|
REAL ETHICS by Steve Stazel | November
2006 | Index of all Real Ethics columns
Buyer agency vs. co-op commission
Real estate commission disputes are rapidly rising. For the most part, the reason is that some of our real estate colleagues are confused in thinking that the buyer agency commission and the co-op commission are the same.
The buyer agency commission exists because of an agreement between the buyer and the broker. The co-op commission exists because of an offer the listing broker makes to pay whoever is the procuring cause.
The confusion comes from the fact that in most situations, the buyer agent is paid the co-op commission and receipt of the co-op commission satisfies the buyer agency commission agreement. In a perfect world this would be how it would work, but as we know, not everything is as simple as it appears – especially in a real estate transaction.
The following example will give you a clearer picture of why the buyer agency commission and the co-op commission are not the same.
In this example, Buyer A has a buyer agency agreement with REALTOR® B. Buyer A is on a Sunday drive when she sees an open house. It looks interesting from the outside, so she goes in.
The listing broker, REALTOR® C, asks Buyer A whether she is working with another broker, and she replies that she is not. REALTOR® C shows the house to Buyer A, but this is not the house for her. However, REALTOR® C knows of a house (listed with another broker) which Buyer A might like and shows the house to Buyer A. Buyer A loves the house, and writes a contract through REALTOR® C; the closing occurs in five weeks.
So who gets paid by whom in this situation? It may look confusing, but the answer is relatively simple.
In this situation, we have two commissions which have been agreed to be paid. One is between the listing broker of the house that was sold and REALTOR® C (co-op agreement). REALTOR® C will receive the co-op commission. The second commission agreement to be honored is the agreement between Buyer A and REALTOR® B (the buyer agency agreement). Buyer A is obligated to pay REALTOR® B as a result of the Buyer Agency agreement. Remember, REALTOR® B must look to Buyer A, not REALTOR® C or the listing broker for their commission.
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.
|
