The Variable Commission and What it Means in Arizona Real Estate
The other day I received the following email:
I have a client that is interested in your listing located at: 4337 E Seneca Street Tucson, AZ 85712, however, I am a little reluctant to show it since there is a variable commission. Would you explain to me what this is please.
A couple of things ran through my head immediately.
1) Why didn't he ask his broker, or know what a variable commission was in Arizona Real Estate?
2) If your client wanted to view a home on MLS, why would you let commission interfere with your fiduciary duty?
3) Don't you have a buyer-broker agreement in place?
The existence of a variable commission rate is discussed in the National Association of REALTORS® Code of Ethics we ascribe to if we are, in fact, REALTORS®, and not agents.
- Standard of Practice 3-4
REALTORS®, acting as listing brokers, have an affirmative obligation to disclose the existence of dual or variable rate commission arrangements (i.e., listings where one amount of commission is payable if the listing broker’s firm is the procuring cause of sale/lease and a different amount of commission is payable if the sale/lease results through the efforts of the seller/ landlord or a cooperating broker). The listing broker shall, as soon as practical, disclose the existence of such arrangements to potential cooperating brokers and shall, in response to inquiries from cooperating brokers, disclose the differential that would result in a cooperative transaction or in a sale/lease that results through the efforts of the seller/landlord. If the cooperating broker is a buyer/tenant representative, the buyer/tenant representative must disclose such information to their client before the client makes an offer to purchase or lease. (Amended 1/02)
To me, the important question to ask the listing agent in this situation is, "Do you have any offers, or pending offers?"
If the listing agent in fact, has an offer in place from a buyer client of their own, that is when the situation can affect cooperating agents and their clients. The seller may be able to NET more from the dual agency offer, than from another, supposedly identical offer, from an outside agent. Knowing that there is a variable commission in place is important disclosure.
I use variable commissions with my investor clients who flip properties to help them with their bottom line. After all, with each sale comes another purchase, and another flip. I avoid them like the plague in regular listings because it is my JOB to bring clients in and try and sell my listings.
But back to thought number 2 above. I believe it is my duty to show homes that my clients are interested in, regardless of the coop commission agreement on MLS. If I am worried about receiving less than my business plan allows, that's a discussion when filling out the Arizona Buyer-Broker form.
Meanwhile, that agent never showed the listing. Hmmm