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REAL ETHICS by Steve Stazel | Dec
2005 | Index of all Real Ethics columns
Differences between cooperation and compensation
Can you, as the selling broker, negotiate a higher co-op commission with the listing broker than what the listing broker has publisher in the MLS? The answer is yes.
The National Association of REALTORS® Standard of Practice 3-1 states that “REALTORS® acting as exclusive agents or brokers of sellers/landlords establish the terms and conditions of offers to cooperate. Unless expressly indicated in offers to cooperate, cooperating brokers may not assume that the offer of cooperation includes an offer of compensation. Terms of compensation, if any, shall be ascertained by cooperating brokers before beginning efforts to accept the offer of cooperation.”
The above paragraph may need to be discussed. There is a difference between the words “cooperation” and “compensation.” Cooperation means the listing broker will accept offers from other brokers. Compensation means the listing broker will pay an amount of money to whoever is the procuring cause—usually the broker who brings the offer.
Sometimes we don’t realize this difference because we have been “spoiled” by MLS. When we submit our listings to MLS, we are offering “cooperation” to all other members of the MLS. On the MLS input sheet is a field for us to indicate the “compensation” we are offering. If you should ever show a property which is not in the MLS be sure you know prior to showing the property how much “compensation” the listing broker is offering.
Remember the last sentence of Standard of Practice 3-1 which states in essence that a selling broker may contact a listing broker to negotiate a higher (or lower) co-op commission. This must be done PRIOR to showing the property. (before beginning efforts to accept the offer of cooperation)
When the co-op commission is listed in the MLS, there is no need to insert the co-op commission into the contract. If a co-op commission is entered into the contract it, may be a violation of Standard of Practice 16-16, which states that “REALTORS® acting as subagents or buyer/tenant representatives or brokers, shall not use the terms of an offer to purchase/lease to attempt to modify the listing broker’s offer of compensation to subagents or buyer/tenant representatives or brokers nor make the submission of an executed offer to purchase/lease contingent on the listing broker’s agreement to modify the offer of compensation.”
Each month, the Aurora Association of REALTORSŪ Web site features Real Ethics,
a column by Steve Stazel devoted to explaining Code of
Ethics issues for members. A REALTORŪ since 1974, Stazel is a Professional Standards
instructor and senior Ethics
instructor for the Colorado Association of REALTORSŪ.
If you have an ethical concern or an issue you would like
to see addressed, please call Stazel at (303) 773-3333 or e-mail him at
stazels@msn.com. The comments of this article reflect the understanding and
opinions of the author and do not represent an official expression of policy by the National Association
of REALTORSŪ.
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