|
REAL ETHICS by Steve Stazel | November 2011 | Index of all Real Ethics columns
Buyer agency commission vs. co-op commission (don't get them confused)
Real Estate Commission disputes are rapidly rising and for the most part it is because 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. Buyer A goes into the open house. In response to listing broker's question of "Are you working with another broker?" Buyer A says "No." The listing broker (REALTOR® C) shows the house to Buyer A. This is not the house for Buyer A. However, REALTOR® C knows of a house (listed with another broker) which Buyer A might like and shows the house to Buyer A. She loves the house, writes a contract through REALTOR® C, and a closing occurs in five weeks.
Who gets paid by whom in this situation? It 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 his or her commission.
Each month, the Aurora Outlook features RealEthics, a column by Steve Stazel devoted to explaining Code of Ethics issues for members. The comments stated in this article are those of the author and do not necessarily represent the views of the National Association of REALTORS®, the Colorado Association of REALTORS® or the Aurora Association of REALTORS®. Ultimately, a hearing panel of the Professional Standards Committee determines whether a violation of the Code of Ethics has occurred on a case-by-case basis. These comments should not serve as the foundation of any ethics complaint, arbitration request or response.
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.
|
