Zillow Advice: Home Buying - Commission

As a listing agent, we go ...

Tue, 16 Jun 2009 15:57:00 GMT

As a listing agent, we go through this from time to time, I agree with all the agents who stated that unless the offer was full term/cash the seller can change anything they choose... everthing is up for grabs... including and not limited to commissions... we have a box to check of for variable commissions, most check no as a default... it always amazes me that agents will assume they can write low ball offer or even what I would consider decent offers and if the seller can not meet the terms get upset if compensation must be adjusted... in the end the buyer always pays the commissions.. not the seller.. but it has to be a high enough offer to take it off the proceeds and still satisiy the leins... for the transaction to close... If the buyers agent thinks the list price is out of line, move on to a different property... there is plenty to pick from... but as a buyers agent work for your buyer first and not your pocket book... as a listing agent work for your seller, not your pocket book, but do run your business smart enough to make money and have a living... smart business is smart business at the end of the day... Good luck everyone... we all have to work together ... when you do enough business one transaction is not the break point to your career!

I agree that this is a problem ...

Tue, 16 Jun 2009 15:22:00 GMT

I agree that this is a problem between the agents and I do not think that it should interfere with the sale. The buyer is caught in the middle, but they did not set up or contribute to the problem one bit. Unless the buyer has agreed to independently pay their agent any commission shortfall in a separate contract, I do not believe that they are responsible. This issue can be dealt with after the sale and there are provisions most contracts to do that.

under most mls rules, the ...

Tue, 16 Jun 2009 15:02:00 GMT

under most mls rules, the listing agent cannot do this. When the house is listed on the MLS, it states the commission to be paid, that commission offer does not require a full price offer typically, and would have to explicitly spell out what commission for full price, what commission for less than full price if this were the case. The buyer's agent could volunteer to reduce his commission, but the sellers agent can't really demand/ask/counter for this.

Now, if you examine your typical contract or counter offer, you will notice that the agent does not sign the contract. (though on many forms, the agent does sign a receipt for earnest money... forms vary take a look at yours) Who signs it? the buyer and seller, as it is a contract between them!

If the sellers agent sends a counter that reduces the commission to the buyers agent, a crafty agent could simply have is buyer sign it, proceed to close, and demand full commission anyways. Why? because the agent doesn't sign the counter, so he/she has never agreed to a commission reduction.

This is a problem between the agents, and should NEVER interfere with the buying process/contract. Nevertheless, in my opinion, the buyers agent should fight for his/her 3%, and let the listing agent live with 1%. If the lister wasn't willing to pay 3%, he/she shouldn't have offered 3%.

The listing agent does not ...

Tue, 16 Jun 2009 12:51:00 GMT

The listing agent does not have an agreement with the buyers

Did the buyer's agent create or attempt to create an agreement with the listing agent by including compensation in the sales contract? If so, then it was addressed by the listing agent in the answer. In any case, commission/compensation is not part of a sales contract unless the agents include it and it should not be in any case.

Did the buyer's offer meet the rerquirements of the listing agreement regarding price&terms? Did it meet the advertised price in the MLS? Historically commission rates do not drop when an offer less than the advertised or listing agreement terms is accepted. If this is the case, then the seller is certainly within his/her legal rights to offer an alternative or as is being written here, "change the terms" since the listing terms have not been met. They have done so by countering with a 4% commission.

The buyer's agent was expecting 3%. The seller was expecting a certain price. Without further clarification on what was offered and whether the commission/compensation was written into the offer, we cannot clearly determine whether the seller or listing agent is acting improperly.

If a buyer's broker is offered 3% for a home listed for $300K and an offer is made for $275K, the seller does not have to accept it and they can counter. If the commission has been written into the sales contract, then yes they can legally counter that as well. The seller's unhappiness with their agent is irrelevant. Maybe they would have been happier with a full price cash offer as the listing agreement calls for. The seller is simply saying, yes I will accept the offer from the buyer if the commission is adjusted downward to 4%. The listing agent is conveying this to the buyer's agent and is willing to take a hit to get the deal done. Here again, their hapiness is irrelevant.

Commissions are reduced all the time, this just gets a little uglier when written into sales contracts and buyer's agency agreements. The buyer's agent should accept the lower commission offer, not expect the buyer to pay the difference and get the deal done. Buyer's are never told of this possible scenario, only that the seller pays the commission. If the seller's compensation to the buyer's agent is not equal too or greater than the buyer's agency agreement, then the buyer must make up the difference. Why? Because the buyer pays all commission anyway.

The listing agent does not ...

Mon, 15 Jun 2009 23:39:00 GMT

The listing agent does not have an agreement with the buyers. If the sellers are unhappy with their agent's services, there are provisions in every standard contract that I have ever seen for that to be dealt with outside of the enforcement of the purchase agreement/escrow. The listing agent has legal recourse based on the listing agreement that was signed with the seller, but does not have a right to alter your offer unilaterally the after it has been submitted. The seller's also cannot change the deal with you once they have accepted your original offer with 3% going to your buyer's broker. The listing agent can either choose to drop out of the deal now and claim that the listing agreement was breached by the seller or they can choose to complete the deal and go to arbitration following the close of escrow. Neither one of these options will stop the sale of the house to you if the seller accepts your offer. If your buyer's broker commission was part of the original agreement submitted, they will also get paid independent of the listing agent's problem with their seller. Although it is nice, the agreement to pay the full commission to the listing agent is not an essential part of closing escrow. If there is an issue between the seller and their agent, it is dealt with as specified in the contract. No contract I have ever seen gives the agent the right to delay escrow closing once an offer is accepted or the power to change the terms of an offer to suit themselves. It is not the buyer's responsibility to make sure the listing agent is compensated in full as agreed in the listing agreement. That is for the sellers to deal with because they are the ones who signed it.

workabee,It is Buyer's problem ...

Mon, 15 Jun 2009 21:12:00 GMT

workabee,It is Buyer's problem if Buyer signed Buyer-Broker Agreement and Buyer agreed to compensate his/her Broker in the event the Seller does not pay commission, or below what the Buyer and the Selling Broker agreed upon in the Buyer-Broker Agreement.

This is similar to Buyer purchasing a FSBO property. Buyer Broker is entitled to the compensation - unless the agreement was otherwise.

In this case, the Buyer agent should have checked the compensation in MLS BEFORE showing the property. If commission in MLS stated 3% then the Buyer Broker is LEGALLY entitled to 3% from the Listing Broker.

Say, the compensation in MLS was 2%. In this case, Buyer would have TWO options:
1) see the property and pay Buyer Broker 1%,
2) reach a compromise with the Buyer Broker and purchase at 2% without paying the additional 1%

The point is it is Buyer's problem, because LEGALLY Buyer Broker could demand the compensation that was stated in Buyer-Broker Agreement or refuse to represent the Buyer.

Would you expect to go to a doctor and NOT pay the fees, or use a lawyer and NOT pay legal fees?

No, they can't change the ...

Mon, 15 Jun 2009 18:40:00 GMT

No, they can't change the terms and as the buyer it isn't your problem anyway.

CherieVBch,We have two ...

Mon, 15 Jun 2009 17:36:00 GMT

CherieVBch,

We have two separate contracts here:
1) between the Sellers and their Listing Broker - completely confidential
2) between the Listing Broker and the Selling Broker - commission is clearly stated in MLS, at least it is in MRIS.Those two contracts are completely independent of each other.

The Listing Broker can agree to represent the Seller for FREE, based on 3% compensation with the 3% going to the Buyer Broker, if the Listing Broker chooses to do so. It is between the Seller and the Listing Broker and it is confidential - has NO legal bearing on the Buyer Broker. Why should it?

The only legal agreement that exists between the Buyer Broker and the Listing Broker is the compensation stated in the MLS that the Listing Broker promises to pay the Buyer Broker. The Listing Broker can put 3%, 2% or 0% in MLS, if approved by the Seller - although the 0% compensation might not be in the best interest of the Seller looking for a Buyer as few Buyers can afford to compensate their agents.

The Listing Broker has no legal right to lower the compensation AFTER the offer was produced.

The standard listing agreement ...

Mon, 15 Jun 2009 12:48:00 GMT

The standard listing agreement in Virginia is specific. The seller must accept the terms of the listing agreement if the offer made by a buyer is cash in the amount on the listing agreement or such other terms as agreed by the parties. Unless your offer is full price/cash the seller is free to negotiate the terms as they see necessary.

Agent compensation should not be included in sales contracts. In fact they are not unless language is added by the selling agent. It seems to me that if the selling agent is so concerned about being compensated they include it in the offer they draft for the buyer, they should explain to their buyers the whole picture beforehand. The agent brought a willing and able buyer and is expecting compensation. Fair enough. However, the MLS advertised a certain price as well as compensation for this price.

Nowhere, not in a listing agreement or in the MLS does it say a buyer's agent will receive 3% for "any" accepted offer. Agents on both sides often make presumptions, based on what typically happens rather than on contractual language.

In your case and again, unless your offer was full price/cash, the seller is certainly within his or her rights to renegotiate the commission terms or any other terms of the listing agreement and instruct their agent to convey these new terms back to the other party.

Perhaps all agents should better understand what they are agreeing to and stop assuming things.

If a 3% buyers side commission ...

Mon, 15 Jun 2009 11:08:00 GMT

If a 3% buyers side commission was advertised, the listing agent cannot simply send your agent an email telling him/her that they are changing the commission structure for the deal. Your agent must agree to such a concession.

Have you signed an exclusive buyers agency agreement with your buyers agent that commits you to pay them any commission shortfall up to 3%? If so, and the deal goes forward as described, you may have to cough up the 1% to your agent while you all fight things out in arbitration.

I think that this is really more about the fact that the sellers are unhappy with the price (and are taking it out on their agent). But the house has been on market for a long time, they want it done, and are now facing reality. Since they can't get a better price, they are trying to improve their bottom line by strongarming the agents.