Special offer

Co-broke and why it shouldn't matter to you as a buyer

By
Real Estate Agent with Advantage Realty #1

WHAT'S "CO-BROKE" AND WHY IT SHOULDN'T MATTER TO YOU AS A BUYER

In a nutshell, "co-broke" is the amount of compensation the buyer agent receives in order to sell you a home (please be advised that this pertains to Florida and Highlands County in particular).

At the time of listing, the listing agent and the seller agree upon the amount of money the listing agent is to receive at the time of closing. The amount , called commission, is usually a percentage of the final sale price. The commission is part of the listing agreement. In order to put a listing  in the MLS, the listing agent has to offer a share of his or her commission to the agent that ends up selling the home (buyer agent, selling agent etc.). This is called "co-broke". Co-broke is usually a percentage amount of the total commission the listing agent receives: Example: the listing agent receives x% and offers the selling agent half of x%. It's a 50/50 split but it doesn't have to be.  The listing agent doesn't state his own commission but has to input in the MLS how much co-broke is being offered for the listing.

Your buyer agent is being paid out of the listing agent's commission. The amount does vary depending on the co-broke being offered and the final sale price.

So, let's say you are looking for a 2 bedroom, 2 bathroom, 2 car garage home in a golfing community in Sebring. Your price range is $100,000 to $150,000. The home shouldn't be older than 10 years and you would prefer golf course view but it's not a "must".

We will search the MLS using the following criteria: Sebring, 2 bedroom, 2 bathroom, 2 car garage, $100,000 - $150,000, built after 1999, golf course frontage yes and no, and we will add the legal description of all golfing communities in Sebring. This results in a list of homes that meet all your wants and needs. Together, we will now eliminate all the homes that are not of interest to you. Once you have found several homes that you would like to view, we contact the listing office and make arrangements for a private showing at your convenience. At that point in time, we also to begin to evaluate the asking price on these homes to help you make an informed decision when it comes time to write an offer. We don't want you to pay more than you have to.

The amount of co-broke being offered for each individual listing is NOT a criteria we use when we initially search the MLS for you. We do not withhold any listings from you because it is listed with another office or because the co-broke is not high enough. We don't withhold any listings from you, period.

Even though you know now what "co-broke" is, it shouldn't have to matter to you and most importantly, it shouldn't matter to your agent either!

ON EDIT: to clarify, my point is that no buyer agent should withhold listings from their clients because the co-broke doesn't fit the buyer agent's needs. It happens all the time and the buyer doesn't even get the change to offer up the difference as posted in the replies below.
Percentage figures used above have been changed from numbers to letters.

If you are looking to purchase real estate in Highlands County and would like to have access to ALL listings, regardless of the co-broke, give us a call!

Andrea of Darrin & Andrea Mills
ERA Advantage Realty

www.millsrealestate.net
www.sellmysebringhome.com
www.findmysebringhome.com

 

Comments (42)

Tori Stamps
Stamps Realty - Franklin, TN
MA JD - Broker/Owner Franklin TN Homes for Sale

Andrea, you are right - in an ideal world, it shouldn't matter.  However, when I list with a client I always outline the following scenario: 

"(1) We have 50 homes identical to yours in the county; (2) Buyer's agent has 5-6 slots for homes he can show in a day with his clients; (3) all the other homes are offering x% commission; (4) If all things are equal and an agent has to narrow it down between 2 houses, which one do you think he'll show - the one offering 1% or the one offering 3%?" 

I also explain to my buyers that I get paid x%.  If a home doesn't offer me that x% (e.g., fsbo), it will be up to them to cover the cost.  I also say "I will do my best to see that doesn't happen." - because it's normally in their best interest that they don't have to come up with an additional couple of grand out of their pockets at closing time.  While I will send all listings, I will make sure they know which house will put them in this scenario.  99% of the time, the client eliminates the house on their own fruition.

While it SHOULDN'T be a factor, we are a business.  We can't work for free so the listing agent can walk away with 90% of the co-broke.  In order for me to STAY in business, I need to make sure that I'm bringing in a certain amount of money.  To do that requires I make sure I'm being offered fair compensation.  It sucks, but it's reality.  While we don't normally have problems like this around here, I recall seeing some posts from another area where a $1 co-broke was being offered! yikes!

Dec 10, 2009 12:40 AM
Jerry Murphy, CRS, SRES
Long Realty West Valley - Anthem, AZ
Anthem, Phoenix, and Scottsdale AZ Real Estate

Exactly, we should never put our own self interests ahead of our clients.  Sometimes it backfires on us, but in the long run we all win.  Perfect example of this was a few weeks ago when I was showing a young couple some homes.  The wanted to stop in at a new home builder that they visited prior.  Upon entering the sales office the salesperson recognized them.  She introduced herself to me and proceeded to tell us that I would not be given a co-broke should my clients choose to purchase a home there due to the fact that my clients had visited before without me present.  My clients clarified the situation with the salesperson stating, "if Jerry doesn't get a commission then we're not buying here."  And we walked out.  I was very honored that my clients thought so highly of me, and had such integrity.  On the other side I thought it was stupid that the salesperson and the builder would forgo a $150,000 sale over a $4,500 commission.  Penny wise, pound foolish.  Great post and best of luck to you.

Dec 10, 2009 12:42 AM
Gene perez
Greater Mortgage Solutions & Valley Hills Realty - Santa Maria, CA

good informative article for public ,,,,done in a nice and very easy to understand

Dec 10, 2009 01:05 AM
Dennis Duvernay Broker/Owner
Hillview Realty - Northbridge, MA

My buyer clients see any and every home that they would like to see that matches their criteria. Would I like more commission? Of Course! My clients come before my commission so I would never not show a home because it might make me a few dollars less. I think Jerry's comment says it all.

Dec 10, 2009 01:18 AM
Andrew Monaghan
The Monaghan Group - Glendale, AZ
CRS, GRI, EPro Associate Broker

I havae Co brokes are important to many buyers agents and tehy do determine which homes get shown.

For example i have one bank that pays 2.75% comission and gives a $3000 agent bonus, these homes dont get shown as teh agents skip over the "low" comission.

I wish it worked the way you say

Dec 10, 2009 01:23 AM
Sonja Patterson
Keller Williams - BV - College Station, TX
Texas Monthly 5-Star Realtor Recipient for the Hou

Great post for consumers. I have found many first time home buyers do not realize that our fees are paid (usually) by the seller.  Of course, if seller does not pay my commission...that will be reflected in our lower offer. ;)

Dec 10, 2009 01:49 AM
Tammy Lankford,
Lane Realty Eatonton, GA Lake Sinclair, Milledgeville, 706-485-9668 - Eatonton, GA
Broker GA Lake Sinclair/Eatonton/Milledgeville

I've from time to time been disappointed in the co broke offered once my clients were "in love" with a home, but that's the breaks.  I never withhold, I don't even look at it until I'm drafting an offer.

Dec 10, 2009 01:57 AM
Lisa Moroniak
Keller Williams Realty | Northern Virginia | 703.635.0388 - Leesburg, VA
SFR - Short Sale & Foreclosure Certified

As with all communications client-oriented, it's about setting the expectation during the initial consultation. If you expect to earn a full commission, then set the expectation with the client upfront that they will be accountable for making up the difference.  That's also a great litmus test to determine their level of commitment to the process, and how much of a challenge they might be down the road.

Dec 10, 2009 02:08 AM
Ted Tyndall
Davidson Realty Inc. - Saint Augustine, FL
I will help You find the Home YOU want to Buy

In our area of Florida 6% is normal with a co-broke of 50%. It is common for the listing agent to keep it at 50% if the seller offers less than 6%. In our areea I have not heard of any agent asking the buyer for the difference.

It is wrong to not offer a home to the buyer because of your personal gains.

Dec 10, 2009 03:06 AM
Barbara Altieri
Better Homes and Gardens RE Shore and Country Properties - Shelton, CT
REALTOR-Fairfield County CT Homes/Condos For Sale

I do believe some agents will not show or, if they do, might dissuade their buyers from a listing that has a lower than norm co-broke. 

My clients see all homes that fit their criteria.  Commission has never been a factor in what I show or don't show.

Dec 10, 2009 03:34 AM
Cheryl Kuzniar
Prime Property Solutions - Niskayuna, NY

I show my buyers listings no matter what the co broke is, as it is our duty to our clients to show listings that fit their needs. 

As far as the 50/50 co-broke, I don't think that is fair, if any of you have listed properties, you know there is usually a pretty large expense on the listing agents part.  Therefore, offering a 50% co-broke would in essence be paying the selling agent more than you would walk away with as the listing agent.  In NY most Brokers require at least 2.5%.  I feel that the listing agent should walk away with at least .5% more than the buyers agent because of the up front expense they have.

P.S.  I feel that many posts on this blog are violating Federal Fair Trade Laws, please remove your commission percentage examples...

Dec 10, 2009 03:36 AM
James Lyon
Vista Pacific Realty - Sacramento, CA

I see all different types of commissions offered and yes short sale often have their commission designation in the agent remark section.

Dec 10, 2009 04:06 AM
Karen Pannell
Real Living / Home Realty - Owensboro, KY
Owensboro KY Real Estate -270-903-2167 Homes, Cond

Thanks for this detailed explaination for consumers, and for pointing out that it is NOT ABOUT US!!!

kp

Dec 10, 2009 08:21 AM
Martin E. Kalisker, Esq.
Natick, MA
Real Estate Law From A Practical Perspective

If a client enters into a buyer's agency agreement, the amount of co-broke compensation becomes a moot point.  This is because your stated fee is set.  You can get x% from the listing agent and the remainder from your client, or your client can pay the whole amount in situations like FSBO listings where the seller may not wish to offer compensation to a buyer's agent.

I also have another way around this. My office compensates agents based on sales volume, rather than commission dollars generated.  This way, my agents are equally incented to show two different  $800,000 listings that offer different co-broke fees to the buyer's agent - in other words, their job is to find the best $800,000 home for their client.

Dec 10, 2009 09:15 AM
Alan Brown
Coldwell Banker Realty - Davenport, FL
32 Years of Real Estate Experience .

I show my buyers which ever homes regardless of the co-op commission. In this business listings are king "he who has the listings controls the market" That's why in all the books you read about real estate it says you should spend 80% of your time trying to get listings and 20 % of your time working with buyers. As we all no that is a tough nut to crack. I definitely spend more time maintaining my sellers and prospecting for more sellers, than my buyers, hence I expect to get paid more, no offence it's just the way it is.

Dec 10, 2009 09:19 AM
Satar Naghshineh
Satar - Amiri Property and Financial Services Corp. - Irvine, CA

"Even though you know now what "co-broke" is, it shouldn't have to matter to you and most importantly, it shouldn't matter to your agent either!"

Would you show for sale by owners as well?

I disagree with your blog. It's my time and I want to make sure to make it as profitable for me as possible. For that very reason, you should have an buyer broker agreement in place. It makes you free to show almost every listing knowing that you will be compensated accordingly. I guess the only type of listing that you would still need to disclose, is a variable listing...which you didn't cover.

Dec 10, 2009 01:20 PM
Anonymous
Z Realtor

Andrea,

 I think you make great points.  We have to be more concerned about helping our clients get the house they really want, as opposed to just maximizing profits for ourselves.  Absolutely.

Re:  Posts #34 and #38

 Like most of us, I have been on both sides of this.  Obviously I have had listings that sold in a few weeks to buyers who have been riding around with their buyer's agent for months and months.  Which means the buyer's agent could have very well have spent more money than I have.   I have no idea how long a buyer's agent may have been working with their clients.

 To me... IT TAKES TWO TO TANGO.  And since both sides are EQUALLY NECESSARY for the transaction to go through, I have absolutely no problem with a hypothetical 50/50 split that may (or may not) be common where I am.  I have no problem with it at all.

And I do not sit at the closing table and try to calculate how much the buyer's agent may be walking away with compared to me--- and worry about if they might be walking away with more after-expenses money than I am.  I guess I spend my time at the closing table thinking about other things.

 

Dec 11, 2009 04:13 AM
#40
Anonymous
Z Realtor

Andrea,

 I think you make great points.  We have to be more concerned about helping our clients get the house they really want, as opposed to just maximizing profits for ourselves.  Absolutely.

Re:  Posts #34 and #38

 Like most of us, I have been on both sides of this.  Obviously I have had listings that sold in a few weeks to buyers who have been riding around with their buyer's agent for months and months.  Which means the buyer's agent could have very well have spent more money than I have.   I have no idea how long a buyer's agent may have been working with their clients.

 To me... IT TAKES TWO TO TANGO.  And since both sides are EQUALLY NECESSARY for the transaction to go through, I have absolutely no problem with a hypothetical 50/50 split that may (or may not) be common where I am.  I have no problem with it at all.

And I do not sit at the closing table and try to calculate how much the buyer's agent may be walking away with compared to me--- and worry about if they might be walking away with more after-expenses money than I am.  I guess I spend my time at the closing table thinking about other things.

 

Dec 11, 2009 04:14 AM
#41
TheMillsTeam YourSebringRealtors
Advantage Realty #1 - Sebring, FL
863-212-5441

For those who work with a buyer agreement and who's buyer is willing to make up the difference - no problem! Agent gets paid their required commission, buyer gets to see all listings!

The point is about agents without buyer agreement that withhold listings from their buyers because they dont' like the co-broke.

Dec 14, 2009 10:28 PM
Tony and Suzanne Marriott, Associate Brokers
Serving the Greater Phoenix and Scottsdale Metropolitan Area - Scottsdale, AZ
Haven Express @ Keller Williams Arizona Realty

 

This is a very tricky area.  No guarantees that the split between Listing and Buyer Broker will be 50/50 of the total commission.

 

Jul 14, 2010 07:53 AM