Question Details

Diane Glander, Real Estate Pro in Spring Lake, NJ

Re Commission Splits: As a listing agent, how do compensate buyers agents?

Asked by Diane Glander, Spring Lake, NJ Wed Aug 29, 2007

50/50 or less? I always split 50/50, and am getting tired of agents who consistently give less. I've had numerous closings this year where I assumed since they were giving 2%, they were keeping 2%, only to learn that they were keeping 3%! What are other Trulia agents doing?

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Diane-I completely agree with you and feel your frustration. There is nothing worse then to get to the closing table and realize the other agent is keeping a higher split. The worst part of this is usually the agents that do this aren't the greatest ones to work with anyway. So, after a grueling transaction and feeling like you've done the work of both agents, then you find out they actually made more money. ARRGH!
After this happened, I entertained the thought of doing this on my next listing but I just couldn't. I realized I did not want that agent having the same feelings that I had. These are people that I have to work with on a daily basis and have good relationship with. I refuse to burn bridges over 1%. I guess if you are going to practice this way you better have a crazy good marketing plan and be on your best game to justify it.
Regardless, I will still continue to split 50/50 or more to the buyers rep. Keep in mind, you want agents to show your home and work with you. Creating a bad repuation in your market will do more harm than good.
Web Reference: http://www.amywengerd.com
5 votes Thank Flag Link Wed Aug 29, 2007
You will find that this is common practice amongst "discount" brokers. These brokers end up offering their services to the seller at a discount and pass that discount on to you, in your case it's at 5%. This split should be disclosed under "Buyers Agent" in the MLS, note that there is no Sellers agent break out. There are a million REALTORS who are hungry and these brokers bank on them bringing the buyer to the table. This goes back to a lesson I learned from one of the best in the business, "Listings are the key to longevity in this business."
5 votes Thank Flag Link Wed Aug 29, 2007
This is a somewhat dangerous topic as it could be construed as competitors striving to reach fee structure accord. While I don't believe that to be the case as the question is not what is being charged to the client, I still don't feel comfortable mentioning percentages. I will say that I never offer a buyer's agent less than the norm. That risks stigmatizing the property. You see plenty of threads villifying an agent who refuses to show property where the compensation offered is lower than standard, but the real culpability lies with the listing agent. That agent is the one who knowingly stigmatizes the property in other agents' eyes by offering less than the going rate. A smart agent does not punish the sales force, but fully absorbs any fee reduction.
4 votes Thank Flag Link Wed Aug 29, 2007
Thank you Sylvia. I agree with you totally. I can't spend time worrying about how much someone else gets paid. If the seller does not mind that the listing agent gets more than the buyer's agent, then it should not matter. When I represent the buyer, I usually don't even get to see the seller's closing statement and I therefore typically don't know how much the listing agent's commission is, just like the listing agent does not know what my commission split with my broker is. I just want to get paid what's stated in the MLS and I am happy if nobody wants me to contribute so that the transaction can close. Things could be worse. I could represent a buyer who wants me to buy a refrigerator or washer and dryer as a closing gift.
Web Reference: http://www.go2kw.com
3 votes Thank Flag Link Thu Aug 30, 2007
Ute Ferdig -…, Real Estate Pro in Newcastle, CA
MVP'08
Contact
For Marin, CA; we have very strict MLS rules and we put the commission percentage the buyer agent is getting on MLS and that's what we go by

There are cases where the agents have a typo, for example the total commission is X percent, and the split is 1/2, 1/2; the agent makes a mistake and put X % on MLS, and they will have to give the whole X percent to the selling agent. Not a pretty sight.

We don't usually get to see the split percentage and in a lot of ways, it really does not matter.

If you are willing to either buy or sell a house for a stated commission percentage for your side, and you know that going in, why does it matter how much the other side is getting?

How can we decide if the other side did not do as much or more work than us? Perhaps this house had been on market for a long time? perhaps the listing agent paid for certain expenses which compensate the extra percentage, or perhaps the buyer agent had a walk in and the walk in wanted this house and is buying that specific house.

We don't know a lot of variables behind the scene; and we really don't know which side work more with the buyer or seller he represents. So, for me, perhaps I am naive, but as long as I am happy with the commission I am getting, what the other one gets really does not matter to me.
3 votes Thank Flag Link Thu Aug 30, 2007
Sylvia Barry,…, Real Estate Pro in Novato, CA
MVP'08
Contact
I am what some people may call a "discount" broker, because we take on listings for less than 5-6-7%. However, as the listing agent, we ALWAYS give the buyer's agent half or more than half.
Web Reference: http://www.cityservice.com
3 votes Thank Flag Link Wed Aug 29, 2007
Denise,
There is a place to write in a commission split in your purchase contracts? Considering that the purchase agreement is between a buyer and seller, and that commission is generally determined by separate agreement, that seems highly irregular. In an agreement between two principaIs, how do the agents negotiate using the same document? Is it boiler plate? Sorry for the third degree, but I don't see how that can be legally valid or even in harmony with the code of ethics. I must be misunderstanding something.
2 votes Thank Flag Link Thu Aug 30, 2007
I would never gyp the buyer's agent. Without their buyer, I have no sale, and I appreciate that.

If one side has to sacrifice a bit, as the listing agent I'd be willing to take the hit rather than be stingy with the cooperating commisson.
2 votes Thank Flag Link Wed Aug 29, 2007
Patti Pereyra, Real Estate Pro in Chicago, IL
MVP'08
Contact
Jennifer, good for you. As a consumer, I'd be upset if it wasn't split 50/50 without me being aware of it. I have learned to ask that question. The trend in our area is to split 50/50 but then subtract some arbitrary amount from $100 to $750.

I have to agree with Paul and Carol that as long as the buyer's agent is receiving the norm or above and the additional amount is going to marketing, there is nothing wrong with that.
Ruth
2 votes Thank Flag Link Wed Aug 29, 2007
Ruthless, Other/Just Looking in 60558
MVP'08
Thank you, Jennifer. I thought the questions was clear and in no way an FTC concern.
2 votes Thank Flag Link Wed Aug 29, 2007
Generously.

I always bring this to the table with my sellers so they understand one of the many areas their commission is spent. It infuriates me that so may agents keep cutting the BAC. We have to work a lot harder now with the change in the market and the listing agents won't be getting ANY of their cut if we don't bring buyers to their properties.

We all work hard - let's share the love!
Web Reference: http://JenifersPdxHomes.com
2 votes Thank Flag Link Wed Aug 29, 2007
Diane, I always split 50/50. I did one time skew the split to my benefit on the advise of my broker. I had a listing that I took at 6%. I tried a new tactic in a strong market. I told the seller if we did not have a contract in 3 weeks, I would lower the commission to 5%. I listed it at 2.5% in MLS as a safety measure. We got a contract in 2 1/2 weeks. I asked my broker what I should do, they said to keep it. The other agent was not happy and was sure to let me know! This was when I was very new in the business. The only time I think it would be appropriate is if you were getting a high commission 7% or 8% on the condition that you would provide services at your own cost such as inspections appraisals, home repairs etc. If the buyers agent is getting 3% and you have bargained for and had expenses on the rest that may be something to consider. For me it is now 50/50.
2 votes Thank Flag Link Wed Aug 29, 2007
In a related matter, and specifically in response to Denise Stuart remark, the local rule here in our MLS is that the cooperating broker shall not use the contract, or a counter, to amend the commission offered by the listing broker, nor can you make the submission of an executed offer contingent on the listing broker upping the offered commission.

We don't have a field for the commissions on the Purchase Offer. The commission split IS referenced on the Listing Kontract...but that document is not something that the buyer or their agent would see. I did have a buyers agent ask once for a copy of the listing...their Transaction Coordinator "needed" it for their file. I told her that the transaction coordinator could pound sand.

As an education for the rest of us I would like to hear from some of the agents who do offer less than half of a gross commission as a co-op split and see how that is working out for you in this slow market. I'd also like to hear from the agents who've encountered this practice and see if the agents doing it have a reputation for that and if it diminishes your willingness to transact with them. It's not something that I've heard much of. I can see how the practice would be justifiable in areas where the homes were much cheaper than they are here in San Diego but the sheer size of the commissions makes the need to rearrange commission dollars less of an issue.
1 vote Thank Flag Link Fri Aug 31, 2007
I have not represented a buyer in a sale that has closed yet, as I have said, we have recently begun using buyer agency here. From what I have learned, the buyer's agent accepts what the listing agent is offfering in most cases, however, the EBA can state that the buyer's agent's fee is 3% (for example), which if not covered by the listing agent's compensation (which is, say, 2%), will be put in to the offer. If it is not accepted by the seller, the buyer/client is responsible for the extra percentage.
1 vote Thank Flag Link Fri Aug 31, 2007
I agree with Paul about Denise. The commission is determined at the time of listing. The split however is not. The purchase agreement is about the house. Our in-house attorney feels the purchase agreement is between the buyer and the seller. It is not a place for the buyers agent to negotiate their fee. I tend to agree. Our mls has a commission listed. It is your choice to represent the buyer at this fee or not. Has nothing to do with the sellers or the price they are willing to take for their home! Just my opinion.
Web Reference: http://carriecrowell.com
1 vote Thank Flag Link Fri Aug 31, 2007
In Sacramento California 15 years ago the commission splits werewritten on the last page of the contract after all the principals signatures' so it technically wasn't part of the contract (coming after the signatures)

About ten years ago CAR removed the commission verbiage from the contract itself and created a separate form for commission confirmation. It could be that not all states have caught up with the idea of a separate form.
1 vote Thank Flag Link Thu Aug 30, 2007
Jim Walker, Real Estate Pro in Carmichael, CA
MVP'08
Contact
I always split them 50-50%. Now that the market has changed though, if I take a short commission I will offer 3% to the selling agent. Some agents here don't put your home into the mix if it is below 3%. The only exception would be if the listing was a slam dunk, then I'd split it in half.
1 vote Thank Flag Link Wed Aug 29, 2007
boy there are some shady agents, huh?

as a listing agent i figure i can cut my own throat all i want but try to compensate the buyers agent at 3% or more...i have 4% on four listings right now and one with a 5% ($57,000!) because we need that sold NOW! the short sale commissions get clubbed by the lender so they get split 50/50.

the days of stiffing the buyers agents are over in this area...we can't get the deals to the table so i am sure not going to hobble my clients by cheaping out on the buyers agents. that goes for the whole deal......i don't get my drawers in a twist about title and escrow like some agents
1 vote Thank Flag Link Wed Aug 29, 2007
In my world the buyer gets 3%. nothing more, nothing less.

The rest is up to me.

I also have a understanding with all my listings, that when I sit their homes open I can eat their food and do my laundry. They better have cable.
1 vote Thank Flag Link Wed Aug 29, 2007
Mr.P, Other/Just Looking in Arizona
MVP'08
Ruth, In NJ, as agents, we can split the commissions any way we want, but there is a clause in the listing agreement that explains the way the split will be so that the homeowner is aware. Any deductions we take are usually MLS fees and are minimal.
1 vote Thank Flag Link Wed Aug 29, 2007
Barry... this is about distribution, not actual fees. I think the heart of Diane's question is whether we are doing our listing clients a disservice when we don't compensate buyer's agents fairly. This goes to marketing, reputation, and karma - but not price fixing. But you are wise to stay clear of any conversation pertaining to actual commission rates.
1 vote Thank Flag Link Wed Aug 29, 2007
J R,
The fee split is on the HUD. It shows the amount going to each brokerage. I have heard of agents dealing with a relo company where you can give as much as 35% of your commission in fees skewing the agents percentages to cover their costs. I am not in favor of that either. do a lot of relo listing, so I am speaking from knowledge. Relo is a lot more paper work and less pay!
1 vote Thank Flag Link Wed Aug 29, 2007
I am licensed in 2 states, and in one of those states, this uneven commission split is becoming more and more common. However, I am ONLY speaking in regards to commissions of 7% or higher. The listing company is taking a 3% commission plus a 1% marketing fee, and the buyer's agent is taking 3%. So, in the MLS it reads as a 6% total commission and on the listing contract, there is a 1% marketing fee to the listing company. The buyers agent becomes aware of the 1% marketing fee when they see it on the the Hud-1 at the closing.

While this seems to work quite well in our area, I would be very upset if I were a buyer's agent and received anything less than 3% and I haven't seen that happen whenever the split is different.

While I know that everyone may not agree with the 1% marketing fee, I admit that I only felt justified in charging it when my broker started their own TV show and charging me a high fee to advertise my listings. That 1% fee is usually completely spent in the first 30 days of marketing.
1 vote Thank Flag Link Wed Aug 29, 2007
Carrie, how did the other agent know what the split was? Here, a separate check is written to each brokerage, and the buyer, his/her attorney, and the other agent never see the other check amount.

And to answer the question, I always split it 50/50, although there agents in my area who split a 5% at 3/2 in their favor. The MLS only has the selling commission not the listing side. I have gotten a 50/50 split however by speaking up.
1 vote Thank Flag Link Wed Aug 29, 2007
I obviously need to clarify my answer :-)
I do not do this but have heard of Realtors that do.
I have not been in the situation to have to do this.
Denise Stuart
Coldwell Banker
The Real Estate People
http://www.realeasy4u.com
0 votes Thank Flag Link Fri Aug 31, 2007
Exactly, Ruth, and this is how it was presented to me in both my CBR accredition class and in the buyer ed continuing ed and other classes I've taken. According to them, it is rare that the buyer has to come up with the extra amount, because you can put it into the offer. It must be worded in such a way that it is not considered renegotiating the commission in the offer, much like a buyer would add an amount to be used to closing costs or to cover a c.o. issues or missing appliances. And there is an opinion that it is NOT the seller who pays the fee, it is the buyer, because they buyer is the one who brings all the money and is paying for the house with monies that include the fee.
0 votes Thank Flag Link Fri Aug 31, 2007
I've seen what JR is talking about. In our area it's optional. The benefit of this and how you sell it to the sellers is that FSBO, foreclosures and other properties come into play. I think you have MORE credibility doing it this way than pretending that your services are "free" as so many agents have said because the seller is paying the commission. It also can benefit the buyer if a property is offering an agent bonus or higher co-broke. Your buyers agent with consumer agreement is for a fixed percentage regardless of what the seller is paying.
Ruth
0 votes Thank Flag Link Fri Aug 31, 2007
Ruthless, Other/Just Looking in 60558
MVP'08
I think it is so important to split the commission 50/50, so that is what I do with all of my listings. In this market, it is an effective marketing tool to offer a competitive fee to the buyer(s) agent. This combined with pricing the home correctly, as well as staging is crucial in getting a home sold these days.
0 votes Thank Flag Link Fri Aug 31, 2007
For the answer to this question doesn't a buyers agent have on the contract the commission split place to write in? I know my contracts have this. If the market slows down and homes are on the market for an extended amount of time. You could always write in the commission of 3%, this will shine light on the Realtor and the Seller of who exactly gets the lower commission and that the Buyers agent has not agreed to taking the lower pay. IF the home has been on the market for some time, do you think the seller may rethink this?
And in some cases the Seller may not even realize that they have signed off the Buyers agent to take the lower commission.
Even though the Real Estate slow down will effect all of us one way or the other, I do think it's a good thing, it will make less seasoned Realtors to take stock and maybe classes to sharpen their skills and us who are more seasoned Realtors can get back on track and take care of our clients needs just as we always have.
Hope this helps
Denise Stuart
Coldwell Banker
The Real Estate People
0 votes Thank Flag Link Thu Aug 30, 2007
I think every situation is different. I think it's great that Buy Side was able to qualify the buyer so well. Perhaps it is standard operating procedure there for a buyer to have all that in place before viewing a home. In my area, if I qualified a buyer to that degree, they might comply and they might simply move on to another agent who would just take them wherever they wanted to go. I already related a story about my experience with a homeowner rather than a listing agent, where the homeowner divulged their financial position to my customer. There is room in the world for every type of brokerage, one size does not fit all.
0 votes Thank Flag Link Thu Aug 30, 2007
Because of this question, I asked a new questions, "Who works harder, the listing agent or the buyers agent? Why?" That lead to very good responses: http://www.trulia.com/voices/Home_Buying/Who_works_harder_th…
After reading all of those responses as well as a variety of other unrelated Q&As, I went to bed. When I woke up, I wrote the following. I apologize for going off topic but as I say, one issue leads to another.
**********
It's interesting how all these threads relate and how they lead to other conversations. It's wonderful to see agents unite on issues and other times debate. It's curious to see differing responses based on regional facts verses personal opinions. But best of all is being enlightened when you are wrong.

I was called devilish for asking this question. I admitted I was stirring the pot. I questioned myself if I had an ulterior motive. And I was enlightened for being wrong. I was wrong in the fact that I wasn't stirring the pot and that the agents united on their responses. The little white angel Ruth sitting on my right shoulder will tell you my ulterior motive was to unite the agents after reading the thread on commission splits. My mind works in a curious way in that I know I am getting at something but I don't know what it is yet. It could be to help you clarify to clients why you earn your commission or it could be to widen your perspective of the other side of your own case. Just as clients might only focus on the price aspect of a contract, do you have tunnel vision when you are acting in the different roles of buyer vs listing agent? (Rhetorical question to ask yourself.)

The little red devil Ruth sitting on my left shoulder apparently had a different ulterior motive in asking this question. First, I must give some background. When I bought the house in Oak Park, I used BuySide Realty (a commission rebate company similar to RedFin). I had a signed Buyer's Agent contract with my favorite trusted agent in the La Grange area. She knew we were looking all over the Chicagoland area and our agreement both written and understood was for the local area. When a local offer was rejected, we moved on to our second choice an Oak Park home. BuySide Realty not only asked if I had worked with any agents, but they required that I fax my agreement and that my agent verify that she was not the procuring cause for the property. They then required my bank's pre-approval letter and contacted the loan officer for verification. Once all the "i"s were dotted and the "t"s crossed, BuySide contacted the listing agent to let us see the home. We were quite shocked to be greeted by the homeowner and not the listing agent who was from Naperville (twice as far as La Grange from Oak Park). We used the homeowner to gather information that we would not have discovered if the agent had been there.

In the interest of trying to keep this from being a lengthy case study, let me cut to the chase. BuySide Realty DID all the HARD WORK that agents protest about in posts such as the guy who asked for a kickback or the many "should I have a buyers agent?" questions. The listing agent on the other hand made the seller or the seller's attorney do all the work. Since we had never met or spoken with the listing agent, we just assumed that he was a "discounter" or "flat fee listing" (even though he's with a top National full-service franchise office) and that this was the arrangement he had with the seller. Imagine our shock when the HUD statement showed he was collecting MORE than the NORM for FULL service and the co-broke was for the norm. I don't know if it was out of curiosity or suspicion but looked up his license. He had previously had a disciplinary action against him. When the rehab was complete, the former owners of twenty years came to an Open House. I politely asked why they used an out of town agent. She said she interviewed several local agents and didn't have a good feel about them. A friend recommended this Naperville agent to them.

The MORAL of the story:
Don't assume a discount service doesn't pull their own weight in their responsibilities and don't assume an agent is going to do everything that is implied by paying a "full service" commission.

Ruth
Web Reference: http://www.oak-park-il.com
0 votes Thank Flag Link Thu Aug 30, 2007
Ruthless, Other/Just Looking in 60558
MVP'08
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