Austin TX Real Estate - Hill Country Austin Lakeway Homes for Sale: Contracts are Between Buyer and Seller. Don't Negotiate my Commission!

Contracts are Between Buyer and Seller. Don't Negotiate my Commission!

In a real estate transaction, the contract is between the buyer and the seller. The buyer's agent and seller's agent act as representatives for their clients. The agents help facilitate the transaction so both parties make it to closing.

The seller's agent works out the commission before listing the property for sale. That's a contract between that seller and that agent/brokerage.  Within that listing agreement, the listing agent discloses what he will pay to a cooperating agent who brings a buyer to the house. This amount is put into the MLS. The MLS is a contract between agents to cooperate and pay the advertised fee.

real estate commission money mlsIf a buyer's agent doesn't like the fee offered, prior to showing the property and prior to writing an offer on a property, the buyer's agent may contact the listing agent and try to negotiate the fee. Sometimes it works, sometimes it doesn't. However, once an offer is submitted on the property, it is against the Code of Ethics to use the commission offered in the MLS as a negotiating tactic to increase or decrease the amount!!

This means, if the seller doesn't like the offer that the buyer submitted, the listing agent cannot change the commission being offered to appease his client. Granted, sellers and buyers are not held to the Code of Ethics like Realtors are, but when it's suggested to counter with a commission reduction, the listing agent should tell his client that he can't do that.

I was just in this situation. I told my buyer what the counter was and how they wanted to take my commission. She was angry. She said, "But you've worked so hard for me, don't let them take your money!" In the counter back, I told the listing agent that first, it was against the COE for him to even ask me to reduce, and second, that my buyer adamantly told me not to reduce.

Bottomline is that the contract is between the buyer and the seller. The agents are doing a job and should get paid for the job they're doing. As the agents involved, we do not partake in any losses the sellers have made on the house, nor do we enjoy any profit when the sellers make a killing. Pay us for the work we've done and honor the contract you've signed!


**Are You Packed Yet?**

 

Donna Harris, REALTOR®
Donna Homes, Owner

www.DonnaHomes.com donna harris donna homes austin texas real estate agent

austintexas-homesforsale.com
Donna@DonnaHomes.com

 

Austin TX Real Estate and the surrounding areas of Lakeway, Bee Cave, West Lake Hills, Cedar Park, Round Rock, Steiner Ranch, Spicewood, Circle C, and everywhere in between… Hill Country Austin TX Real Estateand beyond. Whether you’re buying or selling an Austin TX Home, I’ll be with you every step of the way.

 

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Copyright©2014 By Donna Harris, All Rights Reserved. You may re-blog with links back to this post.
*Contracts are Between Buyer and Seller. Don't Negotiate my Commission!* was first published on donnahomesblog.com.

 

 

Comment balloon 59 commentsDonna Harris • September 04 2014 08:53AM

Comments

Well written post that you wrote Donna. I cringe when a client comes in for a mortgage that is not represented and they are attempting to buy directly from the seller. Half these transactions never close.

Thank you for commenting on my post.

Posted by Joe Petrowsky, Your Mortgage Consultant for Life (Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709) almost 3 years ago

Thanks Joe!

Posted by Donna Harris, Realtor, CDPE & ASP - Hill Country Lakeway Austin (Donna Homes, PLR) almost 3 years ago

Wow Donna, what nerve some people have.  If the listing agent really wanted to appease the seller, why not reduce their OWN commission rather than try to take well-deserved money out of your pocket.

Posted by John Meussner, #MortgageMadeEasy Costa Mesa, CA 484-680-4852 (Mason-McDuffie Mortgage, Conventional Loans, Jumbo Loans, FHA, 203(k), USDA, VA,) almost 3 years ago

When banks will allow a buyers agent to be paid by the buyer and roll that into the mortgage, the same way it is already rolled into the price paid for the home enabling the seller to pay the buyers agent, then this will disappear. Both buyer and seller pay their own agents and then this style of negotiation will also go away.

Posted by Nick & Trudy Vandekar, 610-203-4543, Tredyffrin Easttown Realtors, Philly Main Line (Long & Foster Real Estate Inc 610-225-7400) almost 3 years ago

John, to be fair, the seller DID ask his own agent to give up money too. He actually agreed, though he told me he wasn't going to.

Nick & Trudy, I don't see that happening. Buyer will go straight to the seller's agent more if they have to pay for their own representation. That's my personal opinion.

Posted by Donna Harris, Realtor, CDPE & ASP - Hill Country Lakeway Austin (Donna Homes, PLR) almost 3 years ago

It's amazing to me that people on all sides of the transaction seem to think that our pay is up for grabs as part of the deal. 

Posted by Karen Fiddler, Broker/Owner, Orange County & Lake Arrowhead, CA (949)510-2395 (Karen Parsons-Fiddler, Broker 949-510-2395) almost 3 years ago

Great post. I was just asked by another agent to "share" the $2,500 difference because her buyer didn't want to agree to my seller's price. I was like NO!

Posted by LaNita Cates (REMAX of Joliet) almost 3 years ago

Donna- I still think that many don't have a clear understanding of the whole process.  You were very fortunate and had a client who did! 

Featured in Bananatude

Posted by Kathy Streib, Home Stager - Palm Beach County,FL -561-914-6224 (Room Service Home Staging) almost 3 years ago

Something that seldom comes up here, thank goodness. I have had agents contact us wanting a higher commission, but they never get it (typically on new construction or REOs).

Posted by Than Maynard, Broker - Licensed to List & Sell - 405-990-8862 (Coldwell Banker Heart of Oklahoma) almost 3 years ago

Donna that has not been practiced in AZ for many years -in fact it is not allowed to be addressed in the purchase offer. I have had a few agents and fellow brokers call me and try to negotiate a different amount but that does not fly.  It is clearly stated in our MLS offering as well as our listing agreement with the seller what the co-op agent amount will be.

Posted by Anna Banana Kruchten, CRS, Arizona's Top Banana of Real Estate! (Phoenix Property Shoppe) almost 3 years ago

Than and Anna, In my market, we have a traditional commission of X%. In some un-named neighborhoods, the agents who have basically ruled in those communities, have taken reduced commissions to get so much business, and then only offering Y%. Many times, if you call to negotiate for the X% BEFORE submitting an offer, the agent has already prepared the seller for such a call, and they have authorization to change the offered commission. Many people don't know to make the call BEFORE any negotiations take place.

 

Posted by Donna Harris, Realtor, CDPE & ASP - Hill Country Lakeway Austin (Donna Homes, PLR) almost 3 years ago

I have a transaction in which the seller demanded an additional $1,000 from the buyer to bridge the gap after a low appraisal. The buyer already agreed to pay $5K but the seller wanted more. I conveyed this to the buyer's agent who then agreed to pay part of her commission, which I never asked her to do. I worded the addendum to say that all parties understand the buyer's agent has offered to contribute $1,000 toward the seller's closing costs and authorize her generosity to balance the inequity between sales price & appraisal. When the buyer read that, she felt so badly that she agreed to reimburse her agent.

Posted by Elizabeth Weintraub Sacramento Real Estate Agent, Top 1% of Lyon Agents, Put 40 years of experience to work for you (Lyon Real Estate) almost 3 years ago

Interesting post, Donna. So, how do you deal with commission rebate requests by buyers? For example, the prospective buyer asks you "I found this rebate offer on Redfin. Will you match it?"

Posted by Gerhard Ade, Real Estate with Confidence (RSVP Real Estate) almost 3 years ago

You're preaching to the choir over here!  Yes, it's a contracted commission when the listing agent and seller sign.  It's an advertised co-op fee spilt on the MLS.  I had a few instances in years past that had listing agent try to do this to me.  I coughed up $1,000 once. Never again.

Posted by Carla Muss-Jacobs, Principal Broker (503) 810-7192, Buyer Focused ~ Buyer Results (BuyersAgentPortland.com | Portland Metro Exclusive Buyers Agent | 100% Buyer Representation ~ 100% of the Time) almost 3 years ago

Elizabeth, Yes, an agent offering his/her commission is one completely different. That was generous of her.

Gerhard, A rebate back to a client is a completely different animal all to itself, and the conversation better take place before I open one single door for the buyer.

Carla, Fool me once...

Posted by Donna Harris, Realtor, CDPE & ASP - Hill Country Lakeway Austin (Donna Homes, PLR) almost 3 years ago

I have never considered that as a COE violation, but that makes sense. I see this happening all the time. It seems as though some agents start out with this as their negotiation tool. Not a good strategy.

Posted by Aaron Poling, Working to get YOU the BEST Deal! (Long & Foster) almost 3 years ago

It seems the whole world wants you to work for free. Now am getting ready to write a code of ethics complaint. Will see where it goes.

Posted by Bill Reddington, Destin Florida Real Estate (Re/max Southern Realty) almost 3 years ago

    If you want to change the compensation that is posted in the MLS, or the amount that we previously agreed upon, you need to see me the Broker and make your request on a separate commission agreement. 

     As you stated so clearly, the Contract For Sale and Purchase is between the Buyer and Seller, not the Brokers.  

Posted by Fred Griffin, Licensed Florida Real Estate Broker (Frederick Griffin, Exclusive Buyer's Broker) almost 3 years ago

For those unfamiliar with where in the COE I'm talking about, it's Article 3-2. "To be effective, any change in compensation offered for cooperative services must be communicated to the other Realtor prior to the time that Realtor submits an offer to purchase/lease the property."

 

This is why I said you can call before you submit an offer, but once you've submitted an offer, you can't negotiate commissions.

Posted by Donna Harris, Realtor, CDPE & ASP - Hill Country Lakeway Austin (Donna Homes, PLR) almost 3 years ago

Broker commission cannot be stated anywhere in the purchase contract, or addendum. It's not only COE violation but illegal in California to do so. 

Posted by Pamela Seley, Residential Real Estate Agent serving SW RivCo CA (West Coast Realty Division) almost 3 years ago

Love your take on Real Estate commission

Posted by The Eastside Real Estate Team 425-200-4093 (Keller Williams Realty - Bellevue) almost 3 years ago

This whole COE angle has got me interested - I interpreted it as an agent not being able to renogiate the commission to a higher level, not a lower level!  That would only work between agents, not a potential buyer who wants to work with the listing agent and cut the fee.

Posted by Margaret Goss, Chicago's North Shore & Winnetka Real Estate (Baird & Warner Real Estate) almost 3 years ago

Hi again, Donna.

   Regarding the Code of Ethics of NAR - more and more Real Estate Agents are opting out of NAR.   So, the COE doesn't come into play.  

    However, as  Pamela Seley, REALTOR®  points out in comment #20, State Contract Law may preclude Agents from negotiating the commission on the Sales Contract.  Check with an Attorney for clarification in your state. 

Posted by Fred Griffin, Licensed Florida Real Estate Broker (Frederick Griffin, Exclusive Buyer's Broker) almost 3 years ago

Indeed! I've had more than one client who has told me not to accept a commission reduction on their behalf. And when I'm asked by another agent to do so, I simply say no. It usually stops the conversation in this regard and somehow the deals get done.

 

Posted by Nina Hollander, Your Charlotte/Waxhaw/Fort Mill Area Realtor (RE/MAX Executive | Charlotte, NC) almost 3 years ago

Fred, In my market, to be a part of the MLS, you must be a REALTOR®, so this would only pertain to Realtors in my market and not real estate agents

Posted by Donna Harris, Realtor, CDPE & ASP - Hill Country Lakeway Austin (Donna Homes, PLR) almost 3 years ago

Margaret, It's about not using the commissions to negotiate a contract between buyer and seller, period. Doesn't matter is one is wanting more or someone to take less. They market the commission at X% and can't negotiate to change it in order to benefit their client.

Posted by Donna Harris, Realtor, CDPE & ASP - Hill Country Lakeway Austin (Donna Homes, PLR) almost 3 years ago

Contrary to what most agents think...

Regardless of what the co-op fee is, the Buyer can always ask the seller to pay the BA a higher commission.  Yes, Legal and ethical. Read the code education manual.

What the Buyer cannot do in the offer is ask the LA to reduce their commission....but they can ask the seller for closing costs, a new roof and more money for their buyers agent.

In the early days of buyer representation, the co- op fee was many times $100 or 0%.  Exclusive Buyers Agents all got paid through the purchase contract.

Eve

Posted by Mike & Eve Alexander, Exclusively Representing ONLY Orlando Home Buyers (Buyers Broker of Florida ) almost 3 years ago

You have written a very good reminder to those who attempt re-negotiating commissions in the manner you state.

Posted by Myrl Jeffcoat, Greater Sacramento Real Estate Agent (GreatWest Realty) almost 3 years ago

I have not heard of anything like this in our market.  You pay what you advertise.

Posted by Evelyn Johnston, The People You Know, Like and Trust! (Friends & Neighbors Real Estate) almost 3 years ago

Oh how I hate to be asked to pay for someone else to purchase a home that they have no intention of letting me live in.  I have had seller's ask for a reduced commission to compensate for a low offer and I have had a buyer ask me to reduce a commission to pay for closing costs.  In all cases, the answer is NO! 

Posted by Jenna Dixon, Assoc Broker - Let's Talk Cobb County Real Estate (DRA Homes | Cobb County Real Estate ) almost 3 years ago

It is a big no-no to have a seller counter the commission in a contract with a buyer.  Wow.  I would have done the same thing.  Your buyer had a reason to be upset.  I hope that you were able to get the home for the buyer, but if not, I am sure you will find one that is even better.

Posted by Karen Feltman, Relocation Specialist (Cedar Rapids/Iowa City, IA Lepic-Kroeger REALTORS) almost 3 years ago

I am curious whether any other professional would agree to reduced their fees.  Unfortunatley some agent have done this and sent a very bad message to the public we all have to live with.

Posted by Joan Whitebook, Consumer Focused Real Estate Services (BHG The Masiello Group) almost 3 years ago

Here! here and very well stated. This should be mandatory reading material for all. 

Posted by Paula McDonald, Magnolia Realty ~ Granbury, TX 936-203-0279 (Magnolia Realty ~ Granbury) almost 3 years ago

Donna Harris - true - don't play with my contract when you negotiate the price (and some agents believe that's the way to do business!)

Posted by Praful Thakkar, Andover, MA: Andover Luxury Homes For Sale (eXp Realty) almost 3 years ago

Some listing agents are so spineless, they would agree anything. How the seller can trust such agent with negotiation on their house if they can not even negotiate his/her commission?

Posted by Inna Ivchenko, Realtor® • Green • GRI • HAFA • PSC Los Angeles CA (Barcode Properties) almost 3 years ago
Signed contracts are that way for a reason. I don't know why people don't automatically get that. They should not be making deals that they can't afford to make in the first place.
Posted by Laura Cerrano, Certified Feng Shui Expert, Speaker & Researcher (Feng Shui Manhattan Long Island) almost 3 years ago

Very unethical on the seller's part, seems to be in direct violation of their agreement with the listing agent!

Posted by Brian Force, Work With the Best! almost 3 years ago

We can voluntarily kick in a part of our commission to make a deal work, but using it as a counter offer tool is a no no.

Posted by Richard Iarossi, Crofton MD Real Estate, Annapolis MD Real Estate (Coldwell Banker Residential Brokerage) almost 3 years ago

I love your buyer! That's great that they had your back and recognized your value.

Posted by Jason Potrzeba, Private Money & Commercial Mortgage Broker - MA/RI (Acadia Advisory Group) almost 3 years ago

One thing I learned after a few years (or days in real estate)...someone is always trying to get into your wallet.

Posted by Gary L. Waters, Broker Owner, Waters Realty of Brevard, LLC, ... a small office, delivering big service! (Waters Realty of Brevard, LLC) almost 3 years ago

All the eyeballing and wanting a bigger slice of the commission is missing, gone, not an issue. When you list, market, sell your own inventory. One agent, buyers way way more savvy in small rural markets than many give them credit for. 95% of our sales are that way and no back and forth, friction and delay. Small purchase prices simplify everything because no room for all the pie slices. No staging, no four lawyers at the closing. Kept simple, easy, less drama. Fewer chairs used around, at the closing conference room table.

Posted by Andrew Mooers, Northern Maine Real Estate-Aroostook County Broker (MOOERS REALTY) almost 3 years ago

The commission is an agreement between the seller and the listing broker. What's in the MLS is an agreement between the listing broker and the selling broker.

None of the above have anything to do with the buyer's offer.

Posted by Doug Rogers, Your Alexandria Louisiana Agent (Bayou Properties) almost 3 years ago

If the contract says the buyer's agent gets X then that's what he gets. I try to stay away from listings that say the the BC is less than the going rate.

Posted by Raul Rodriguez, Looking out for the client's interest and not my p (Covenant Partners Realty) almost 3 years ago

It always bothers me when another agent tries to get me to lower my commission, but it REALLY bothers me when I am buying personal property and they think I should just give up the commission because it is my own transaction. Sorry, I brought the buyer!

Posted by Shannon Milligan, Richmond VA Real Estate Agent/Associate Broker, RVA Home Team - Winning with Integrity. (RVA Home Team) almost 3 years ago

The requests are a result of misinformed bloggers who put out what they want to be Deriguer.  It's a violation, and does not need to be broached.

Posted by Geoff ONeill (John L. Scott Medford) almost 3 years ago

For the listing agent not having the guts to tell the seller, that an signed agreement has been made when they listed. Another one is where the seller asks the listing agent to lower their commission.... Boy I have seen them all,,  well not quite!! :)

Thanks Donna

 

Posted by Paul Durry, Broker Associate, CDPE, CIAS, CHMS (Premier Real Estate of Lawton) almost 3 years ago

Most of the time, the reducing commissions conversation is all wrong. But when it is right, I do listen and consider

Posted by Richie Alan Naggar, agent & author (people first...then business Ran Right Realty ) almost 3 years ago

Very good explanation.  My answer is always no and I don't even hem haw around.  Contract is always between buyer and seller and has nothing to do with commission .

Posted by Barbara Calwhite, 417-438-7387 Specializing in Relocation (Keller Williams Realty of Southwest Missouri) almost 3 years ago

Good Morning, and very good explanation. A contract is between a buyer and seller, but I am finding that both are trying to find ways to "save" money and the first place they come is to us!!! I hope you were able to get the contract executed with the commission which was in the MLS.

Posted by Sharon Paxson, Newport Beach Real Estate - Arbor Real Estate (Arbor Real Estate) almost 3 years ago

Amen Donna, I 100% agree with your blog post, how dare that other agent. Some just don't abide by any ethics.

Posted by Bob Ratliff, "Sold with Bob" (Renowned Realty ) almost 3 years ago

My son recently had to take $500 off his commission in a sale for his own home.  The appraisal came in $8k under and so some cuts had to be made.  Situations like this its easier to reduce the commission than lose the sale.  But I would agree and say no way in a normal transaction should listing agent be able to propose that.  

Posted by Kevin Mackessy, Dedicated. Qualified. Local. (Blue Olive Properties, LLC) almost 3 years ago

Great article, you are correct in your facts regarding both the parties to the contract as well as the MLS co-op fee. All that being right does not change the reality that Buyers and Sellers will look to their Agents to make the deal work. In each situation, the answer is usually no, but I have participated in commision reductions to get the deal closed. Like it, NO, done it, Yes.

Posted by Clay R. Seay (Florida Homes Realty & Mortgage) almost 3 years ago

I liked your blog and also liked comment #40. Someone is always trying to get into your wallet. Sellers, Buyers, Agents, Builders ....... try to get a share of your commission .....

Posted by Rosalind Nicholas, Toronto Real Estate Agent, Toronto ON (RE/MAX Condos Plus Corporation, Brokerage) almost 3 years ago

The real issue is many consumers (Buyers and Sellers) don't perceive the value in the commission being paid.
Mel

Posted by Mel Ahrens, MBA, Kelly Right Real Estate, Customized Choices for your Real Estate Needs (Kelly Right Real Estate) almost 3 years ago

This is a post that is point specific. The seller's agent was too weak as they made the request instead of holding their ground and reminding the seller that the commission was resolved before the house was even presented to market

Posted by Ed Silva, Central CT Real Estate Broker Serving all equally (RE/MAX Professionals, CT 203-206-0754 ) almost 3 years ago

Hi Donna,

Excellent blog!  Clients need to understand our commission is not for negotiating.

Posted by Ricki Eichler McCallum, Broker,GRI,ABR, - Your Coastal Bend Home Source (CastNet Realty) almost 3 years ago

Presumably, your buyer decided to pursue another home, and the seller still has a home to sell.

So, that didn't work out well for anyone.

Posted by Claude Labbe, Realty for Your Busy Life (Real Living | At Home) almost 3 years ago

Hello Donna. Bravo, period.

Posted by Sheila Anderson, The Real Estate Whisperer Who Listens 732-715-1133 (Referral Group Incorporated) almost 3 years ago

Claude, Actually, my buyer is currently under contract with this house. And there is no commission reduction. The buyer got a good deal and even a few repair items agreed to. We'll close in 4 weeks.

Posted by Donna Harris, Realtor, CDPE & ASP - Hill Country Lakeway Austin (Donna Homes, PLR) almost 3 years ago

Participate