In a buyers or sellers market, it is never good to negotiate your hard earned commission!

Sometimes you need to give up the commissions to close the deal... waiting for the end then change it sellers and buyers dont understand the expenses for an agent. Just think for years we make 3% however with new technology our overhead has gone sooooo our overall net is less than years ago.

Debbie- In our market on offers similar to yours the commission is often countered to the sales price less the reductions. This is especially common with bank owned properties. The banks will not pay commission on the reductions.

Best,

Scott

In our market it's common that the commission is based on the sale price minus the concessions. I don't really consider that negotiating the commission.

It is standard in our market to not pay commission on seller's assist, only on the net sale price.  at least, I should say, it's standard for our office and for several other offices - it's plainly stated in the MLS that no commission will be paid on seller's assist.

I personally think it's only fair.

Debbie  I do not think you're being unreasonable.  If the Seller didn't want to pay the full commission they should have offered a lower percentage so that you knew up-front. 

Hey, Debbie -

Our Team never negotiates our Real Estate Fee (never say "Commission," OK?)!

Relative to seller credits, however, we use some discretion and offer some flexibility.

Let's say it's a full price offer, to really impress the client - and the buyer asks for a 3% credit back for closing costs and pre-paid expenses.  On a $400,000 house (there are still a few of these out there in Chicago thesed days), that is $12,000 - or potentially $720 in additional Realtor's Fees (you work out the percentage - don't want to be caught violating Fair Trade!)

For something like that, where the net sales price, known UP FRONT, is actually $388,000 - I will not lose the deal for $720, and most Buyer's Brokers agree in this case.  Here, we would base our compensation on the NET of $388M, not the GROSS, $400,000.

However, if the credit comes AFTER THE FACT - say, the furnace is bad, and the seller asks for a $3,000 credit so they can purchase a new one - I will NOT reduce my fee.  This is based on a REPAIR ISSUE - not a SALES PRICE ISSUE.  Rarely does a seller complain here.

Write if you'd like to discuss further - we're here!

DEAN & DEAN'S TEAM CHICAGO

Hello Debbie -- excellent talking points, enjoyed your post.

Hello Dean -- very well spoken!

Hi Debbie.  Just wanted to stop by and say hi.  Congrats on the contract.  I am sure it will work out.

Ken

Lori - I don't want to... but the listing agent offered it up to the seller.

Lynn - I will not lose a transaction over it, but I just don't appreciate the fact that everyone thinks that they can use the commission real estate fee as a means to put money back in their own pocket.

Scott - I completely understand why it's done, I guess my issue is with the way this was done.

Terry - Thank you for the advice.

I think both sides of the arguement can be challenged.  Local real estate "culture" will vary.  I stand on the side of NET.  Anything other than net makes no sense to me personally.  The bottom line, the amount the sellers actually receive, to me, is the fair number to pay a fee on because that's all they're walking away with.  I don't care what side of the deal I'm on.  I try to be fair.  The sellers give a little to help my buyers, I'm not going to demand they give an additional amount. 

Karen - That's a great idea to put that disclsoure in the MLS, concessions are very common here...

Anthony - I agree...

Dean - Thanks for the advice about the "real estate fee" I like it... I follow your reasoning completely, thank you for taking the time to write a great comment. 

Tann - Thanks for stopping by and you're right... Dean had a really good point.

Ken - Thanks for stopping by, I will do everything I can to get the deal done....

Hi Debbie!

While I understand where you're coming from, I was always under the impression that the sales commission listed on the MLS applied only for the terms as shown on the MLS?? And that anything other than those terms...left everything up for renegotiation.

A Simpler Example: The MLS shows the sales price at $499,900 and full commissions to both offices. The buyer's agent brings in an offer at $485,000, which is not according to the original terms of the MLS listing.

Aren't all bets off in terms of the agreed-upon commission rate shown in the MLS? I'm positive they are. The terms of the sale differ from what was originally offered in the MLS.

The seller is perfectly within their rights to counter with a commission renegotiation if your offer is not exactly what's in the MLS. In the above example, the buyers are asking the sellers to give up $15,000 in gross profits...and as a result, the sellers decide to renegotiate the sales commissions from 3% to 2.5% (let's say). They're simply trying to offset their $15,000 loss by saving $4,850 in sales commissions, making the resulting net loss only $10,000 vs. $15,000.

I know your particular situation is a little different, but the moment you altered the original terms of what's showing in the MLS, you opened yourself up to any sort of re-negotiation on the compensation too! Although the net sales price in your specific situation was comparable to what other properties were selling for...it was NOT the original terms as shown in the MLS. It's a bit frustrating when sellers (and sometimes other agents) don't understand that if you ask the seller to contribute "x" dollars in concessions...BUT they come out virtually the same (either because you padded the sales price, or their home was slightly overpriced to begin with)....that sometimes all that anyone sees is the amount you're asking them to pay on behalf of the buyer, not the overall "virtue" of the deal.

I wish you the best of luck!

Dave

David Daniels
President/CEO
FlyersToYou, Inc.
Ph; (951) 652-8365
ddaniels@flyerstoyou.com

Total commission to be paid is an agreement between Seller & Listing Brokerage.  If a Seller needs reduced commission due to terms of the contract that they otherwise would be in agreement with, they should re-negotiate with the Listing Brokerage.  The co-broke compensation listed in the MLS is an agreement between Listing Brokerage and Selling Brokerage.  I don't see that one is dependent on the other - and I'm saying this as someone who is primarily a listing agent.  Every listing agent should be telling Sellers they should anticipate concessions in today's market.

DEBBIE - I've had my compensation based on the net but it was my expectation all along.  It's just the way that things are done around here.  If it is not the norm in your area, then I don't blame you for standing your ground. 

I do not know all the details of this particular scenario.  I do not have a problem with taking a commission on the sale price minus seller concessions in favor of the buyer.

If the listing is listed in a REALTOR controlled MLS it is a violation of NAR COE... if all of this was not disclosed up front.  Very unethical to disclose this after a contract is written.

David - The comment that was left after yours really sums up the issue for me... (Thank you Anthony Clark - WELL SAID/WRITTEN)

Total commission to be paid is an agreement between Seller & Listing Brokerage.  If a Seller needs reduced commission due to terms of the contract that they otherwise would be in agreement with, they should re-negotiate with the Listing Brokerage.  The co-broke compensation listed in the MLS is an agreement between Listing Brokerage and Selling Brokerage.  I don't see that one is dependent on the other - and I'm saying this as someone who is primarily a listing agent.  Every listing agent should be telling Sellers they should anticipate concessions in today's market. - Anthony Clark

Anthony  - Thank you, you really put the thoughts that I was having into words.  I have told all of my sellers to expect to pay concessions.  Both of the listings that I have under contract contain seller concessions.  It is a fact of life right now that most buyers need assistance with closing costs and our job is to educate sellers upfront to be prepared.  THANK YOU for taking the time to comment.

Adam - I wouldn't say that it is standard here, I have a listing under contract that includes seller's concessions that were part of the original contract and I never considered offering up net real estate fee as part of the negotiation.  The seller didn't ask for it either.  She was happy to have a contract!

Debbie and Anthony,

Hmmm...very good points....and after re-reading my post above, I realize I may not have articulated my point quite as accurately as I had intended.

I'll try again...LOL! Blame it on the coffee pot being empty!

I fully understand that the commission to be paid is an agreement between Seller and Listing Brokerage and seemingly has nothing to do with the MLS (they are completely independent of one another as Anthony pointed out). But are they really?

Our Commission Agreement form here in California states the following:

___________________("Principal"), agrees to pay to _______________________, ("Broker(s)"), as compensation for services, irrespective of agency relationships, the sum of either ___________ percent of the transaction price, or __________________________________Dollars ($_______), for property situated in the City of _____________________________, County of _______________________, California, described as _________________________________ ::::etc., etc.:::: It then states "Broker may cooperate with other brokers, and divide with other brokers such compensation in any manner acceptable to Broker.

------------------------------------------------------------------------------------------------
No mention of MLS, no mention of price as indicated in the original Listing Agreement (only a "transaction" price which isn't established until a final deal is made.) So yes, this agreement is entirely separate from the original listing agreement and co-op agreement below and is exclusively between Seller and Listing Broker.
----------------------------------------------------------------------------------------------

But that doesn't mean it's set in stone!

When offers and/or counter-offers are written, we use the COOPERATING BROKER COMPENSATION AGREEMENT AND ESCROW INSTRUCTIONS (CAR Form, CBC, Revised 11/06), which states:

3.) Listing Broker Compensation to Cooperating Broker:
Provided the transaction between the principals closes or Listing Broker receives compensation for the transaction, Listing Broker agrees to pay Cooperating Broker, and Cooperating Broker agrees to accept, compensation as follows:

A. Property listed with the (insert MLS here):
Confirmation of Compensation in MLS: Cooperating Broker is a participant in the MLS or reciprocal MLS and accepts the offer published in the MLS as _______% of the selling (or leasing) price or $____________.

OR

Modification of Compensation in MLS: Cooperating Broker is a participant in the MLS or reciprocal MLS and accepts the offer of compensation published in the MLS as modified herein: ________% of the selling (or leasing) price or $____________________.

OR

Cooperating Broker Not a Member of the MLS or Reciprocal MLS: Cooperating Broker compensation shall be ________% of the selling (or leasing) price or $______________.

B. Property Not Listed With Any Multiple Listing Service ("MLS"):
Cooperating Broker compensation shall be _____% of the selling (or leasing) price or $_____________.

Whew! That was a lot of typing, but here's the point I was trying to make:

You stated:

I responded to the listing agent with the buyer's counter-offer this evening and didn't negotiate my commission.  I explained that the offer of compensation in MLS is 3%, that the offer of compensation to a buyer's agent has nothing to do with a buyer's offer and would expect that the offer of compensation is honored.

My opinion??? The offer of compensation in the MLS has EVERYTHING to do with the buyer's offer, as the commission is only payable when "the transaction between the principals closes or Listing Broker receives compensation for the transaction" as indicated above. If the buyer and seller can't reach an agreement on the offer...then how in the world will the transaction ever close?? The MLS is only a means for a listing agent to communicate that if the terms of your offer match what's shown in the MLS (i.e. the Listing Agreement)...they'll pay you 3% (as that's likely to be the only legal grounds for even the listing Broker to sue for commission.

Section A above is where you would have likely put in 3% of the selling price in your original offer, as that's what you fully expected and hoped to receive. But it all becomes re-negotiable once your offer comes in at anything other than what the seller wants. If you alter the terms, the seller runs no risk of defaulting on the listing contract and they can counter your offer with anything they want at that point! Whether it's honorable or not is a matter of perspective. You came in with an offer which presumably netted the seller less than what they had anticipated. Perhaps they felt dishonored?? If the listing agent did their job correctly, he/she would have included a check in the box MODIFICATION OF COMPENSATION IN MLS as shown above. Since they based it on net proceeds vs. % of transaction price, they probably filled in the "x-amount of dollars" section. Perfectly within their rights. Heck, we even provide them the form with which to do so! There were certainly no misrepresentations nor NAR Code of Ethics violations as some have implied. They were simply responding to yuor offer.

You could probably get the 3% commission back if you only convince your buyers NOT to need the 3% gift downpayment nor the closing costs, and pay the price as shown on the MLS. But that's not going to happen.

You know what they say...."What's good for the goose..."

In any case, I hope you were able to work things out on that deal...maybe you can post a follow-up?

Dave


David Daniels
President/CEO
www.FlyersToYou.com
Ph: (951) 652-8365

Debbie, In our area we just get paid on the percentage of the sales price.  I have heard the seller want to negotiate the fee off of the net, but that is not our practice here.  Seems like in the comments that is a standard practice in other areas?  I say stick to your guns.

Debbie,  All the sellers think because the market has dropped that we in the REal Estste Business ought to bear the cost. NOT!!! I fired one of my clients today because he was so hard headed about my refusal to lower my commission. I told him my costs have gone up, not down, and I wasn't willing to bear the burden of his price drop in the current market conditions. 

Now before someone out there jumps all over me because of this mind you this listing is 20 miles out of town, a pain to service, and this is a high maintenance client. The house is a hard sell because of the chopped up floor plan etc.  I have already worked on this listing for six months with no offers and the feedback has not been positive.  I talked to this client repeatedly before the listing expired and he wasn't going to make a committment.  He didn't call me to come talk until the listing was already expired.

I just got disgusted with his hard headed attitude like it is all our fault that the economy is down and prices are dropping.  He wanted to make a huge profit on this house and is just mad because in the current market that isn't going to happen. So...for me it was easier to walk away than to keep arguing with a hard headed person. I have a feeling that the Mrs. was going to give him an ear full after I left because she didn't look happy with his bullish behavior to me.  I told him he was welcome to look for another agent, perhaps the guy in the Begging Video will take it, I just felt it wasn't worth it and for the next six months he wasn't going to be happy no matter what I did.  Better to walk away and find another client who is more reasonable. 

Hi Debbie,
You earned it and I say stick to it.

We're working harder than ever before to make those transactions go together.  There is always a seller out there who thinks we don't need a paycheck. 

I guess I'm just not understanding the idea of being entitled to commission on an amount the seller isn't actually getting.

Asking the seller to pay commission on anything other than the net sale seems kind of wrong to me but hey, what do I know.  This isn't about a seller wanting to lower an agent's commission but to pay commission on what's fair...if the seller is getting $175,000, why should he pay commission on $180,000?

I guess it just goes to show how localized real estate customs can really be...

Mostly the net is what I have seen as well. But, maybe it is time to routinely put this into the private remarks on the MLS, that compensation is paid on the net, if seller pays any assisted buyers cost. That way everyone one knows what to expect when it happens.

Debbie-  The Listing Agent is entitled to change HIS/HER fee at any time and need not disclose that to the Selling Agent (unless they want to) and that fee may go up or down.  The Selling Agent is entitled to the percentage/dollar amount listed in the MLS.  If the Seller was unhappy with the offer (and, like you, I think the offer was excellent in this market) and net proceeds, the Listing Agent should have taken a little hit in his/her fee, not you.  Just my opinion.  But I just took the ethics training last week and the CoE is pretty fresh in my mind.  :)  Having said that, if the Listing Agent in your particular situation (seems like it's an FHA loan--under $353,750 here in our area, as we are in the same market)--with 6% Seller concessions) doesn't understand what his/her options are, you either gotta explain the fee thing to them (THEY take the hit) or simply submit and you take a little hit in your fee.  --But your broker must sign an addendum saying he/she will accept less than what they are OWED in the MLS and the Listing Agent's broker must sign it, too, as the fee agreement is between BROKERS, not sales associates.  Most likely, your broker will capitulate-but he doesn't have to.  I'd be interested to see what happens.   

I may be confused...(it wouldn't be the first time)...but no one is entitled to the sales commission as stated in the MLS, unless and until they bring an offer in at exactly what the MLS states. Anything less, and you run the risk of seeing the following (it's pre-printed on our Cooperating Broker Compensation Agreement here in California) Isn't it the same in other states??:

Modification of Compensation in MLS:

Cooperating Broker is a participant in the MLS or reciprocal MLS and accepts the offer of compensation published in the MLS as modified herein: ________% of the selling (or leasing) price or $____________________.

You bring an offer in that nets the seller less than what he was expecting....and they, along with their agent...have the absolute right to renegotiate on all sides. The sellers can renegotiate with their agent, and their agent can renegotiate with you.

I'm not clear on how anyone thinks this is even remotely an ethics violation, or why it should only be a hit that the listing agent takes. It's the buyers agent who's presenting an offer that's (in this case) perhaps 6% less than the seller was expecting. We don't know the sales price, but if it was $300,000, the seller is losing $18,000 (in his mind). There are arguments that the net comes out to what other homes are closing for, but this discussion isn't about the accuracy of the subject property's value. It's about what the seller thinks is happening on this deal.

If the seller believes he's losing $18,000 because of paying 6% in buyers costs, then he's perfectly entitled to change his commission agreement with the listing agent. The listing agent, in turn, has every right to present a modification of the terms as shown in the MLS, since the offer submitted isn't what the MLS originally asked for (sales price, terms, etc.). Now, if the listing agent failed to counter with a modification, and accepted the offer....and LATER wanted to modify the commission, then most of the responses here might apply. But under the circumstances....everything seems legit to me.

By the way....is what we're talking about here the 3% loss of commission "due" the listing agent on the $18,000 loss to the seller??? Because if so, we're only talking about the agent's split X $540.00. If the agent's on a 70% split, their net loss is $378.00, but they'll still earn a commission of just under $6,000.00! 

Which makes it equally difficult for me to understand some of the posts implying that people "expect us to work for free". The seller's losing $18,000 in his mind...and asking you to give up $378 of your commission...while still paying you SIX THOUSAND DOLLARS!!!

Am I missing something????

Dave

If they have advertised that they will pay a 3% buyer commission, then that is what they should pay.  They should not risk messing up the sale just because they decided to change their minds half way through negotiations. 

Georgina,

While I want to understand where you're coming from....couldn't the same thing be said for what the buyers have done?

After all...the sellers advertised their home at X-dollars with no seller-paid concessions. The buyers offered some amount (we don't even know if it was the asking price or lower, as it wasn't stated in the original post)...but they DID ask the seller to contribute 3% towards a gift downpayment and 3% toward their closing costs.

So, while they advertised that they'd pay 3% commission to the buyer's agent, they also advertised a price which DID NOT INCLUDING 6% IN SALES CONCESSIONS! Perhaps the buyers shouldn't risk messing up the sale because they decided to offer wayyyyyyyyyyyyyyyyy less than the seller asked?

I'm glad that this entire blog isn't for public consumption...it's so unbelievably one-sided in favor of getting the commission without regard for what the seller is being asked to give up!!  It's actually frightening to think how the general public would view this. YIKES!!

Dave

David Daniels & Everyone that has been kind enough to comment - Sorry for the delay in my response, David you must drink a lot of coffee : ) 

First - Yes, I changed the title...  Seemed more appropriate.

Second - Since writing this, the subject contract has been accepted and I agreed to base the real estate fee (Thanks Dean) on the net. 

Third - A seller that I'm representing accepted a contract over the weekend that includes 6% of seller concessions and the buyer's agent is collecting 3% of the sales price (not the net). 

Now let me get  back to responding!

Audrey - I gave up $400 so that the buyer can have the house they love...  Their daughter gave me a hand drawn picture of their family in front of the house.  It was never about the money... 

Sandra - I've been there...  This house was only on the market a few days.  This seller was probably disappointed with the amount that he can really sell for... I get that. 

Debbie,

LOL...picked my daughter up from school, stopped by my favorite coffee house....gulped down a large iced mocha....came back and was sooooooooooooo glad to see your latest post!!!

I love happy endings!!! And the hand drawn picture just had to be the greatest token of appreciation ever, huh???? I know I get slightly over the top in some of my comments...but after all is said and done, it's wonderful to see that this transaction ultimately came together....and that (presumably) everyone feels great about it.

Now....go get some more! :P

Dave

P.S. CONGRATULATIONS!!!!!!!

David - Slightly?!  You're a hoot.  I'll have to come up with another topic to get you fired up!  

Thanks David... Folks like you make AR what it is.

Karen - I think that the "real estate fee" should be paid on the sales price, I know how hard buyer's agents are working... how many homes they are showing and how much gas costs.  I spent $200 on gas last week working with 3 different buyers.  But what do I know?

Hey Lisa  - Thanks for stopping by.  I have a seller who just accepted a contract with a 6% contribution he never questioned the "real estate fee" on the net sheet based on the sales price. 

Georgina - I agree with you, but I gave up what I should have been compensated for a family who's needs outwayed what I believed was right. 

I think it's what is fair to the seller and routinely request that the commission be based on the seller's net (well sale price - concessions, not all their closing costs) when a buyer's agent brings an offer like this. :)