BrokerBryant.com: Sorry But The Co-Broke Commission Is Too Low For Me.

Sorry But The Co-Broke Commission Is Too Low For Me.

tutas towne realty

Hi folks. I read a blog post from Tricia Hoffman titled "Risking Your Client's Happiness Over $200."

Basically it's about an agent contacting the listing agent to ask for a higher co-broke. One of the commenters, Joetta #44 wrote:

  • "I wonder how all these listing agents who said the agent had a perfect right to ask for a better split would feel if they got an email from a buyers' agent asking for a higher commission than what is shown in the MLS."

Ok. I'll bite :) I've been primarily a listing agent for 18 years. I do not split commissions 50/50. I take a larger chunk on the listing side and always have. Over the years I have had many agents request the co-broke be changed. It doesn't bother me in the least that they ask. As long as they are asking PRIOR to accepting the co-broke being offered. This is as per our CoE.

 

  • Standard of Practice 3-1 REALTORS®, acting as exclusive agents or brokers of sellers/ landlords, establish the terms and conditions of offers to cooperate. Unless expressly indicated in offers to cooperate, cooperating brokers may not assume that the offer of cooperation includes an offer of compensation. Terms of compensation, if any, shall be ascertained by cooperating brokers before beginning efforts to accept the offer of cooperation. (Amended 1/99)
  • Standard of Practice 3-2
    REALTORS® shall, with respect to offers of compensation to another REALTOR®, timely communicate any change of compensation for cooperative services to the other REALTOR® prior to the time such REALTOR® produces an offer to purchase/lease the property. (Amended 1/94)
  • Standard of Practice 3-3
    Standard of Practice 3-2 does not preclude the listing broker and cooperating broker from entering into an agreement to change cooperative compensation. (Adopted 1/94)

Sometimes I agree to an increase and sometimes I don't. But what I always do is help the agent understand how to get paid when working as a buyer's agent. It's simple. Have a written agreement with your buyer/tenant outlining how you work and how you expect to be paid. That way the buyer can pay you extra commission if you feel you need it.

My guess is that as we move forward towards lenders and 3rd party vendors stepping between agents and their clients it will be even more important to know how to get paid for buyer agents.

Buyer agents should NEVER have to rely on the listing agent to get them paid. The co-broke being offered should be a supplement to your "already negotiated compensation" with your buyer.

If all agents knew how to get paid these types of discussions would become obsolete.

Maybe some of these articles about working with real estate buyers will help.

****Edited on 1-24-2013 to add Standard pf Practice 3-1

 

Join Our Facebook Fan Page Check Us Out On Google+ Follow Us On Twitter

 

***I am NOT an Attorney nor do I play one on TV. Click the button below for my Bio.

The BIO for Bryant Tutas

 

 Tutas Towne Realty, Inc handles Florida real estate sales, Florida short sales, Florida strategic short sales, Florida pre-foreclosure sales, Florida foreclosures in Kissimmee Florida Short Sales, Davenport Florida Short Sales, Haines City Florida Short Sales, Poinciana Florida Short Sales, Solivita Florida Short Sales,  Orlando Florida Short Sales, Celebration Florida Short Sales, Windermere Florida Short Sales. Serving all of Polk, Osceola and Orange Counties Florida. Florida Short Sale Broker. Short Sale Florida.

 Copyright © 2017 http://www.brokerbryant.com/ | All Rights Reserved

Comment balloon 87 commentsBryant Tutas • January 24 2013 07:15AM

Comments

Listings are king. Having inventory to fit the buyer in smaller rural markets results in 95% of our sales being listing and sell. Twist and shout. Agree with your sentiments BB.

Posted by Andrew Mooers | 207.532.6573, Northern Maine Real Estate-Aroostook County Broker (MOOERS REALTY) over 6 years ago

You bet.  My fee is in the representation agreement.

The co-op merely a set-off to that fee. 

 

Posted by Lenn Harley, Real Estate Broker - Virginia & Maryland (Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate) over 6 years ago

Well I knew you were on the ball Lenn. Not sure why all agents don't get this.

Posted by Bryant Tutas, Selling Florida one home at a time (Tutas Towne Realty, Inc and Garden Views Realty, LLC) over 6 years ago

Not only should a buyers agent have an agreement with the buyer for payment, but the buyer can also ask the seller to pay all or a portion of the buyers agent fee through their offer, which is no differently than the buyer asking seller to pay for closing costs.

Contrary to what most think, this is not a violation of the COE...a violation would occur only if there was a request to change the listing agents commission...which this is not.  This is not the buyer asking the seller to pay the listing agent less...it is the buyer asking the seller to pay the buyers agent a fee.

Eve in Orlando

Posted by Mike & Eve Alexander, Exclusively Representing ONLY Orlando Home Buyers (Buyers Broker of Florida ) over 6 years ago

I personally don't mind splitting 50/50... but I'm curious.  How common is it in your market for residential buyer's reps to actually be paid by the Buyer?  5% of the time? 50%?  What's the frequency? 

It appears to me that Practice 3-2 doesn't mean what you suggest.  As I read it, the Listing Broker can't advertise a split agreement and then unilaterally change it after receiving an offer.  I also understand 3-3 to mean that it's perfectly fine to mutually agree at any point in the process.

In commercial, there is no MLS where the commission split is advertised and it has become a part of the negotiation.  My agreement as the Listing Agent specifies what I'll be paid and it is standard practice to split 50/50.  In recent market conditions, Buyer's Agents have been asking for full commisisons and in some cases getting it.  In these cases the Seller ups the total commission paid to ensure I get my original 50% split.  Until you get into institutional investment transactions, it has been my experience that 99% of all compensation to the Buyer's Broker is by commission split.  We have it in our agreement that the Buyer will compensate us IF the Listing Broker does not, although it nearly never happens.

Posted by Dan Mincher, CCIM, Sacramento Commercial Real Estate (The Vollman Company, Inc.) over 6 years ago

I just had another agent decide not to show their Investor client's a tract of land because he had already promised a residential agent a 50% split.  He therefore asked me to go thirds with them?  I explained that I did not cut this deal with the residential agent and that was his agreement.  He then decided to not show the property.  We are talking about a $400K commission too!  Unbelievable.

Posted by Paula McDonald, Granbury, TX 936-203-0279 (Beam & Branch Realty) over 6 years ago

You are right Bryant .... as a listing broker I will co-op at what makes sense in this market.  It is consistant with most other listing brokers for the simple fact of keeping my seller's property competitive with others that are co-oping  in a similar manner.  Why work just has hard with the same liability for .5 -1% less??

Posted by Dan Hopper, Denver Realtor / Author / Advocate/Short Sale (Keller Williams Realty Downtown LLC) over 6 years ago

Almost everything in life is negotiable.  The worst that can happen, is somebody says no.

Commission discussions shouldn't interfere with buyer/seller representation.

Posted by Anthony Daniels, SF Bay Area REO Specialist (Coldwell Banker) over 6 years ago

I wonder how many of these agents would give back the bonus that is in the listing agreement that is above what is in their buyer broker agreement?  

Posted by Kathryn Maguire, Serving Chesapeake, Norfolk, VA Beach (GreatNorfolkHomes.com (757) 560-0881) over 6 years ago

Bryant, for what you do, you should take DOUBLE what the buyer's agent receives!!  I agree--negotiate if up front--and bear in mind, buyers agents have an agreement with the buyers; if the compensation doesn't meet your expectations, it's time to discuss it with your BUYER!

Posted by Debe Maxwell, CRS, Charlotte Homes for Sale - Charlotte Neighborhoods (www.iCharlotteHomes.com | The Maxwell House Group | RE/MAX Executive | (704) 491-3310) over 6 years ago

Bryant, I normally work as a buyer's agent, but if I ever switch over to a listing agent I will definitley follow your system.  I need to up my game on the BBA a bit too.  Good advice.

Posted by Mike Cooper, GRI, Your Neighborhood Real Estate Sales Pro (Cornerstone Business Group Inc) over 6 years ago

Bryant - interesting that this popped up today. I just created a slide for the CE class I'm teaching today on this very subject.  Agents seem to rely only on the co-broke and seldom do they ask me for more.  It's all in how they're taught and how they chose to think about it.  Some tell me - oh I couldn't ask for more from the buyers.  Why not - I always ask?  And from there the conversation in the class gets heated up!!

Posted by Anna Banana Kruchten CRB, CRS 602-380-4886, Arizona's Top Banana! (Phoenix Property Shoppe) over 6 years ago

The best way to cooperate in real estate is to work together and split the fees 50/50...there are times when listings are great and other times when they are a headache as in a buyers market...Never met a buyer who would pay a sales agent a fee to find them a house...on top of the price they are paying.

Posted by Edward Gilmartin (CRE) over 6 years ago

Hi Dan. I edited the post to include SOP 3-1 as well. Thanks for pointing that out. And of ocurse everyone should seek advice in these matters and form their own opinions. I have no cluse of the percentage of agents that work under aBBA in my area. Probably very small. We charge minimums on the listing side and the selling side. I also take alrger split in the listing side and change buyers a transaction fee on top of whatever commission they have agreed to. I work in a very low end market with my average sale being $103,000. I have to ensure I get paid enough to make it all work out for me and my customers. The folks I work with want me to get paid and have no problem making sure that happens.

Hi Mike. The link at the bottom of my article has a ton of info on working with buyers abnd getting paid  better to do so.

Anna. Wouldn't you think knowing how to get paid would be the forst thing agents would want to learn and fully understand? I love what I do and live helping peole. BUT...i'm not running a non profit organization.

Thanks to all for stopping by. Hectic day today but I come back in the mroning and respond as needed. thanks!!

Posted by Bryant Tutas, Selling Florida one home at a time (Tutas Towne Realty, Inc and Garden Views Realty, LLC) over 6 years ago

Edward. You gotta jump out of that box. Would me taking a bigger split as the listing broker make a difference if the co-broke i offered was still higher than the average in my area? For example. I list at 7% and offer 3.25% as a co-broke. Isn't that fair?

Buyers are not paying additional commission on top of the purchase price. They are asking the seller for a closing cost contribution. Part of the closing costs would be additional compensation based on the terms of the BBA. The seller could not care less where the closing costs contribution is going. And of the buyer gets lucky and you fond a property offering a high co-broke or bonus that is more than the agreed amount in the BBA you can rebate them (if your state's laws allow this).

We have rarely had a buyer balk at working under a BBA with built in compensation. It takes the commission out of the equation and gives us more freedom to show ANY property regardless of the co-broke including FSBOs. Once the BBA is presented properly it becomes a no brainer for the buyer. BBAs should be mandatory. Just as a listing agreement is.

Posted by Bryant Tutas, Selling Florida one home at a time (Tutas Towne Realty, Inc and Garden Views Realty, LLC) over 6 years ago

Bryant,

In the Silicon Valley the prices are high and the inventory is very low. However, buyers often expect their agents to rebate money to them, not pay their agent. With commissions generally running from 10-100K per transaction this happens a lot.

Posted by Marcy Moyer, Probate, Trust, and Investment Specialist (eXp Realty of California Silicon Valley Probate, Trust, and Investment Sales) over 6 years ago

Bryant, I am sure you are worth your part of the commission whatever it is because marketing and negotiating for an undetermined period of time cost money. I wouldn't be offended either and would mostly stand my ground.

Posted by Debbie Reynolds, Your Dedicated Clarksville TN Real Estate Agent (Platinum Properties) over 6 years ago

Interesting discussion here.  I've always split 50/50 but not with Short Sales, as they are so much more work/time involved.  I've also been one to ask up front if they'll raise it to X before I show it.  There should be room for a civil discussion regardless of the property.  Great post!

Posted by Jan Green, HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN (Value Added Service, 602-620-2699) over 6 years ago

I have argued this for years.  Buyer's agent are welcome to "request" (not demand) a higher co-op fee at any time (including after the showing)... separate from the written offer, as long as they don't hold the contract hostage.

I don't understand the philosophy of "it's only fair to make it 50/50"... the co-op commission is listed in the MLS...  if you're unhappy with the co-op... try to negotiate it... or get the balance from your buyer.... but don't come whining to me (the listing agent) about "fair"... that ain't gonna get you anywhere with me.

(btw... for those who advocate 50/50... what about the times I'm offering 2.5% co-op, and only have a 4% listing?   Where's your 50/50 now?)

Posted by Alan May, Helping you find your way home. (Coldwell Banker Residential) over 6 years ago

The idea of listing agents taking a bigger piece of the pie is the old idea from the strong market days when it was easier to find buyers than to get listings. The last 5 years that flipped and it's been harder and more expensive to find the buyers. I guess we buyers agents should have taken that opportunity to hammer you listing agents. Our mistake.

Posted by Rob Nelson, Your Neighborhood Realtor (Crye-Leike Realty) over 6 years ago

#20 Rob- I suppose that is regional because here in South Florida we don't have a shortage of buyers. I don't believe I can point to a time when there was a shortage of buyers. We have a huge shortage of listings! 60% of our closings are cash sales and our average price point is over $400K. 

Posted by Katerina Gasset, Get It Done For Me Virtual Services (Get It Done For Me Virtual Services ) over 6 years ago

Kathryn, my buyer's agent agreement stipulates that if the cooperative listing shows a bonus above the fee I usually receive, I will pass it along to my client if their lender agrees that it can be done.

Another thing that's happened here in WA State is that they're now requiring us to be firm on the payment to a buyer's agent on short sales - even if the bank reduces the commission they're willing to pay.  So, as listing agents, we have to be careful as to what we advertise because you can get stung on it.

Posted by Reba Haas, Team Reba, CDPE (Team Reba of RE/MAX Metro Eastside www.TeamReba.com) over 6 years ago

This topic has been stomped on a few times.  The biggest issue here is that agents assume a position of morality or over actual COE.  Failure to refer to the COE will always cause people to hold beliefs about untruths.  Plain and simple.  As agents, we've been known to speak out of ignorance when a simple research would have easily brought about clarification.  All too often we jump at the opportunity to dole out information without a citation in sight and in this case Bryant you went beyond proving your point by citing the more credible source that governs our actions.  We should do more of that.

Posted by Charita Cadenhead, Serving Jefferson and Shelby Counties (Alabama) (Keller Williams Realty) over 6 years ago
Love the argument, it took me back to my early years when the commissions and the splits were controlled by the real estate boards.
Homes were 5% with 60% going to the selling agent. When the FTC shut that down and listing agents started listing at 6% the  older selling agents were still going for the 60% and a fight would start even though the listing clearly stated 50/50. A selling agent would declare the listing agent was greedy and was still getting 40% of the 1% commission increase and they had the important part of the deal, the buyer.

I was a listing agent basically and started putting selling agent to get 60% of 5% period just like the old days and to make a point and cause a ruckus. If you calculate that, it equals 3% of the price. So they would call and I would say well just for you I'll split The 6% 50/50 with you. The old timers felt they had won something and would show my listing and it was 8 months before an agent got out his pencil and said hey both ways are 3%.  

Posted by Brian Park (Park Realty Investments) over 6 years ago

Hi BB,  Great post and comment thread.  For me the takeaway is always have an agreement up front.

Posted by Bill Gillhespy, Fort Myers Beach Realtor, Fort Myers Beach Agent - Homes & Condos (16 Sunview Blvd) over 6 years ago

Buyers’ agents can request a more favorable commission split if the wish to do so...BUT…the request must be done upfront…before writing an offer.

Standard of Practice 16-16

 

REALTORS®, acting as subagents or buyer/tenant representatives or brokers, shall not use the terms of an offer to purchase/lease to attempt to modify the listing broker’s offer of compensation to subagents or buyer/tenant representatives or brokers nor make the submission of an executed offer to purchase/lease contingent on the listing broker’s agreement to modify the offer of compensation. (Amended 1/04)

 

Agents cannot extort a commission change from the listing agent based on the treat of withholding an offer.

 

Posted by John Juarez, ePRO, SRES, GRI, PMN (The Medford Real Estate Team) over 6 years ago

Great post, especially informing agents that commission is negotiable prior to writing the contract or even as a part of the seller concessions.  Although, apparently some listing agents don't bother to tell their clients they are taking a larger portion of the commission and are surprised when this becomes a part of a contract negotiation.   

Posted by Steven Pahl, Real Estate Consultant Tampa, FL 813-319-6423 (Keller Williams Tampa Properties) over 6 years ago

Hey, you know this has been stomped on but possibly the listing agent was not paying out even half & the other agent could tell?  Infuring that the buyers agent was greedy/grabby/not entitled to take something less was an insult I felt.  Then these same agents wonder why their listings just linger & die a slow death on the market - they're always perplexed about everything aren't they?

Posted by Lyn Sims, Schaumburg IL Real Estate (RE/MAX Suburban) over 6 years ago

When I work short sales, I always have the buyers sign the Buyer Rep where it states X% on closed short sales and if the commission varies from that, then they come up with the difference.

 

Posted by Carla Muss-Jacobs, RETIRED (RETIRED / State License is Inactive) over 6 years ago

Bryant:  What would cause you to change your mind on the co-op commission amount?  Just curious.  It seems you've thought about what to offer on the front end....what set of circumstances would compel you to change your mind?  Scott

Posted by Scott Nowling, Prudential Starck (Prudential Starck) over 6 years ago

It has been my opinion that it is not the agent who should determine the split, but the seller.  If a lower co-broie fee is being offered, an buyer may choose another property or lower their offer, or asking for closing costs.  I am not sure that agents adequate explain the possible effect of offering a co-broke fee which is less than competing properties is fully explained so that the seller can make an informed decision.  So, given we have a fiduciary duty to the seller to look out for their best interests, it is my humble opinion that it is the seller not the listing agent who should determine how the fee should be split.

Posted by Joan Whitebook, Consumer Focused Real Estate Services (BHG The Masiello Group) over 6 years ago

Whilst I do not come around too often these days, I have to say that I always enjoy reading your thoughts BB.

You're looking good, which must mean all is well in Florida!

As I embark on a couple of joint ventures, this is beyond thought provoking, merely supporting many of my own thoughts out here in California!

 

Posted by Bill Nazur over 6 years ago

Personally when I have a buyer's agent call and ask to raise the commission split (which is typically 50/50 except on short sales) I start to feel that they are putting their pocket book ahead of the buyer's interests. If it is THAT important to an agent I believe it would also sway their ability to lead the buyer the right way.

 

Put money first and you will deservedly suffer the consequences...

Posted by Joe Yates (eXp Realty) over 6 years ago

This subject of commission split will continue to be "beaten to death" and a variety of views expressed by buyer's agents but if you really want a certain "commission" then you should be able to substantiate your worth with your buyer's or just accept what the co-op commission is.  If you are scared to ask your buyer's to pay you for finding them a home that will make them happy why do you feel justified in asking the listing agent for more?  BTW - my seller's know exactly what the co-op that I am offering to buyer's agents since its part of the listing agreement.

I have been on both sides of the issue - with short sales sometimes you take a hit on the reduction that the lenders force down our throats to get an approval - I may not like it but it goes with the territory.  Having the buyer's agent get upset with me after I help get their buyer a great house at a discounted price and most of the time closing credit to boot because they don't want to have the conversation about a 1% or .5% payment with their own buyers is icing on the cake. 

Take control of your compensation - have the buyer's sign the Exclusive Buyers Contract - have them make up the difference if the co-op does not meet your needs and we all can be happy!  Or just be a listing agent and get paid the big money - your choice!

Posted by Evelyn Santiago, Managing Broker Heart Realty Group, Inc., Passionate About Real Estate & Our Clients! (Heart Realty Group, Inc..) over 6 years ago

Interesting discussion, and I'm enjoying reading the responses.  I used to use Buyer rep agreements every time, which explains that if I don't get %x, then the buyer must pay me--but after watching an older couple turn tail and run after reading it...I do not always have buyers sign a buyer rep agmt.  You have to get a feel for the buyers' personalities.  I haven't missed any meals yet, so it's all good. :)

Posted by Sonja Patterson, Texas Monthly 5-Star Realtor Recipient for the Hou (Keller Williams - BV) over 6 years ago

Here are two thoughts. The only way buyers agents can control how much they are going to get paid is for them to grow some stones and negotiate their own fee. As long as they let listing agents do that for them, they will have to shut up and take what they can get. Seems to me that one of the vital services buyers need from their agent is the skill to negotiate the best deal for them. If a buyers agent can't even negotiate their own compensation how are they going to match wits with a skilled listing agent? Answer by the way is they won't. 

 

Second thought is that buyers agents still think they control the information and thus can control their buyer. "Good luck listing agent. If you don't pay me enough money, I just won't show your listing. Poor seller." Well guess what buyers agents, your buyer shops the net and will not let you get in the way of them seeing the homes they are interested in and since you don't negotiate your own fee and you don't have you're clients sign a BBA you will wake up to your client writing with someone who will show them the homes they want to see. 

Posted by Kip Lohr over 6 years ago

I had a listing agent pull this on me once.  It was a million dollar property.  I was the selling agent.  After the 2nd counter offer from my buyers - she tells me that it will work out if I agree to lower my side of the AGREED UPON coop by 1%.  I said NO WAY - After that the offer was accepted by the seller and everything went smoothly to closing.

As a Listing agent I have had a selling agent write themselves a 3,000 selling bonus (over and above the 3% coop already offered on a 150,000 property) into the contract.  There is no end to what people will "try" to do in this business. 

Posted by Debbie Cook, Silver Spring and Takoma Park Maryland Real Estate (Long & Foster Real Estate, Inc) over 6 years ago

as not to diapoint ... great post & just as great comment thread! As a mainly Buyers agent, if the commission % is too low for me, I simply contact the Listing Agent & negotiate PRIOR to the showing because like in Flordia, when you show the property, you're agreeing to the commission %.

Posted by Samantha Smith, Sam I Am Houses, Simply Texas Real Estate (214.422.0729 www.SamIAmHouses.com) over 6 years ago
Bryant, Thanks for this post, a subject I need to study more about.
Posted by Pete Xavier, Outstanding Agent Referrals-Nationwide (Investments to Luxury) over 6 years ago

Bryant, I have given up commission take-backs when the listing agent wanted to skewer me to look good in front of her clients.  I gave in because I wanted my clients to be happy.  What's a few hundred dollars lost, knowing that my clients will be happy for years. 

Posted by Christina Sanchez Hood, #SiliconValleyHOODS | Inspired Living over 6 years ago

Article 16, SOP 16-16 is huge in this example. Your buyer could always make up the shortfall(and attempt to re-coup it in the Agreement of Sale).

Posted by Michael J. Perry, Lancaster, PA Relo Specialist (KW Elite ) over 6 years ago

We are mostly buyers agents (working our way over to be bigger listing agents this year) and we never asked for better compensation from the listing agent.  We have had the listing agent offer more commission a few times when we called to make an appointment for their listing.

Posted by Steve Warrene, Pittsburgh Real Estate Investment Specialists (Your Town Realty) over 6 years ago

Amen and well written Bryant. Buyer agents who are not strong enough to ensure compensation from the buyer usually get paid everything they are worth (or more).

Posted by Joe Manausa, Tallahassee Real Estate (Joe Manausa Real Estate) over 6 years ago

Scott #30 asked:

  • Bryant:  What would cause you to change your mind on the co-op commission amount?  Just curious.  It seems you've thought about what to offer on the front end....what set of circumstances would compel you to change your mind?  Scott

My answer is simple. If it's in my sellers best interest to do so.

Debbie#37. If they are using the pruchase offer to increase the commission they are in violation of our CoE. A Realtor can't do that.

Standard of Practice 16-16

REALTORS®, acting as subagents or buyer/tenant representatives or brokers, shall not use the terms of an offer to purchase/lease to attempt to modify the listing broker’s offer of compensation to subagents or buyer/tenant representatives or brokers nor make the submission of an executed offer to purchase/lease contingent on the listing broker’s agreement to modify the offer of compensation. (Amended 1/04)


Jane #31. You are absolutely correct. Our listing agreements specifically point out how much co-broke is being offered. The seller must agree to the split. And agents need to be sure they understand the possible consequences if not offering enough.  Which is another reason why the seller needs to be asked if the buyer's agent ask for an increase.

Posted by Bryant Tutas, Selling Florida one home at a time (Tutas Towne Realty, Inc and Garden Views Realty, LLC) over 6 years ago

I've seen many agents pass on showing a home that doesn't offer a 3% commission. When there's inventory they don't have a lot of incentive to show a lower commission home versus a higher commission home. In these circumstances, you might never get a chance to get them to ask for more. On my listings, I always offer the cooperating agent at 3%... I want them to show my listings. If I feel I should get a higher commission, I negotiate that separately with my seller upfront, but I don't penalize the buyer agents (it just reduces my seller's chance of getting their home sold).

Posted by Nina Hollander, Your Charlotte/Ballantyne/Waxhaw/Fort Mill Realtor (Coldwell Banker Residential Brokerage ) over 6 years ago

I can honestly say that I've never shown or not shown a property based on the co-broke.  I review with my buyers all the properties that match or semi-match their criteria and they decide which homes they would like to see.  However, I do know many agents who do not show homes below a certain co-broke.  Now, when listing a home I do explain to the seller the disadvantages and advantages of the co-broke.  Depending on the situation I've listed homes where I took less and paid out more and I've listed homes where it was split 50/50 and so on. 

I've never asked for more than the co-broke and I've never been asked by a buyers agent to increase the co-broke.  Not showing homes or withholding offers based upon the co-broke is a clear violation of Article 1 of the Code of Ethics. Article 1 requires that “Realtors® pledge themselves to protect and promote the interests of their client.”  Simply asking for a higher split is not a violation if the agent is still willing to show the property and present an offer based on the current co-broke offered. 

Posted by Gina Chirico, Real Estate Agent - Essex County, New Jersey (Lattimer Realty) over 6 years ago


Real Estate Commissions 101

  1. ALL Commissions are negotiable.

  2. All Commission agreements are between the Broker and the customer/ client.

    1. If you are signing listing agreements and/or Buyer Broker Agreement without the authority to do so, the agreement may very well be unenforceable.

  3. There is no 50/50 split rule.

  4. The co-broke offered in the MLS is an incentive for Buyer agents to show and sell the property.

    1. You are free to charge your buyer whatever you want. You do not have to be at the mercy of listing brokers. But if you don’t know how to get paid then quit whining about how low the co-broke is. It was YOUR decision to accept it as your full compensation.

  5. As a listing broker your commission can be paid as a percentage, as a set fee or both.

    1. Commission can be paid before listing, at time of listing, during the listing, before closing, at closing, after closing or any combination thereof.

  6. You can charge your customer/client as much as you want as long as they are agreeable. There are no limits.

  7. If you collect commission from more than one party it must be disclosed.

  8. A real estate transaction does not have to be completed to receive a commission.

  9. In most cases you cannot sue the seller for your co-broke commission.

  10. There is no part of the CoE or law that requires us to show property offering a co-broke we are not willing to accept. That is a myth.

    1. What the CoE does require us to do is to discuss commission and what we expect to be paid with our Buyers PRIOR to going to work. If you don’t then yes you need to go show that property offering you a $1 co-broke.

  11. If you say commission doesn’t matter then you are delusional and technically unemployed.

Posted by Bryant Tutas, Selling Florida one home at a time (Tutas Towne Realty, Inc and Garden Views Realty, LLC) over 6 years ago

Gina. "Protecing and promoting our clients interests" has nothing to do with compensation. My last comment may help.

Posted by Bryant Tutas, Selling Florida one home at a time (Tutas Towne Realty, Inc and Garden Views Realty, LLC) over 6 years ago

I agree that protecting and promoting our clients interests should have nothing to do with compensation, but I, like many of the other commenting agents, know agents who do not like to show homes without a commission over a certain point.  These agents rarely set a minimum commission in their buyer representation agreement.  If a house is a good fit, I show the home.  If the co-broke is under what is in my buyer representation agreement, I tell the buyers so that there are no surprizes.

 

Posted by M. Lynn Delatte (Developers Realty) over 6 years ago
I do not change the commission when buyers agents ask. Listing agents spend money to get their clients just like buyers agents. If you want to control your split go list. If money is the first thing on your mind in real estate you will never make it anyways. I hate greedy agents. If you really need another $300 you must not be very busy and should really find another career.
Posted by Sandra Watkins (RE/MAX Town & Country) over 6 years ago

Nicely written, BB. I especially like your Real Estate Commissions 101 comment in #47. ANd I slightly disagree with Joe in #43. He stated:

Buyer agents who are not strong enough to ensure compensation from the buyer usually get paid everything they are worth (or more).

I would amend that to say they get paid everything they're worth or LESS!

Posted by Pat & Wayne Harriman, Broker/Owners, Wallingford CT Real Estate (Harriman Real Estate, LLC (203) 672-4499) over 6 years ago

BB, I once had a listing agent change the co-op fee in the MLS after my buyer's offer was accepted. It was a nice try, but didn't work. If you want to get paid what you think you are worth, a BBA with a minimum fee list will do the job.

Posted by Michael Setunsky, Your Commercial Real Estate Link to Northern VA over 6 years ago

I will admit to not having read all of the above comments and this may have been mentioned, but as a listing agent with a reduced commission (or one that is not set 50%-50%) how will you know how many agents simply pass over the listing due to the commission descrepancy? I've noticed this before when helping a new agent find a property for a perspective buyer. When I asked them if they showed a particular property they said "I saw that one, but is has a low commission". Hmmm..Not something I would have looked at first in my search, but a valid point. How will you know that your listing is not being saved until they have nothing left to show?

I wouldn't know how to act on a listing appointment if I didn't have to explain why I shouldn't reduce my commission from the start. I always tell sellers that they should have there listing as close to what typifies the market from the onset; if anything raise it! Why give away any bargaining chips at the start of the "game"?

Posted by Andrew Herren (Craig Massee Real Estate) over 6 years ago

I've often done the opposite of the OP and given the bigger portion of the commission to the Buyer's Agent. As long as I get what "I" need, and I do MUCH more than other Listing Agents in the area, then if I can get the Seller to give extra Commission, then I'll pass it on to the other Agent as an extra Incentive - i.e. - MY bottom line is the same either way. 

My previous Broker was very big on the IDEA of having the Buyer pay the difference if we sold a property that had a lower compensation than we had on the Buyer's Agreement. It was rarely enforced, tho.

Posted by Travis "the SOLD man" Parker; Associate Broker, email: Travis@theSOLDman.me / cell: 334-494-7846 (Team Linda Simmons, Enterprise, AL 36330) over 6 years ago

Congratulations on being featured in the daily drop. I wrote a similar article with respect to agents passing showing properties with commissions far below the norm. In my example I was referring to a listing I recently saw that had a 1% buyers agent commission. What I noticed was that been the market for quite some time. It's in an area where most homes sell very quickly. I took that as evidence that buyers agents were not showing the property because the commission was so low.

I wrote a very similar article that got featured this morning. My perspective, and that shared by many of the people commenting, is that we as agents must show whatever properties are available regardless of commission when it's in the best interest of our buyers.

Posted by Bryan Robertson over 6 years ago

Bryant,

Always a compelling topic, compensation between Realtors.

As a Listing Agent, we offer a 50/50 split every time. This could be custom or a trend or just what we are used to after all these years. As a Buyer Agent we had always enjoyed this same consideration. Lately (perhaps in the last 5 years) some listing agencies have decided that they will not split 50/50. Now these same agencies do receive a 50% split from us.

We are clear that a selling agent cannot interfere with your established Listing Contract and suggest to you or the seller that the contract be changed. There is also no place in the purchase and sale to legally insert any wording suggesting an adjustment in your listed compensation. That area is sacrosanct.

If you are splitting on a 60/40 basis, we would write in the Purchase and Sale "Seller will pay, or caused to be paid, .05% of the selling price to the selling agency". Seller can accept or reject this condition.

When we have done this in the past, some sellers have asked the listing agency why we, the buyer's Agent, would ask such a thing. Each time, the seller was never informed that the listing agency was not sharing equally with cooperating agencies. Our listing contracts actually have wording requiring that the listing agency disclose its policies regarding compensation and cooperation. My understanding of this is so the seller knows that less than a 50/50 split "could" cause some agents not to show their property.

I can assure you that it costs us more per transaction to be a buyer's agent than to be a listing agent. Not sure how any agency could justify a less than 50/50 split (not that you have to justify your policy) except to say we have been doing it and we are selling enough properties.

To each his own...

Posted by Richard and Jean Murphy, (207) 712-4796 (Harborview Properties) over 6 years ago

I have learned a lot from this post. Is it like this in every state? Just curious if the real estate law differs for different areas of the U.S.

Posted by Atlanta's Home Inspector, David Lelak IHI Home Inspections, Experience the IHI Difference (IHI Home Inspections 404-788-2581) over 6 years ago

Great post, BB!  I have always used a Buyer Broker Agreement.  However, with inventory so low in my area, I am now totally focused on sellers.  In the past, when I wrote a BBA, I always had a certain percentage, and if the co-broke was less, the buyers would pay the difference.  About a year ago, I could see that listing agents were offering lower and lower co-brokes, simply because we have such an abundance of buyers.  I made the mistake, then, of also lowering my minimum commission in the BBA to match the average rate offered, but wouldn't go below that.  From now on, I will be requiring what I want my commission to be, and if the buyers don't agree, then I'll move on.  It really isn't worth working for buyers at a discount.

I have a very effective Buyer Consultation, and by the end of it, after I show them the value of my services, they usually will sign the BBA.  If they don't want to agree to compensate me for my work, then I'll wish them well and say "good bye".

Posted by Bob Willis, Orange County & L.A. County Real Estate Agent (Berkshire Hathaway HomeServices California Properties) over 6 years ago

I think what I typed and what I meant in my first comment are somewhat confusing.  See what happens when I comment before coffee ;)

While I agree you shouldn't work for the amount the seller and their agent said you should be paid and luckily I've never ran across a co-broke that was less than what I charge to be a buyers agent, I also don't think you should "pretend" a property doesn't exist if it meets the criteria for your buyer. 

I do agree that you should explain to your buyer upfront, how you get paid, what you get paid, etc. and if the buyer doesn't agree to it then you don't have to work with that buyer.  There are plenty of agents who never discuss this with their buyers and blatantly refuse to show or pretend these homes don't exist and they are wrong.  While it may not be a violation of CoE (and my apologies for misusing the reference in my comment above) it is not right and in my eyes they are misleading buyers and putting their financial interests first without properly explaining it to buyers in the beginning, or at the very least, prior to showing the property that is offering less than you are willing to accept.  

With that being said, agreeing to the co-broke doesn't necessarily make you delusional or unemployed when the offering co-broke is equal to what you charge as a buyers agent.  If you aren't willing to discuss your compensation with your buyer in the beginning then you are dependent on the listing agent and seller for your income everyday but don't mislead buyers for your mistake.

Thanks for your comment above.  Your points are well taken.   

Posted by Gina Chirico, Real Estate Agent - Essex County, New Jersey (Lattimer Realty) over 6 years ago

Excellent post, I do not ask for refuse to show a home due to co-broke.  I will strongly suggest my buyers not lookk at homes that state, "Buyer to pay listing agent XXX$ seller says not to present offer without bonus to listing agent"

Posted by Edie Czerniak, My Only Purpose is to Deliver Successful Results (NextHome Advisors) over 6 years ago
Great post and comments. I always tell my buying clients that my broker is paid a minimum of 3% of the sale price and if a listing broker is offering less than 3%, they would be responsible for the balance. I'll bring their attention to any listings offering less than 3% before showing so they can make the decision. I recently got a call from an agent on one of my listings that offered 2.5% telling me he doesn't work for less than 3%. I told him that was between him and his buyer.
Posted by Debra Hight, Debra Hight (Coldwell Banker United, Realtors) over 6 years ago
This post is comprehensive and complete. Very well said!
Posted by Dennis J. Zisa & Associates, Inc., 28 years in So. Jersey and the Greater Camden area (Dennis J. Zisa & Associates, Inc.) over 6 years ago

I'm not aware of any State having a law that would dictate how we charge, how much we charge and how much we offer as a co-broke. If there are please post them here for educational purposes.

Commissions are 100% negotiable. Anything that stated they weren;t would be restricting free trade andmay be a violation of anti trust laws.

Andrew#53 asked:..... how many agents simply pass over the listing due to the commission descrepancy?

My response. I have no clue. My only concerns are the buyers that do look and getting the property sold. If a property is just sitting on the market it could be price, commission, condition or location. These would need to be address if the poroperty is not selling. Change what needs to be changed. That could be the co-broke.

Gina: It's all about disclosure. Just another reason why it is beneficial to ALL parties to sit down and discuss how we work, how we get paid, what's expected of the buyer and what they can expect form us. Then put it writing and get to work.

Buyer's agents are one of the few professionals I know that are willing to work without an employment contract. Makes no sense to me.

Posted by Bryant Tutas, Selling Florida one home at a time (Tutas Towne Realty, Inc and Garden Views Realty, LLC) over 6 years ago
In our area we are starting to see commissions 2% and less. Listing agents who state that a buyer broker agreement to get a fair commission should go back and work with a few buyers. A first time buyer has a difficult understanding that they will need to pay part of our commission. After coming up with their 3.5% down and closing costs this is a stretch. A good buyers agent will sit down and do a Buyers Consultation to explain the buying process. We will spend 1-4 months with these buyers driving then to homes matching their criteria and writing offers until finally we can get one accepted. Most homes in our area will receive multiple offers. After countless hours and many weekends, paying broker fees, TC fees, E&O, office fees, and gas it's unfair to think we do not deserve to be paid fairly. A good agent will keep a buyer in a tough transaction and keep the clients in place when it is in their best interest. I love what I do and enjoy giving the buyer keys to their new home. We need to keep in mind this is a business and we must generate a profit in order to continue.
Posted by Debbie York (Coldwell Banker Residential) over 6 years ago

I am primarily a listing agent.  I always pay a minimum of 3% to co-ops as this is what is reasonable and customary in my area.  I do receive a larger share, but as long as I offer the standard co-op commission,I don't believe any  agent should care.  I have never had an agent ask for more.

I am not a fan of agents offering less, but it happens.  I saw a $10,000 home with a 2% co-op.  I wonder how often that homes was shown or how much longer it will be on the market.

Agents rarely admit that they don't show homes with lower co-ops, but those homes get shown far less (I have heard 85% less according to our scheduling software), so someone is not being honest.

I also have a minimum co-op of $1,000 on low end properties, which can be 10% or more. I don't try to get these listings, but they sometimes come to me.

Once when representing a buyer, I showed and sold a 2.5% co-op commission bank owned home.  I assumed the listing commission was also 2.5%.  I was surprised at closing when the listing agent received 3.5%.  I didn't say anything because I accepted the 2.5% and should not have felt taken advantage of....but I did.  If I received 3% i wouldn't have cared if the listing agent received 50%.

Posted by Jim Basquette, CRS, CNE, GRI, e-Pro, CLHMS, PSA (Basquette Group of Huff Realty) over 6 years ago

The Buyers Agency Employment Contract which has the minimum dollar amount is discussed when we talk about their search criteria.  With all the bargain hunters looking for a $4,500 foreclosure house or dealing with rentals which only pay a fourth of the first month rent the client must be aware of how the world operates.  I want my clients to make their decisions on purpose.

Posted by Dwight Puntigan, Dwight Puntigan (DRP Realty, LLC) over 6 years ago

I had a listing one time that was very old home that was listed at $35,000.00 with 6% commission split 50-50 but if an accepted offer came in below that amount such as 30000 the minimum would be $1000.00 to both sides. we got and offer much less than that price. The other agent for the buyer was surprise when I called him to ask if he looked at the listing agent remarks. He couldn't believe I would let him know about the minimum. I believe in fairness to all agents no matter whether or not they have been with me. But $1,000.00 is my minimum and my buyers and sellers know this.

Posted by Theresa Akin (CORPUS CHRISTI REALTY GROUP) over 6 years ago

Isn't discussing actual percentages and dollar amounts here a bit dangerous?

Posted by Marte Cliff, Your real estate writer (Marte Cliff Copywriting) over 6 years ago

Thanks, Bryant.  I was a little frightened when I saw my name in print, but it wasn't painful at all!  

Posted by Joetta Fort, Independent Broker, Homes Denver to Boulder (The DiGiorgio Group) over 6 years ago

Very interesting...  I'm thinking that before long the listing agents fee will be eliminated by the flat fee brokers... Time will tell...

Posted by Beth and Richard Witt, Long Island Cash Home Buyer 516-330-6940 (Long Island Cash Home Buyer) over 6 years ago

I agree with your post. Simply disclose your terms and conditions, services and fee structure prior to accepting any client. Any professional relationship must be suitable and mutually beneficial to all parties. 

Posted by Kimo Jarrett, Pro Lifestyle Solutions (WikiWiki Realty) over 6 years ago

The challenge I seem to have is when listing a short sale.  Most of the lenders will max out the commission amount at 6% on an approved short sale.  That is great except for when it is a cheap deal.  A friend of mine is trying to short sale a low end junker condo and the sales price will end up being $20,000 or less.  3% per side is $600 each - not much motivation for a buyer agent.  How can you offer a buyer agent more on deals like this? 

Posted by Rob Arnold, Metro Orlando Full Service - Investor Friendly & F (Sand Dollar Realty Group, Inc.) over 6 years ago

Hi Bryant.  I agree with your post.  I offer a lower commission on short sales all the time and a 50/50 split on standard sales.  However I may adopt your concept and off a lower commission on each listing.

Thanks.

Posted by Sharon Sanchez, Your Number "1" Source For Real Estate. (Ace Home Realty) over 6 years ago
In North Carolina the new listing agreement (BOR) lists the commission split so the sellers knows up front what it will be. I had not thought much about it until now, but I wonder if that is illegal, since I might want to change my mind about how much I pay an " out of the area" agent who knows nothing about real estate in our area. After all, what we do with the commission should be our decision. Hmmm.
Posted by John Dotson, The experience to get you to the other side! (Preferred Properties of Highlands, Inc. - Highlands, NC) over 6 years ago
Richard and Jean, maybe nobody has noticed, but if you are asking for .05% of the selling price you aren't going to get paid very much. I know this was an old thread, but it just jumped out at me. Better fix that!!
Posted by Kelly Fischer, Kelly Fischer, P.A. (Treasure Coast | Sotheby's International Realty) over 6 years ago

Hi Bryant, we don't do a 50/50 either because we feel we end up doing more that 50% of the work.

Posted by Bob Miller, The Ocala Dream Team (Keller Williams Cornerstone Realty) over 6 years ago

I split my commission depending on each deal .... I also work with what is typically offered in the mls ... when it is low I explain to my clients what is going on and if they want a particular property that is too low than I have them sign a buyer agreement where they pay me .... 

 

when an agent offers 1% OR $ 500 than it is obvious that they want to double end and will most likely not accept your clients offer anyway .... 

 

the greed in our business :(

Posted by Lehel Szucs, REALTOR of choice (All Seasons Real Estate, Inc.) over 6 years ago

Good post.  As usual, you cut through everything and get to the point.  I agree, if the buyer's agent wants to get paid then they need to prepare an employment contract and get the buyer to sign it before they start taking them out. 

Posted by Tom Esposito (Alpharetta Home Solutions) over 6 years ago

I think we can get into trouble when we start discussing specific numbers.  However, we must always act in our clients best interest.  That means showing them the homes that best meet the needs they say they have.  If we are worried about getting paid we better get a BBA.

Posted by Gene Riemenschneider, Turning Houses into Homes (Home Point Real Estate) over 6 years ago

It makes me crazy when I see agents put on their web sites that there is no charge to the buyer..."doesn't cost you anything".  I wonder what these agents would do if client showed up ready to make an offer on a For Sale By Owner property...work for free!?

Bryant,
A few questions if you will indulge me.
(I will assume that in your market a 50/50 split of the list agent commission is normal and customary.
Also, I will assume for the discussion we are talking only about available commission paid by the seller.)

1.) DISCLOSURE:
How do you explain to your sellers your fee structure and your un-equal fee split?
How does that conversation go, or is it just ink in the listing agreement?

2.) OBJECTIONS:
How do you handle objections from your sellers when they know (find out) that a 50/50 split is normal and customary, but you “always have" taken a "larger chunk"?

3.) WHY NOT MORE:
Why not take the entire listing commission and not split at all?  What will the (your) market  bare?

4.) "sellers best interest"
"(circumstances would compel you to change your mind? ) If it's in my sellers best interest to do so."
When would it not be in the "sellers best interest" to offer the buyer’s agent more commission/incentive?
Only when they cannot afford to, correct?

Thanks...this has been thought provoking and given me things to consider and remember for the future.

Posted by Chris Marquez (Charleston HOME Properties ~ www.BuySellCHS.com) over 6 years ago

Rob #72, I pay co-op agents 3% or $1,000 whichever is higher.  If the seller does not agree to a minimum comission on low priced properties, I don't take the listing.  If it's a short sale or any 3rd party decision maker affecting the commission , I don't take the listing on low priced properties.

Posted by Jim Basquette, CRS, CNE, GRI, e-Pro, CLHMS, PSA (Basquette Group of Huff Realty) over 6 years ago

I suppose if some agents rufuse to show homes with low commission splits it may do  a disservice to that home owner esp in a slow market where cooperation is necessary and where homes do not vary much if listing agent insists on giving himself most of the commission. This should be explained to seller too.

Posted by Edward Gilmartin (CRE) over 6 years ago

Bryant: This discussion about commissions and fees makes me uncomfortable, as it's on the edge of RESPA problems. In our MLS it is clearly stated what the % split is or whether it is variable. Then it's up to the Buyer's agent to have it clarified on what percentage they will be paid and get it in writing, but not on the purchase agreement, as it's between the two Brokers.

Posted by Nancy Middleton, Nancy Middleton, Counselor Realty, Minnetonka, MN (Counselor Realty, Inc.) over 6 years ago

There is no problem with the discussions as long as be are not involved in anti-trust violations.  I have not seen anyone seeking agreement on setting commissions. 

 

Back to the original discussion, always, always, always get a BBA before showing properties to your buyers - even if you will most likely, at least in the Seattle area, have a 50-50 split.  If my buyers insist on looking at houses that offer a lower buyer-side commission, they know by the BBA how much they will end up spending. 

Posted by Roger Stensland, Let's Move! (Keller Williams Realty Puget Sound) over 6 years ago

When I go on a listing appointment one of the selling points is I have a good relationship with all the agents that show units and have access to lots for customers due to their marketing and refrerrals...If I gave those key people less of a split they would not be my friends and I could not say this.

Posted by Edward Gilmartin (CRE) over 6 years ago

The reality is that Buyers search for properies on the Internet, and instruct their agent what to show them.  If the agent refuses - they simply go on to another agent.  Co-Brokes are specifically NOT included in the Zillow type internet searches, so the Buyer has no idea of the co-broke.

Posted by Tony and Suzanne Marriott, Associate Brokers, Serving Scottsdale, Phoenix and Maricopa County AZ (BVO Luxury Group @ Keller Williams Arizona Realty) about 4 years ago

Do you listing and buyer's agents out there think that the collapse of the real estate co-op commission is a possibility? Now that listings are all online, it seems that buyers are telling agents what houses they want to see vs. the buyer's agent giving them options to choose from. For you buyer's agents out there: are you seeing lower co-op commissions as a result of this or other industry-wide changes? Please share your stories, experiences, and thoughts with me. Thanks!

Posted by Evan Smith, Copywriter - Real Estate Specialization (Write Web Source) about 1 year ago

This blog does not allow anonymous comments