Can a Seller’s (Listing) Broker change a Buyer’s Broker commission? When can they do that? Is it legal per GA license law? At what point do they have to disclose any changes? The following is a synopsis of the latest episode of “Real Estate Made Crystal Clear” with our very own Dana Sparks. You can watch the video in its entirety below.
In the world of real estate, agents often encounter situations where the co-op commission for a buyer’s broker ends up being different than what was initially advertised in the MLS. These discrepancies raise questions about the legality and regulations surrounding alterations to a broker’s co-op commission. In this blog post, we will explore the various facets of this topic and provide in-depth insights for real estate agents.
Seller Agrees to Total Commission
When a seller decides to list their property for sale, they enter into a seller brokerage agreement that outlines the total commission to be paid. In jurisdictions like Georgia, the listing broker typically shares a portion of this commission with the broker representing the buyer. This shared commission, known as the co-op commission, is communicated through the MLS service.
The seller brokerage agreement, such as the Georgia Association of Realtors (GAR) listing agreement form f-101, specifies the negotiated commission amount. It distinguishes between the total commission paid by the seller (Section 4A) and the portion of that commission shared with the cooperating broker (Section 4B).
Commission Adjustment to Co-Op Commission
Under the GAR seller brokerage agreement (Paragraph 4C), there are circumstances where the listing broker may choose not to pay the cooperating broker the commission initially mentioned in Section 4B. These circumstances need to be clearly defined and agreed upon between the listing agent and the seller. Commonly, this adjustment occurs when the listing agent is the first to show a buyer the property, even if the buyer is represented by another broker.
It is crucial for agents to have open and transparent discussions with sellers about potential changes to the co-op commission. Sellers may have varying preferences, with some agreeing to adjust the commission to incentivize the listing agent to bring buyers, while others may prefer to maintain the initially communicated commission to ensure fairness.
MLS Service & Disclosure of Co-Op Commission
MLS services, such as FMLs and Georgia MLS, have specific rules and regulations governing the disclosure of co-op commission. In FMLs, for example, there is a dedicated field on every listing called “buyer agency compensation,” which notifies the buyer’s broker of the offered commission by the selling broker if they participate in the sale.
According to MLS rules, any potential reduction in the compensation payable to the cooperating broker must be clearly communicated before the submission of an offer. This information should be included in the public remarks section of the listing to ensure transparency for all interested parties.
Seller Approval of Changes to Co-Op Commission
Agents must obtain the seller’s consent when considering alterations to the co-op commission for the buyer’s broker. It is essential to have clear discussions with the seller about potential changes and document their agreement in the seller brokerage agreement or a special stipulation.
While some sellers may agree to adjust the co-op commission to incentivize buyer’s agents, others may prefer not to alter the commission structure to ensure fairness and encourage buyer’s agents to bring potential buyers. Ultimately, the seller’s approval is crucial in determining any changes to the co-op commission.
What if the Property is not Listed in an MLS Service?
In cases where a property is not listed in an MLS service, such as new construction or off-market listings, it becomes even more important to negotiate the buyer’s broker commission before showing the property. Since there is no contract to cooperate through the MLS, the financial arrangements between the buyer’s broker and the listing broker need to be worked out in advance.
Agents should proactively communicate and come to a mutual agreement on the co-op commission before involving buyers. This approach ensures transparency and avoids potential conflicts regarding compensation when dealing with properties not listed in an MLS service.
Buyer Obligation to Pay Buyer’s Broker Commission
Buyers also have a role to play in understanding the commission structure. When buyers enter into a buyer brokerage agreement with their broker, it outlines the commission the buyer is responsible for paying to their broker. This amount is typically offset by the commission paid by the seller or listing broker, as evidenced in the MLS service.
Buyers should carefully review their buyer brokerage agreement to understand their financial obligations. The agreement will clarify how the commission paid by the seller or listing broker will offset the commission owed by the buyer to their broker.
In conclusion, understanding the intricacies of co-op commission changes is vital for real estate professionals. Alterations to the co-op commission are allowed, but they must be agreed upon by the seller and communicated clearly to all parties involved. MLS services require transparency regarding any potential adjustments to the commission, ensuring that buyers’ brokers are aware of the changes before making an offer. By adhering to these guidelines and having open discussions with sellers, agents can navigate co-op commission changes while maintaining ethical and legal standards in their transactions.
Watch the entire video for more information here:
