The Variable Commission and What it Means in Arizona Real Estate

GOOD MORNING CARA ... and to put it in writing - I agree - #2 is the real question! We work for free until a transaction closes so whatever it ends up being is what it ends up being!

Cara  Well said!  I discuss everything (including commissions) with my clients so they understand how real estate works.  Shame on him for not showing the property.  Maybe his clients will just call you to see it.  I would not think procuring cause would be a factor since he refused to show it.  Enjoy your day!

Thankfully, showing homes based solely on commission can't happen as often today as in the past. Buyers see the homes for sale on the internet...and their agent has to explain why it isn't on their list.

Cara-Thanks for bringing this up. That is not an arrangement I've seen in our area, but it's helpful to learn of its existence.

There is a variable rate, most agents don't have a clue, case in point.  If buyers agents aren't affiliated with the brokerage it wouldn't apply.

Yes, that agent should have discussed this with her Broker to gain every perspective of what Variable Commission is.  Great post!

Yes we have had this for years in Oklahoma and full disclosure is required or you are subject to fine. It has never stopped me and I have never done a variable myself. 

I have not skipped showing a listing due to this, however, this practice does cause some agents to might otherwise show your listing to miss it.

Good Afternoon,  this is some great Info for all in the business,  keep up the good work and good luck in 2014,  E

I have twice been approached by sellers wanting to use this process. I agreed once and sold the home in 8 days, the sellers were happy.

I was happy. None of the agents who called understood the process or formula, even the one who brought the buyer. She made more than what is a common commision in our area, but still was not happy.

The next time a client suggested a sliding commission, I said no, even though she was a Realtor, her husband an accountant, her daughter a lawyer. Could we craft a great deal? YES. Would the agents understand it?

I was afraid not.

I make a notation on our mls, as required, whenever I list a property with a variable commission. Once in a while, in our mostly multiple offer market, I will be asked by a cooperating agent whether or not I have or expect any offers from my office or from myself. In fact, I will volunteer that information so that the cooperating agent has a clear idea of what the situation will be. It can work in the favor of my seller if the best offer comes from an agent who has counseled his/her client to write a very strong offer in order to potential overcome an offer that I might write.

In any event, my advice to my seller is to take the best offer. Just because I write an offer for my seller’s property clearly does not make it the best offer for my seller.

Cara, in these parts, a variable commission might just happen unplanned if an unrepresented buyer shows up with a low offer and the listing agent offers to lower their fees to make the net work for the seller.  I think you are right, though, that the most important thing is determining whether there is another offer, and if so, is it the listing agent's offer.  Otherwise, the whole thing is sort of moot.

The safest thing to do is have a buyer broker agreement and havee the buyer pay my commission instead of the seller.

Cara -- I don't like doing listings with variable rate commissions. I like your answer to Brian. 

Hi Cara, you should went through a tortuous way to explain a variable commission on the Arizona MLS [aka FlexMLS] as I am presuming you are on this MLS. Perhaps, you may be a little taken away by the code of ethics definition and 'may' have mislead the other agent and yourself by the same token.

And you may be confused between and EA agreement and an ER agreement, whereas if the seller sells the property on their own, no commissions are paid. That has nothing to do with a variable commission.

Let me explain.

If you refer to the rules and regulations of the MLS, and you enter the field "Y" to variable commission, it means the following: the total compensation paid by the owner to the listing broker is different if the listing broker sells the property without the assistance of a cooperating broker.

It does not affect the co-broke in the listing. It is NOT a reduction of the commission to the buyer-agent whatsoever. So, when the other co-operating agent called and asked, you should answer truthfully that, yes if you sell it yourself as a listing agent from a sign call for example, the seller gets a higher net. In fact, you are required to disclose this, otherwise, it's a violation and you are subject to a penalty/fine. This keeps the listing agent honest, in case the offer the listing agent brings is lower than the co-op buyer-agent.

In a variable commission, as explained above, if the listing agent sells the property oneself, only the listing agent reduces his/her own commission. Never to the buyer-agent.

Nothing in terms of questions like this surprises me anymore. In our MLS, it clearly states what the selling agent will earn, regardless of a variable commission structure between listing agent and their clients. So this is one question we don't typically get here.

Cara, I have to agree with Richard (#19). A variable rate commission has nothing to do with the selling agent. As to why an agent wouldn't show a property with a variable rate commission is ignorance of the terminology and purpose.

A variable rate commission only applies in a dual agency situation where the listing agent (brokerage) sells the property and offers a reduced fee to the seller for selling it them self. This is done quite frequently; however, what I don't see is the listing agent disclosing the differential in the fee.

Agents often confuse variable rate commissions with a reduced negotiated fee a seller wishes to pay for the sale of their property.

In 25 years of real estate, I have only noticed listings with variable rate commissions about ten times.