In the last installment, we took a look at the listing broker’s fee. I will now dive a little deeper into what the listing contract says about the distribution of those commission dollars through broker cooperation.
One of the reasons many decide to use a Realtor® to sell their home is to get maximum exposure to as many prospective buyers as possible. One way this is accomplished is through cooperation with other brokers. Broker cooperation means that the listing broker will grant access to and the ability for the broker’s buyer to purchase the subject property. Cooperation does not mean compensation but it sure helps.
If there is no offer of compensation to cooperating brokers, the property cannot be listed in the Trend Multi-list system. Trend states the following, “Listing agreements must include the seller’s authorization for you to offer cooperative compensation. It must also include the Listing Broker’s explicit agreement to make an offer of cooperative compensation, and the amount agreed to must be disclosed on the listing. This is due to the very nature of the MLS and its purpose of facilitating the sale of properties and establishing contractual offers of compensation.”
In my opinion, there is a minor conflict here between the Pennsylvania State Real Estate Commission and Trend MLS. One states that no fee is necessary for cooperation and the other states it is necessary to facilitate a transaction and therefore is necessary to be listed in the MLS.
The likelihood is that not many real estate agents are going to take their buyer to see a home where there is no monetary compensation whether it is on the MLS or not. Most home buyers that are working with a real estate agent will have what is known as a buyer, Tenant Contract. The contract states that the buyer will pay their agent a commission for services rendered relating to the purchase of a home or property. The buyer’s commission can be subsidized by the seller as stated in the contract. If a seller is not offering broker compensation or has limited that compensation in some way, the buyer will be paying the difference. Not offering a cooperating broker compensation may add to the buyer’s cost burden for that particular property.
So you see if you are going to use a real estate broker to sell your home it is prudent to consider offering a cooperating broker compensation. No sense of going half way into the pool.
Paragraph 7 of the listing contract lays out how cooperation with other brokers will be handled financially. There are three types of broker representation listed in the contract; subagent, buyer’s agent, and transaction licensee. If you and your listing broker have agreed to a listing commission of 6%, you may consider offering 3% to the cooperating broker. This cooperation does not mean that you will be paying 9%. The commission is still 6%, but your broker will be splitting that evenly with a cooperating broker ensuring you getting the most from your commission dollars.
Knowledge is Power!
Jeffrey C. Hogue
Click links to read the other articles in this series:
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