You’re a real estate agent curious about the rules around changing buyer’s agent commissions. Well, you’ve come to the right place! Grab a cup of coffee and let me walk you through everything you need to know about this somewhat complex topic.
I’ll shed light on the reasons a listing broker might tweak the offer, limitations that exist, how it impacts you as the cooperating broker, and most importantly – the business relationship dynamics to be aware of.
Ready? Let’s dive in!
Why Would a Listing Broker Change the Buyer’s Agent Commission?
As you know, real estate is complex and dynamic. Listing brokers generally establish the buyer’s agent commission when they first list a home for sale. But occasionally, they need to change it down the road. There are a few common reasons this happens:
Market shifts. Imagine if mortgage rates suddenly spike and buyer demand plummets in your area. Many listing brokers would likely drop the buyer’s agent commission to motivate more showings. The opposite can happen too – commissions might increase if supply is extremely low.
Boost competitiveness. If a home has been sitting on the market for months with no offers, the listing broker may decide to sweeten the pot and raise the commission to attract more buyers. This incentivizes you to prioritize it with clients.
Cover increased expenses. Perhaps the seller decides they want fancy professional photography or an additional open house. The listing broker might dip into the commission to cover these extra costs if the contract allows.
Valid business purposes. There could be other reasonable financial, strategic, or logistical factors on the listing broker’s end. The key is they need to make the change in good faith.
Limitations Around Changing Buyer’s Agent Commissions
Now, listing brokers can’t just wake up one day and drastically drop the commission with no heads up. There are ethical limitations in place to protect you:
Communication is essential. Listing brokers must provide prompt, written notification about any commission changes before you submit an offer. This ensures you can factor it into negotiations. Silent changes or notifications after the fact are strictly prohibited.
Marketing must reflect accurate info. All MLS listings, property websites, and other advertising must immediately be updated to showcase current commission rates. This helps avoid confusion or assumptions during showings.
Cannot be discriminatory. Commissions can never be adjusted based on race, gender, religion, etc. This violates fair housing laws with severe penalties. Changes must apply evenly across the board.
Must act in good faith. There does not necessarily need to be a “valid” reason for altering commission. But listing brokers cannot make changes to intentionally sabotage, manipulate or abuse other parties.
How Should You Respond as the Cooperating Broker?
So the big question – how should you react if a listing broker drops or raises the buyer’s agent commission on a property you’re actively showing? You have a few options:
Accept the new terms. If the new commission rate still appropriately compensates you for your efforts, you may opt to continue business as usual. No further action needed.
Negotiate a better deal. You could certainly try negotiating a higher percentage or bonus by highlighting the value you’ll bring as the buyer’s agent. Never hurts to ask!
Walk away. Alternatively, you can cut ties and stop showing the listing altogether if the new commission isn’t enticing enough. Harsh, but within your rights.
File a complaint. If you have reason to believe the change was unethical – discriminatory, lack of notice, etc. – you may file a formal grievance to investigate.
Pursue legal action. In rare cases where you feel seriously wronged, you could speak with an attorney about options beyond the MLS or licensing board.
My advice? Don’t take drastic actions right off the bat. Have an open conversation with the listing broker first. There may be a reasonable explanation or room to negotiate terms both parties can happily live with.
How Commission Changes Impact Broker Relationships
Here’s where things get tricky – balancing commissions with preserving business relationships.
Let’s say you have a long track record of successfully partnering with a listing broker. You trust each other and work well together. But suddenly they slash commissions on all new listings by 20% with no explanation.
How would you feel? Are you still willing to collaborate moving forward?
Transparency matters. The listing broker should be upfront about exactly why commissions needed to change and the thought process involved. Did market dynamics shift? Are they covering increased expenses? This context goes a long way.
Emphasize communication. Perhaps commissions dropped temporarily because the seller demanded it or faced financial constraints. Keeping an open dialogue allows the listing broker to provide rationale and sets expectations that the decrease is short-term.
Willingness to negotiate. If possible, the listing broker should indicate flexibility to revisit standard commission splitting models once conditions improve. Knowing there is room to eventually get back to more favorable terms can ease cooperation.
Move quickly. The sooner notice is given on commission changes, the better. Last minute notifications frustrate cooperating brokers who have already invested significant time and resources into a listing.
Follow ethical practices. No one likes feeling manipulated or stonewalled. Ensuring transparency and fair dealing preserves trust between brokers over the long haul.
### Times When Commission Changes Are Permitted vs. Prohibited
Let’s look at examples of times when a listing broker generally has the green light to adjust commissions versus when ethical or legal boundaries get crossed:
**Permitted Example**
Stu was receiving lots of feedback that his listed property was overpriced for the slowing market. He promptly notified the buyer’s agent that he needs to drop commissions by 0.5% across all listings to leave more room for price negotiations. No issues here.
**Prohibited Example**
Leslie waited until a buyer’s agent submitted a full price offer on her listing, then called to say she had decided two months prior to cut the commission but neglected to inform anyone. This lack of timely notification violates clear conduct standards. I hope this breakdown gives you greater clarity around the flexible yet ethical parameters for listing brokers changing buyer agent commissions.
Key Takeaways: When Commissions Can Shift
To quickly recap everything we just covered:
- Listing brokers maintain flexibility to tweak the cooperating commission if reasonable justification exists, such as market changes.
- Clear communication standards require prompt written disclosure of any adjustments prior to offer submission.
- Cooperating brokers can accept, negotiate, or refuse the new terms based on their own business priorities.
- While legally permitted in most cases, changes impact trust and collaboration. Listing brokers should proceed cautiously, transparently, and be willing to negotiate win-win solutions.
- Violating conduct rules around commissions – discriminatory changes, lack of notice, etc. – exposes listing brokers to professional complaints or consequences.
And there you have it – a comprehensive rundown of when and how listing brokers can modify the buyer’s agent commission! Hopefully you feel armed with greater knowledge to navigate this nuanced aspect of real estate transactions. Let me know if any other questions pop up!