Variable rate commission must be disclosed in MLS

Reader question: We want to share our variable rate commission experience. Our agent and the listing agent both wrote offers on the property. We are friends with one of the sellers’ children, and he told us the listing agent had agreed to cut his fee if he found the buyer. We informed our agent, and she asked the listing agent if this was the case. The listing agent then revealed he had agreed to cut his fee, and our agent told him that she would reduce the co-op commission to make the costs equal. She also said the fee disclosure should have been on the MLS sheet. The listing agent stated the advice he received was he did not have to disclose it. He also had never heard of this MLS rule before.

We did get the house, but we would not have gotten it if we didn’t have the inside information.

Which agent is correct on the MLS disclosure?

Monty’s answer: Your agent is correct. Variable rate commission rules are in the Realtor Code of Ethics.

There are about 700 different multiple listing services in the U.S. The language they employ to communicate policy varies between MLSes. There are about 80,000 real estate offices in the country. There is no standardized training or standardized rules in the industry, and the law varies from state to state.

The average number of transactions per agent is low, the commissions are substantial, and there is minimal supervision. The nature of the real estate transaction and how the sales develop is very fluid and with near constant negotiation. Both the seller and the buyer want to save costs, and they are looking for ways to accomplish it. Many listing agents will not give up part of the commission with both sides of a sale. Other agents, probably a much smaller number, will offer a concession on their sales commission at the time of listing if they sell the house.

It is likely that agents negotiate a sizable percentage of these commission concessions during the actual negotiation of offers. There are often deadlines written into offers and counter-offers for a variety of reasons.

Will the listing agent call a time-out to go back to one or more agents to tell them of the fee adjustment, and delay a decision, especially when the pay is likely to double?

Richard Montgomery is the author of “House Money - An Insider’s Secrets to Saving Thousands When Richard Montgomery is the author of “House Money - An Insider’s Secrets to Saving Thousands When You Buy or Sell a Home.” He is a real estate industry veteran who advocates industry reform and offers readers unbiased real estate advice. Ask him questions at DearMonty.com