Looking for some input as to what other agents feelings are regarding uneven commission splits. I recently had a listing agreement with a 6% commission and advertised at 2.5% split on MLS. It is approved at 6% and sent HUD over to buyer and agent is making a fuss because he feels this is unfair. Mind you its only a 25k property but just curious as what other agents opinions are as he is claiming that I am being unethical.
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What I really find unethical are the agents who advertise 3.5 % or 4% to the buyer's agent for their short sale listing, knowing they are not gonna pay that! It's a classic example of bait and switch.
Your example is hardly unethical.
Report them to the board! I haven't had any lender's reduce commissions in years, there's no reason to have a reduction. If the listing agent says the bank reduced it then ask for proof in writing.
I totally agree. I pay what I advertise...
I represent both sellers and buyers. On the listing side, I always split 50/50 what the bank provides. One of my pet peeves are listing agents who offer a flat 2.5% knowing that most banks will pay 6% total. I call them on it every time to make them explain it. I always tell them they are free to offer whatever they like on the MLS but as a buyers agent that irritates me and many other buyers agents as well. They usually start rambling off on have to pay third party processors, etc to which I respond "I have no problem with that, but if you want to pay someone to do your work, take it out of your split, not mine." I then am very careful to clarify they are free to offer whatever they like but I just wanted to express my opinion. I had one listing agent tell me the lower split should not come before the best interests of my clients. I told her I have a buyer-broker where the buyer agrees to pay me a certain % (often 3%) and in cases like this, I always tell my clients that the listing agent is paying someone else to do their work and is passing that cost on to you with a .5% fee. If they are willing to pay it then great. If not, we move on. When this particular agent questioned me not putting my clients' interest first, I called her on the same thing for her seller. I asked her "Does your seller know you are lowering the Buyer agent commission to pay for your processing costs? How is that putting your sellers' interests first by repelling potential buyers?" If the listing agent offers a 50/50 split and the bank approves less than my buyer-broker %, then I don't force my client to pay it but will bring it up to them.
Scott -
It's fascinating to hear how agents, both Listing and Selling, handle this issue in different parts of the country. But your question "Does your seller know you are lowering the Buyer agent commission to pay for your processing costs?...." is interesting because in my State, the split is clearly outlined in the Listing Agreement the Seller signs. In our State the total Compensation is specified in Paragraph 4/A and is followed in Paragraph 4/D by the specific Co-Op amount being offered to the Selling Broker. So there should be no surprise to the Seller that the Listing Agent is being paid more that the Selling Agent.
I work similar to others on this site. Obviously, the Seller and I negotiate the Total Listing Commission and then determine together how much of that total will be paid to the Selling / Coop agent. Since, in my Brokerage, no one double-ends any transactions, Buyer agents from other brokerages are very important to us. Is is always an equal split? No, as 100% of my business is short sales and I do all the negotiations myself. If I get more than what I expect from a lender, do I pay the coop agent more than the advertised amount - sometimes. If the same agent brings successful buyers over and over again. But that's my right as the Broker who owns the Listing. I can't reduce the coop amount unless the lender reduces it, but I can certainly pay more if I should so elect as long as there is no contingency for getting that extra commission. It has always been a surprise to the coop Broker at the end of the transaction.
Bottom line, the Seller always knows up front when the split is different for each side.
Much success in 2012 !
Hi Thom. I am in Utah. In our listing agreements ONLY the overall % is in writing. Of course, I always have a discussion with the seller as to how that is split out. I'm not sure how other listing agents do it. I have a very strong suspicion though that there is no discussion of lower % being offered to the buyers agent. On my listings I always offer 3% and our state let's us add specific verbiage:
"This is a short sale. If Seller's lender, as a condition of approving the sale, requires a reduction in the total commission agreed to by Seller in the Listing Agreement, any such reduction shall be divided 50/50 between the Seller's and Buyer's Broker"
Easy, clear, understandable.
I have no problem with the listing agent offering 2.5% or whatever the % may be but I always make them explain to me why, if for no other reason than to help them understand that working with buyers entails a LOT of work as well. I had one client I showed about 35 homes and put in about 7 different offers (REO's and short sales). We got outbid, short sales cancelled, etc etc. Every bad luck circumstance possible seemed to happen with these buyers. Listing agents need to understand that we are trying to keep the buyers locked into their property and close the transaction and that we potentially have put a lot of time and effort and $$ as well driving these buyers around before settling on their property.
Bottom line is:
Listing agents can offer whatever they want. Buyers agents have an agreement with the buyers. In my opinion the environment should be optimal for the interests of both parties to align and get the property sold.
Hi Scott -
It's unfortunate your Listing Agreements don't have everything spelled out, it makes it so much easier - maybe you need to work on your State Association to get your forms changed :-)
That said, we use similar verbiage to define short sale reduction in compensation and how it will be reduced if so. I agree, I think there are many agents / brokers who make the decision without consulting the Seller and that's very unfortunate because it hurts everyone and leaves a bad taste.
I also believe both Listing Agents and Selling / Buyer agents work equally as hard as each other. Selling Agents show and write on 35 - 50 houses, Listing Agents might have to process 5 - 25 offers only to have Buyers walk-away again and again. (I have a file right now, working it for 3 years and the 9th buyer just walked away) it's not fun for any of us!
Like I said earlier, it's great to get perspectives from around the USA and develop a great network of folks we can refer to and from.
Nice to meet you and again, great success in 2012,
Thom
p.s. I lived in SLC in '93-'94 near Little Cottonwood, great place.....!
Well said Thom :)
Thom, our listing agreements also state how much the co op agent is to get. I do question how many agents actually have one % on the listing agreement and a different on the MLS.
I am a fan of paying a 50/50 split of the total commission and have on occasion taken lower % commissions on normal sales and have not cut the buyer agent side.
I have been on the side of the listing agent getting more and the only time that it irritated me was on an REO sale in which the listing agent advertised 2% in MLS and kept 4 % for himself. When I questioned it, I found out that the lender instructed the listing agent to split 50/50. If I had not questioned it, I would have been paid less...
I offer a flat fee instead of a lousy split. Co-broke's fault for not looking at the split prior to drafting.
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