Before I get deep into this blog, let me be clear. The topic of commission is sensitive on many levels and in some case a violation. I will be discussing a specific situation and not using the actual numbers to avoid any issues. For this scenario just consider things in alphabetical with “A” being low and “Z” high.
I recently visited a for sale by owner (FSBO). It's was in my neighborhood and just what a friend of mine was looking for. I called the sign and spoke with the sellers who actually knew me via my marketing in the neighborhood. We visited with my friend and they explained that they would have used me to sell but they were obligated to use another agency that the builder of their new home required to accept their sale of home contingency. They went on to say that the agency would be offering a Z% commission to the buyers agent in exchange for getting the commission from the new home being built. This is not uncommon for new builders to have an arrangement with other offices. As it turned out, my friend loved the place but needed to get his wife into the home in two weeks. During that two weeks, the seller went from FSBO to listed with the agency. What was odd, was that when I set up the appointment, I noticed the commission had been reduced to A%, The showing instructions were to call the seller directly, so I did. I casually mentioned that I wish I had been able to get this under contract prior before the commission amount changed to A%. The seller asked what that meant. I explained that the rate of Z% had changed since we last spoke. This was a surprise to him as he had agreed in the contract to Z%. Without the sellers consent, the brokerage took it upon themselves to make financial changes to the agreement which benefitted them directly. Instead of working for free as agreed upon, they changed the % to take a portion. Now, to be clear, I had planned to show the home no matter what, as that is what is best for my client. Being a listing agent as well, I know that some agents will NOT show homes at a lower than Z% commission. That too is wrong, and believe it or not I have been scolded by a few agents when I list a lower percentage.
So what is my point? Well, as a consumer and customer, you have rights in the contract and sadly many sellers are unaware that agents are taking liberties with your listing agreement without your consent. Another one of these items would be tacking on an “admin fee” that gets deducted from the buyers agents commission and is not disclosed to the seller. For example, the advertised compensation in the MLS to the buyers agent is Z% minus $299, but the seller thinks they are being competitive at Z% in full. This deduction is usually an office fee the agent is responsible for but they instead pass it off to the buyers agent as a deduction. Most buyers agents already have a similar fee they have to charge, so in essence, they are getting hit twice. This deters some agents from showing the home as well.
When you list, it's important that you know the details and then follow up to ensure you are getting what was agreed to. If you do notice inconsistencies, you should contact the agents broker directly to get it fixed. Many offices allow agents to input their own listings which can result in errors due to either lack of experience or in some cases, on purpose with the hope no one will notice. Always ask for s copy of your MLS Broker report that shows the fees you agreed to compensate other offices. To be fair, most agents get it right, but you can always tell when a agent doesn't know what they are doing. These listings are the ones you see that are missing info, bad photos and similar. When looking to hire someone to list your home, ask to see current online versions of their listings or recent ones. The paper reports don't show the whole picture. It's as easy as a few clicks for an agent to send a link to their prior listings. Review them as a buyer would and then make a more educated decision. The wrong agent can cost you thousands of dollars and also have your listing stay on the market far too long!