Commissions

The real estate profession has become increasingly based in legalities. While a handshake can signify an agreement, the contract is the foundation of the real estate transaction today.

With the increased focus on legal issues, NVAR provides members services in the legal arena. Various articles on current and hot legal topics are provided through the weekly NVAR Online News. In addition, the Legal Information Line is available to members.

There are many real estate related questions that arise often. These FAQs (Frequently Asked Questions) by topic are provided to assist you in finding quick answers.

Commissions

Q:  As a listing agent, what should I say if during the presentation of an offer to the seller, the seller instructs me to reduce the other agent’s commission in a counter-offer?

A:  The NAR Code of Ethics, Standard of Practice 3-2 and the MLS Rules and Regulations Section 5 require the listing agent to “timely communicate any change of compensation for cooperative services to the other REALTOR® prior to the time the other REALTOR® produces an offer to purchase/lease the property.”
1) Explain Standard of Practice 3-2 and the way the commission works between brokers.  Explain that the other agent’s commission is strictly between the brokers and is neither the seller’s decision nor part of any agreement between the buyer and seller.  The seller granted that authority to the listing broker in the listing agreement.
2) Explain that compensation between brokers should not be negotiated through the contract.  The negotiation should be agent-to-agent or broker-to-broker.
3) Explain that you cannot reduce the commission you offered to the cooperating agent/broker after the offer to purchase was provided to you without the cooperating agent/broker’s permission in advance of making a counter-offer.
4) Suggest the seller submit a counter-offer to the buyer at a price and terms acceptable to the seller, not including the cooperating agent’s commission.
5) Be aware that if you reach an agreement with the seller to reduce the commission, you may have to bear the entire reduction.