Don’t Fall for Commission Reduction Strategies

By
Commercial Real Estate Agent with RE/MAX West Realty Inc., Brokerage (Toronto)

Don’t Fall for Commission Reduction Strategies

Question:

I have a Listing and I just got a call from a Buyer agent who is presenting an offer and would like to reduce the commission substantially. We are aware we will be in multiple offer situation shortly and need to know if:

A)  we have to disclose the agent’s reduction, and

B)    by how much?

 

It’s another Brokerage firm, so not in-house. What would you advise the Seller due to multiple offers, “no commission reduction” or go along with it?

Answer:

The commission reduction strategy is a technique used by some Buyers’ agents to intimidate and bully the Listing Agent. Don’t fall for it. Don’t reduce it. Don’t force your other interested Buyers’ agents to have that “commission discussion” with their Buyers (or, they won’t be back next week to bid on your next deal).

It’s your reputation which is at stake.

The proper strategy is to hold firm, there’s no reduction. If they don’t want to take the cooperating brokerage’s commission, that’s fine, you’ll take it. The reason is that that will keep the playing field level for everyone. The Seller pays the same commission, no matter who it is.

If they are so concerned about getting money to help their Buyer, that has nothing to do with you. Let them:

  •         get the full amount,
  •         remit the HST,
  •         pay their Brokerage,
  •         pay their income tax, and
  •         with what is leftover, give it all, if they like to their Buyer.

That’s not your business.

Let’s suppose, you do agree to a commission reduction, you have to advise the others that 1) there is a commission reduction, and 2) the amount of that reduction.

In a multiple Offer scenario, you also have to let everyone know whether there is an Offer from someone from your own Brokerage.

It’s not just commission reductions which have to be disclosed, it’s also terms which may affect whether an Offer is accepted. So, if there is an unrepresented Buyer to whom commission cannot be paid, as the Listing Agent you would be “secretly” cheering for this particular Buyer above all others; that would need to be disclosed.

Brian Madigan LL.B., Broker

www.iSourceRealEstate.com

close

This entry hasn't been re-blogged:

Re-Blogged By Re-Blogged At
Topic:
Home Buying
Location:
Ontario

Post a Comment
Spam prevention
Spam prevention
Show All Comments
Rainmaker
406,595
Gwen Banta
Sotheby's International Realty - Los Angeles, CA

I agree! I was taught from day one of my career that it is totally out-of-line to ask another agent to discount their commission. In my opinion, that is bad for the entire industry!

Mar 02, 2020 01:48 PM #1
Rainmaker
406,595
Gwen Banta
Sotheby's International Realty - Los Angeles, CA

Incidentally, if an agent volunteers to reduce their commission, that is different. We also must remember that agents get different splits from their individual companies and may be taking home much less than we think.

Mar 02, 2020 01:49 PM #2
Rainmaker
1,545,006
Brian Madigan
RE/MAX West Realty Inc., Brokerage (Toronto) - Toronto, ON
LL.B., Broker

In Ontario, if one agent reduces their commission in a multiple Offer situation, then this information must be passed on to everyone else. However, that's unfair. So, just let that Agent deal with their own client.

 

Mar 05, 2020 12:44 PM #3
Post a Comment
Spam prevention
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
1,545,006

Brian Madigan

LL.B., Broker
Ask me a question
*
*
*
*
Spam prevention

Additional Information