5 REASONS A REALTOR OFFERS LESS COMMISSION TO THE "OTHER" AGENT...

By
Real Estate Agent with RE/MAX Compass, formerly RE/MAX WHP 0524642
https://activerain.com/droplet/4RtF

The offer of compensation to the agent working with a home buyer is advertised on the Multiple Listing Service, or MLS. That amount can vary from market-to-market, but the usual in our area is 3%. That's all but a routine factual sight when a buyer's agent searches for properties. 

But every now and then I'll see 2%, 2.5%, 1% or even a flat-fee of say X which looks better than saying 1%. This practice is even more common place with rental properties. The compensation for rentals can be so low that it's laughable. This week I saw the commission offered on a $2,500.00 lease at $100.00. It would typically be $1,250.00. Our MLS requires something be added besides.... zero. 

 

So why does this happen?  

 

1. The seller has hired a discount broker and has agreed to pay LESS than the typical TOTAL commission, so the listing agent is sometimes splitting what they were able to negotiate with the seller.  This practice does in fact lower the odds of the seller selling their home as there are agents who quite simply will PASS on showing this property, regardless if it is unethical, selfish, or not so Christian like. It happens.

 

2. The listing agent realizes it's a SELLERS MARKET and knows for a fact he'll get an offer rather quick and easy. Unbeknownst to the seller, his strategy is to take 4% while offering just 2% to the agent who brings the buyer. HOW the commission is split is completely spelled out in the listing agreement that the seller signs, but to be realistic, that's almost never brought into question by the seller once the home is listed and marketed on the MLS. If the seller IS made aware of the unbalanced split of commission, the listing agent will say something like... "I have to pay for extra marketing and SOMEONE has to reimburse me." In most cases this is complete bullshit. There's a cost of doing business and the buyer's agent works equally as hard as the Listing Agent. In my opinion when this happens in a hot sellers market, the Listing Agent is just being opportunistic to make an extra slice of compensation. 

 

3. Then there's the .. "I want both sides of the deal" mentality. There are examples ALL over our MLS (especially with leases) where the listing agent will try to dissuade their OWN LISTING FROM BEING SHOWN just so they can attempt to work with both the buyer and seller in the same transaction. Leases are easy transactions in the sense they "go quickly", so often times the homeowner isn't even aware this takes place, and there simply isn't a HUD/Closing Disclosure for everyone to see who got paid what. Another strategy for the HOG of a listing agent is to INTENTIONALLY not return phone calls. They don't want to work with other agents! They will go OUT OF THERE WAY to make the process as terrible as possible. Again, this happens with hot listings, leases or lower priced homes where the listing agent feels "I can sell this myself pretty quickly." 

 

4.  Some agents will try (but often fail) to hand out financial punishments to agents who don't completely do their job. The most common is when the listing agent tries to make themselves the procuring cause of the sale. In other words, "I showed the property to your buyer, so "F" you, I'm only paying you X." Sadly, this ridiculous behavior happens more than I'd like to admit, and in the end it typically ends up in mediation or arbitration. These panels are made up of Realtors and the outcome for the greedy individual is typically not going to end well.

 

5. Probably the most ridiculous reason a listing agent will pay "LESS" I've ever seen is because the listing agent has 'hired' a 3rd party vendor to assist with a Short Sale. They believe in their demented opinion that this is somehow something the buyers agent should help pay for. Any cost of selling is a listing agent expense. Period. That's my opinion.

 

One more...

 

Sometimes listing agents quite simply do not understand the financials when calculating the estimated proceeds for their seller. They miscalculate their numbers and have told their clients (sellers) you're getting back $5,000.00 at closing when you sell your home, but have inadvertently forgot to discuss the cost of pro-rated taxes. If the seller is "upside-down" because of this error (on the listing agents behalf) then sometimes the listing agent will ATTEMPT to lean on the buyers agent to help cover the mistake. The miscalculation is a gross error and perfect example of incompetence.

 

 

 

Posted by

 

 
Greg Nino
, Houston area Realtor®.
Helping residential buyers, sellers and tenants 7 days a week.
Available @ 832-298-8555 

RE/MAX Compass (Formerly RE/MAX WHP)

www.GiveMeMyHomesValue.com

www.EverydayHoustonHomes.Com

 

 

The information contained in this blog is believed to be reliable and while every effort is made to assure that the information is as accurate as possible, the author of this blog, and its comments disclaim any implied warranty or representation about it's accuracy, completeness or appropriateness for any particular purpose. All information is copywritten and the property of Greg Nino.  

 

 

 

 

close

Re-Blogged 3 times:

Re-Blogged By Re-Blogged At
  1. Tony and Suzanne Marriott, Associate Brokers 05/10/2016 10:12 PM
  2. Ginger Harper 05/16/2016 05:11 AM
  3. Winston Heverly 08/02/2016 01:42 PM
Topic:
Just for Fun
Location:
Texas

Spam prevention
Show All Comments
Rainmaker
316,290
Evelyn Santiago, Managing Broker Heart Realty Group, Inc.
Heart Realty Group, Inc.. - Oswego, IL
Passionate About Real Estate & Our Clients!

How different brokerages decide to run their business is their business.  As a buyer's agent if you want to be paid a certain % you have the right to obtain the difference from your buyer's.  There is no "set" commisison split...the old days are gone...so is the 50/50 split that everyone "assumes" is  their due/right.  We have control over our business so instead of complaining figure out a way to get paid by asking your "buyer" to put some money into the transaction.  Seller's know what their agents are offering as a co-op since they have to sign off on it.  

 

Yes, I totally agree the leasing side of the business has become a bit of a joke on the co-op offerings.  Why they even bother listing it on the MLS for such low co-ops is interesting to say the least - and not answering to set-up showings or making it difficult to show seems unethical.  They are definitely not doing their clients a good job but inventories are low so I guess they feel justified in acting this way.  Just glad I don't have to rely on leasing for my business.

May 11, 2016 05:06 AM #42
Rainer
20,460
Connie Addison
RE/MAX Sundance Realty II - Fort Myers, FL
Realtor

One other comment about the low co-broke.  I've seen it so many times - the listing agent is the owner of the property and offers 2%.  The irony of that continues to amaze me. 

May 11, 2016 05:31 AM #43
Rainmaker
514,713
Mary Hutchison, SRES, ABR
Better Homes and Gardens Real Estate-Kansas City Homes - Kansas City, MO
Experienced Agent in Kansas City Metro area

Good explaination!  My personal belief is that the commission should be split equally--. Full service justifies a full commission

May 11, 2016 06:34 AM #44
Staff
1,239,843
Bob Stewart
ActiveRain - Mesa, AZ
ActiveRain

Please remember:

All commissions are negotiable. Agents from different companies discussing commissions and using terms like 'normal commission' or other terms that may indicate that commissions are not 100% negotiable could find themselves at odds with collusion and anti competition laws.

If I was holding a real estate license, I would be VERY careful about discussing commission %'s online with other agents. This thread is RIPE for someone from the Department of Justice to drop in make their own interpretations about what is being discussed here.

May 11, 2016 07:49 AM #45
Rainmaker
2,189,769
Elizabeth Weintraub Sacramento Realtor Top 1%
RE/MAX Gold - Sacramento, CA
Put 40 years of experience to work for you

I hear ya, Bob. The Sherman Act. Will not touch that with a 10-foot pole.

I will say that an agent who had asked me to list a property and pay him a referral fee had suggested a very inappropriate way of compensating the buyer's agent, in such a manner that would cause a buyer's agent not to want to work on the listing. This agent was intent on forcing dual agency.  I rejected the listing. I also sent that agent's explicit email to the Bureau of Real Estate.

May 11, 2016 08:48 AM #46
Rainmaker
371,467
James Guido
eXp Realty - San Clemente, CA
REALTOR, Broker Associate, South Orange County CA

I agree whoeheartedly with your take Greg. Thanks for stepping up and sharing what MOST of us are thinking and doing!

May 11, 2016 11:22 AM #47
Rainmaker
1,677,572
Lise Howe
Keller Williams Capital Properties - Washington, DC
Assoc. Broker and Attorney Licensed in DC, MD, VA,

nothing like an abstract discussion of commissions to get the juices flowing on AR

May 11, 2016 12:35 PM #48
Rainmaker
51,156
Brittany Kinsland
MVP Realty - Naples, FL
In the top 10% of REALTORS® in Southwest Florida!

My first blog on Active Rain was about something similar. A greedy agent trying to cut me out of the deal so he didnt have to share commission with me on a lease. I wrote another blog yesterday and touched on my opinion of greed and money karma. I'm staying on the good side of money karma!!!! 

May 11, 2016 01:15 PM #49
Rainer
330,204
Michael Blue
Home Smart Realty West - Encinitas, CA
REALTOR - 760-889-8877, Encinitas/Carlsbad

Commissions should not be discussed here, period! The contract between seller and list agent, is just that. What an agent is paid is negotiable and that's the bottom line. Take what is offered or make other arrangements.

May 11, 2016 02:04 PM #50
Rainer
98,573
Becca Rasmussen
HomeSmart Cherry Creek - Highlands Ranch, CO

In the end, it does not matter one whit what the "split" is between the listing broker and the buyer's broker. If a buyer's broker hasn't already covered their own expected fee with their client and made arrangments to get paid whatever it is they think they're worth -- regardless of the amount being offered by the seller -- then that's their own fault. 

May 11, 2016 10:23 PM #51
Rainmaker
705,051
Richard Bazinet /MBA, CRS, ABR
West USA Realty - Scottsdale, AZ
Phoenix Scottsdale. Sellers, Buyers & Relocations

Evelyn Santiago, Managing Broker Heart Realty Group, Inc. makes an excellent point about the buyer's agent setting how much compensation from your own buyer. I do this for every buyer via buyer broker agreement.

May 11, 2016 11:03 PM #52
Rainer
108,481
Paul Weese
Colorado Group Realty - Steamboat Springs, CO
Steamboat Springs Broker and Outdoor Enthusiast

Excellent post Greg!  You hit a number of facts that drive me crazy, and gave me a couple things to consider.

May 12, 2016 12:11 AM #53
Rainer
17,845
Carl Weisman
Torrance, CA

I don't know Greg, it sounds as though you're admiting that not all Realtors abide by their fuduciary duty, even though that's the number one reason Realtors emplore consumers to hire a Realtor.  What's a consumer to do? How do we know who to trust?

May 12, 2016 12:34 AM #54
Ambassador
2,863,813
Tammy Lankford,
Lane Realty Eatonton, GA Lake Sinclair, Milledgeville, 706-485-9668 - Eatonton, GA
Broker GA Lake Sinclair/Eatonton/Milledgeville

Just wow at the agents willing to discuss "commission splits" although law prohibits it.

May 12, 2016 03:48 AM #55
Rainmaker
734,480
Olga Simoncelli
Veritas Prime, LLC dba Veritas Prime Real Estate - New Fairfield, CT
CONSULTANT, Real Estate Services & Risk Management

We mostly see splits right down the middle, but you bring up good examples of how other reasons creep into the calculations. 

May 12, 2016 07:43 AM #56
Rainmaker
1,086,367
Greg Nino
RE/MAX Compass, formerly RE/MAX WHP - Houston, TX
Houston, Texas

Well said, Olga! My thoughts exactly. 

May 13, 2016 02:04 AM #57
Rainer
20,460
Connie Addison
RE/MAX Sundance Realty II - Fort Myers, FL
Realtor

Well Greg, your post has been most interesting.  Judging by some of the listing agent comments here it seems like you may have "struck a nerve".....and a big one!

May 13, 2016 02:38 AM #58
Rainer
224,265
Ron Climer
Keller Williams Realty Mountain Partners - Tryon, NC

Just a little historical trivia .  Did you know that Tom Watson, the founder of IBM went to jail in 1912 for violation of the Sherman Clayton Anti Ttrust Act?  

May 13, 2016 09:33 AM #59
Rainer
218,480
Greg Mona
Faira Homes Corp - Scottsdale, AZ
Real Estate in the 21st Century!

Hi Greg Nino. I'm a little late to the dance here, but one thing I noticed on the many responses was most were from the standpoint of the listing agent, which makes sense, as that is how your post was structured.  What my two cents worth is has to do with agents who refuse to show a home if the split is less than 3%.  i am astonished at that, as that is pure greed on their part and certainly not putting their buyer first. I can't speak for other markets across the country, but there are definitely agents here who will do that. Sad. 

May 18, 2016 07:55 AM #60
Rainmaker
1,431,210
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

It is all market.  I generally pay the other agent what the market is paying.  If I can get more than that on my side I do.  Generally I do not.  There have been times when I have paid the other agent more than I am getting, depending on the market. 

Jun 16, 2016 08:58 AM #61
Show All Comments

What's the reason you're reporting this blog entry?

Are you sure you want to report this blog entry as spam?

Rainmaker
1,086,367

Greg Nino

Houston, Texas
Providing Real Estate Advice 7 days a week!
*
*
*
*
Spam prevention

Additional Information