oooo ... I smell another buyer agency debate!  Nice one, BB.

Posted by James Malanowski, REO Broker, Palmdale, Lancaster, Rosamond, CA (theJEMgroup.com (DRE #01373117)) about 9 years ago

Bryant  ~This show a true character in you and the other guy -well who cares! Thanks for sharing.

Posted by Monique Hailer, South West Florida & Southern Maryland Homes (Schooner Bay Realty., Inc. & CENTURY 21 New Millenniun) about 9 years ago

In our market...whether it is short or not so short...Listers are Royalty....and in MLS it is stated that the selling gets this of that....perfectly clear...huh ?

Posted by Sally K. & David L. Hanson, WI Realtors - Luxury - Divorce (EXP Realty 414-525-0563) about 9 years ago

I'd rather know that I was guaranteed a certain amount than to split something 50/50, especially on a short sale.  He had to know what the BAC was from your listing.  Isn't it annoying when agents complain about something that is in writing on the listing?  Why don't they take responsibility for this?  How on earth could this agent complain when it is in the co-broke agreement on MLS?

Posted by Gail Robinson, CRS, GRI, e-PRO Fairfield County, CT (William Raveis Real Estate) about 9 years ago

Well the word I have to now enter into the Captcha to post this just about sums it up.

"Soursop"

Nice email response.

Posted by Corinne Guest, Barrington Lifestyles (Corinne Guest, Realtor | Barrington Realty Company) about 9 years ago

BB - seems a pretty fair way to handle it. I know of a couple of agents in this area who work their short sales that way also and it is received in a positive way.

Jeff

Posted by Jeff Dowler, CRS, The Southern California Relocation Dude (Solutions Real Estate ) about 9 years ago

Wow, really?  Long as I got what was promised, it's all good! I'd rather have that than the 50/50 anyday!

Posted by Joel Weihe, Helping you to use your VA home loan benefits (Realty World Alliance) about 9 years ago

In our state if a buyers agent wants x% of commission they simply negotiate it in the buyer/broker agreement.

Then it doesn't matter if they buy a FSBO or a commission that pays v%.

If they want to rely on the sellers agent for their commission.  Then take what they offer and close the deal.

Posted by Mark Watterson, Utah Real Estate about 9 years ago

BB - Geez, you honor the selling agent's commission no matter what?  What are you? Ethical or something?

 

No fair, dude. Seriously.

 

I want 50% of nothing, and if you say I can't have it, I'm telling.

Posted by Coleen DeGroff, Haile Plantation Real Estate - Gainesville FL (eXp Realty) about 9 years ago

Bryant - I agree with you on this, If the buyers agent doesn't want to deal with the short sales, then he can walk away.

Posted by Larry Brewer - Benchmark Realty llc (Benchmark Realty LLc) about 9 years ago

Bryant, it's amazing how so many Realtors® are afraid to ask their clients to pay them.  Geesh!

Posted by Patricia Kennedy, Home in the Capital (RLAH Real Estate) about 9 years ago

BB...

Isn't there a biblical parable about paying what you promise ,,, no more, no less. You are a stand up guy and I think that your ethics are beyond reproach. This is a great way to handle the co-op commission issue.

Posted by Richard Weisser, Richard Weisser Retired Real Estate Professional (Richard Weisser Realty) about 9 years ago

BB - This happens all the time with relo listings because the LA has to pay referral fees. 

Posted by Carol Culkin, Overland Park (Reece & Nichols) about 9 years ago

Hi Bryant...it'shard to please everyone all of the time, you have set a standard, so a Selling agent knows how much he or she will will earn, they know when they start how much they can earn...You are correct your commission is none of anyone's business, that's a contract agreement between you and your seller..if the Buyers agent wants to set their rate they can with a Buyer agency agreement.

Great post !

Posted by Fred Carver Personal Real Estate Corporation, Accredited Real Estate Consultant (RE/MAX Camosun Victoria BC Real Estate) about 9 years ago

A pigment of my imagination you say? - I know just a little about short sales commissions, but if I were the agent on the other end the way you handle it would make me have a better opinion of you and maybe be more likely to lean towards your listings versus others that are similar. Ignorance didn't help that other agent it seems. Rarely does.

Posted by Stephen Kappre, Helping You Home (KW Hometown) about 9 years ago

I've never been able to understand selling agents who get soooooooooo hung up on commission. The commission is paid to the LISTING OFFICE. The listing office OFFERS a share of THEIR COMMISSION to the another office for brining a buyer. There is not flippin' 50/50 rule for petesake!!!!!!!! Sic Billie on him, that'll teach him!

Posted by Colleen Fischesser Northwest Property Shop, A Tradition of Trust in the Pacific NW since 1990! (RE/MAX Advantage | Managing Broker) about 9 years ago

I've never been able to understand selling agents who get soooooooooo hung up on commission. The commission is paid to the LISTING OFFICE. The listing office OFFERS a share of THEIR COMMISSION to the another office for brining a buyer. There is not flippin' 50/50 rule for petesake!!!!!!!! Sic Billie on him, that'll teach him!

Posted by Colleen Fischesser Northwest Property Shop, A Tradition of Trust in the Pacific NW since 1990! (RE/MAX Advantage | Managing Broker) about 9 years ago

Bryant,

You know my position on Buyer's Brokering, so I'll skip it here.

What come to mind is paraphrasing myself.

Regarding commissions the only protection the buyer's broker has is the personal intergerty of the listing agent.

Bill

Posted by William J. Archambault, Jr. (The Real Estate Investment Institute ) about 9 years ago

Anybody ever heard of a guy named Carlos Mencia? He's got a word for this. Next time tell the guy don't be a "Dee-duh-dee". LOL

Posted by Nathan Tutas, Your Central Florida Real Estate Expert (Tutas Towne Realty, Inc.) about 9 years ago

Bryant- We do the 50/50 thing and never have an issue with it. However we say 50/50 up to x%. Once we know who owns the note and what that commission policy is with that investor we will make the appropriate changes in the mls updated the fee the buyer agent will get. But all of our agents that are local know us, they know how hard we work to get their buyers into homes, they know we don't work with buyers and they know up front what the chances are for x% or y% or d%. That is the great thing about running your own company- you can choose how you co-broke. I don't  think ethics has much to do with it. I certainly don't think that I am unethical when I go back to an agent and tell them, we have a problem, the bank wants to cut our commission and no matter how we fought back, they are just not going to give it up. The agent can ask their buyer to make up the difference. Katerina 

Posted by Katerina Gasset, Get It Done For Me Virtual Services (Get It Done For Me Virtual Services ) about 9 years ago

Sounds like someone is pretty stupid! 50/50 rule? There's NEVER been one. The only guarantee we have is that you get whatever the MLS says. That's our MLS rule. And if it's REO, there's extra verbiage to explain that.

Do me a favor and slap that stupid agent for me. It'll make me feel better =p

Posted by Lisa Hill, Daytona Beach Real Estate (Florida Property Experts) about 9 years ago

From the desk of David Dee,

BB, I noticed that to be the case here as well. I recently had an agent who requested that it be 50/50 but that is not the case with this listing. I like the letter you wrote there. To the point.

Posted by David Dee, Real Estate - San Gabriel Valley (L.A.) & N. Orang (RMX REALTY) about 9 years ago

this is so true, so many agents believe that there is some sort of rule and so many agents do not realize that the amount the listing agent is going to be paid is not on the listing, that it is between the agent and their client.  It isn't the selling agents business what you will get paid.  This is an interesting concept to guarantee the selling agents commission something to think about.

Posted by Miriam Bernstein, CRS about 9 years ago

We do the 50/50  if bank lowers commission and have that standard verbage in there. I fight hard for the commission and in the rare case it is lowered, have explained the situation with the buyers agent. So far no one has given me trouble. In the "old days" prior to short sales/prior to boom- when a listing has required a large amount of costly advertising I have split with the buyers agent getting less, but it was always shown on the MLS. Never had a problem. Your policy seems extremely fair.

Posted by Dick and Dixie Sells, Realtors, Tampa Bay Florida Homes For Sale (Sells Real Estate, LLC) about 9 years ago

That seems fair, more than fair. The Realtor got what she was promised. Where's the beef?

There is an agent here that advertises List your house for _____.

The buyer co-op is _____

Less

The sellers call and don't have a clue that the TOTAL commission is above the going rate. Guess they can't add.

Posted by Missy Caulk, Savvy Realtor - Ann Arbor Real Estate (Missy Caulk TEAM) about 9 years ago

BB, 

Completely intelligent plan for me to follow.  You deserve an Olympic GOLD medal just for getting through to closing on all those short sales.  

Works for me!  

All the best, Michelle

Posted by Michelle Francis, Realtor, Buckhead Atlanta Homes for Sale & Lease (Tim Francis Realty LLC) about 9 years ago

Bryant-- I agree with you 100% on this.  This was a fair way to handle it.  You are a TRUE and HONEST person.

Posted by Lizette Fitzpatrick, Lizette Realty, Lexington KY MLS - Kentucky Homes (Lizette Realty - Richmond KY) about 9 years ago

My area is commonly 60-40, listing agent 60, selling agent 40. I agree- it really needs to be paid by the each party, as a line item on the HUD.

Posted by Wendy Rulnick, "It's Wendy... It's Sold!" (Rulnick Realty, Inc.) about 9 years ago

Come on now, get serious, a "50/50 Rule"?  Who made that rule, the government?!?  Wait a minute, there is no such rule... DUH!  The listing agent's agreement is between the seller and the listing agent, it's not the buyer's agent business, as you pointed out.... My advice to that buyer's agent is to GRATEFULLY accept the commission offered and BE HAPPY that you were able to close a transaction & get your full compensation in this down market!!!

Regina Brown

Posted by Regina P. Brown, M.B.A., Broker, Instructor (MBA Broker Consultants) about 9 years ago

And yes if I had my way, each party would pay their agent out of their own pocket.  And agents wouldn't necessarily get paid a percentage of the sales price, it could be an hourly fee.  PAID for actual hours worked, with a retainer up front (like attorney charge).  Agents would actually get paid for ALL the work they do, and would therefore be able to spend less time/money on marketing.  Clients would only pay for work actually performed (whether or not escrow closes).  So it would be win-win for everybody. 

Posted by Regina P. Brown, M.B.A., Broker, Instructor (MBA Broker Consultants) about 9 years ago

50/50 rule? We have the same misconception in NY. What you see on my listing is what you get. 

Posted by J. Philip Faranda, Broker-Owner (J. Philip Faranda (J. Philip R.E. LLC) Westchester County NY) about 9 years ago

We have the "silent" 50/50 rule also. However, our MLS board enforces that if the Broker promises to pay X, then there should be no argument even though there could be a private remark about the 50/50 split.

My concern is if X is a typical fair compensation, but in order to guarantee a commission, you do Y, you must also be competitive in terms of the other short sales and existing home sales out there. It doesnt sound like you run into that situation.

Posted by Loreena and Michael Yeo, Real Estate Agents (3:16 team REALTY ~ Locally-owned Prosper TX Real Estate Co.) about 9 years ago

50/50 is how two bandits would split their take... I know there is the misunderstanding that real estate folks are bandits but not in this case! I am kidding. I understand your position as you are assuming the risk which has its rewards -sometimes!

Posted by Gary L. Waters Broker Associate, Bucci Realty, Fifteen Years Experience in Brevard County (Bucci Realty, Inc.) about 9 years ago

The 50/50 "rule" was out the window many moons ago around here.  If that "rule" every existed.  Its quite an assumption.  I always do  give that much - but that's just me.  I think it helps move the property - sad but true.

Posted by Ruthmarie Hicks (Keller Williams NY Realty - 120 Bloomingdale Road #101, White Plains NY 10605) about 9 years ago

It's like the old bait and switch game with some of these listings. I no longer do short sales so I don't have that drama going on.

Posted by Lizette Fitzpatrick, Lizette Realty, Lexington KY MLS - Kentucky Homes (Lizette Realty - Richmond KY) about 9 years ago

Remind me to tell you my story about 50/50 splits the next time we have a chance to chat.

 

Posted by Margaret Rome, Baltimore Maryland, Sell Your Home With Margaret Rome ( HomeRome Realty 410-530-2400) about 9 years ago

I commend you for taking the cut on the other cases, it all averages out in the end right?

Just curious though, have you ever averaged them out? 

Posted by Bridget Cella, e-Pro, Realtor (Re/Max Connection) about 9 years ago

He he he.  I LOVE the way you do business.  And, obviously the other agent is completely deluded, rather than being happy about getting a fair commmission for the Buyer's-side that would not be split at all.  People are strange. 

Posted by Lisa Spalding, REALTOR, CDPE (Casa Latino Four Corners, REALTOR, CDPE) about 9 years ago

BB- As an agent that is buyer focused, I completely agree with you!  I read a post that you had written a while back that talked about how you deal with your listing commission the seller is going to pay you and then ask the sellers what they want to pay an agent working with the buyer.  It was also a great post that I shared at my office meeting.  I talk about my commission up front when meeting with a new buyer client.  If they want to hire me to represent their interests, I charge x%.   I also do not feel that it is a listing agent's job to earn my commission for me.  In the same token, I don't think that a listing agent should ever come to me and ask to reduce the commission % they originally offered to pay until I actually bring them a contract.  I respect you even more for sticking to your original commission offered.  What each side charges our clients for commission is no one else's business!  With all due respect to Ed, #2- (They scour the listings looking for what pays them the best, not necessarily what is best for their clients)-Please don't paint me with that brush!  If a listing in the MLS shows the compensation paid to a buyer's agent is less than that, I let my client decide if they feel they want to look at the property and pay the remainder.  I have never had a client decide not to look at a home based on the cooperating commission offered being too low.  My clients are always willing to pay me the difference because they know I look out for their best interests!

Posted by Jen Olson (First Weber Group Realtors) about 9 years ago

Bryant- I agree with your position on this.  So this time you were on the higher lend, so be it, you also had more time and work involved in the short sale listing process, than the buyers agent did.

It is business plain and simple.

Posted by Allison Stewart, St. Cloud Fl Realtor, Osceola County Real Estate 407-616-9904 (St.Cloud Homes ) about 9 years ago

I agree 100% with your non 50/50 approach.

Posted by Robert Earl -The Earl of St Pete, The Earl of St. Pete (St Pete LUXE Living Group) about 9 years ago

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