Austin TX Real Estate - Hill Country Austin Lakeway Homes for Sale: Cooperation Does Not Equal Compensation

Cooperation Does Not Equal Compensation

Last week, I sat in the Professional Standards & Grievance Committee training class as everyone on the committee in their respective states must now retake the class every year instead of every two years.  Seven hours of more roll playing...

I guess they make us take it so often because even though you go over the same stuff over and over again, every once in a while, something new sticks in your head.  I had that experience last week.

Cooperation verse Compensation.  Did you realize those are two different things?

You can agree to Cooperation with another broker allowing them to gain access to your  houses and show your listings, but that has absolutely nothing to do with Compensation.  Did you know and understand this?

For the above situation, I'm not talking about where you put the co-broke commission in the MLS and agree to compensation according to your board rules. I'm talking about when you get a call from an agent outside your MLS and board area, and they want to show your listing, or someone within your area who is not a memeber of your board. 

For example, I get a call from an agent in San Antonio saying he's going to be in town and would like to show his client (ie probably a family member or friend) one of my listings.  I can agree to cooperation and allow him in the door.  That agent's mistake is that he didn't ask about compensation.  See, my listing agreements state that if a non-MLS agent submits an offer, he only receives X% and not Y% as stated in the MLS. 

Why is this?  Because non-MLS members don't have the necessary tools to represent their client to the fullest when not from the area, not familiar with the area, not being around to help with inspections and mortgage, etc... that leave the work up to me to do to make sure the transaction closes on time.  That means I'm doing twice the work and Mr. San Antonio agent gets to go back to San Antonio, sit back, and call for updates so he can let me know where to send the check when it closes.

Are you following?  To help sum up, non-MLS members shouldn't assume they will be compensated just because the listing agent agreed to cooperation with them in the showing process.  Always ASK!

And keep in mind, this doesn't just go for out of town agents.  This goes for the Ma and Pa real estate companies who decide they don't want to be a member of the MLS and board in the area. Without being a member, they do not have the Supra keycards to gain entry.  I can agree to cooperation with them, but they better understand that doesn't automatically grant them compensation.

For the buyers out there, if you're wanting "representation", you should think long and hard about using a professional who has all the necessary tools to represent you fully.  Don't chose someone just because they're licensed in the state if they do not regularly work in the area you're wanting to buy in.

Comment balloon 31 commentsDonna Harris • January 21 2009 09:36AM

Comments

Donna,

Good point.  That is why paragraph 8 of the TAR listing agreement addresses compensation for participants in the MLS area and those not in the MLS area.  Many agents don't understand what a variable rate situation is all about.

Thank you for sharing this great information. 

Posted by Richard Weeks, REALTORĀ®, Broker over 9 years ago

Richard, Thank you for your comments. The problem is the listing agreement is between the listing agent/broker and the seller.  The buyer's agent does not see this contract and would not know what paragraph 8 says without asking about compensation when they get permission for cooperation.

Posted by Donna Harris, Realtor,Mediator,Ombudsman,Property Tax Arbitrator (Donna Homes, powered by JPAR - TexasRealEstateMediationServices.com) over 9 years ago

Hmm.. As an Agent, that would be good information to know.  If they are not aware and they are not doing the work, they should get less compensation.

Posted by John Cannata, Texas Home Mortgage - Purchase or Refinance (214-728-0449 http://TexasLoanGuy.com) over 9 years ago

Nice Blog Donna. I have worked with 2 agents from Dallas in the last couple of years who did exactly what you said here. They drove down to show a "buddy" or relative a home. My Listing agreement says 3% will be paid to MLS subscribers and 2% to Non-MLS subscribers. You are correct, we do have to babysit the buyer's agent and provide a bit more effort than normal. The buyer's agent who has NO access to comparable sales SHOULD NOT be representing a buyer period.

Both homes that this happened on where in neighborhoods were NOTHING was selling. Both Homes were priced a bit high and both homes sold to these buyer's! It wasn't my job to tell HIS buyer that they were buying something in a neighborhood that had horrible resale value.

As if the buyer's agent is going to drive down again to ensure a good deal is being had.

I had another agent from Austin who I tried to convince to let me represent versus her trying this on her own. I even offered her a 35% referral fee and she still turned it down!

I paid a full commission to the two agents mentioned above. Why? Because they and their buyer's were buying two houses that had been rotting on the market for over 12 months each. They paid almost FULL price too. Both agents were also lenders. Pathetic, but true.

Had my listings been "good ones" the story may have unfolded differently & I probably would have paid a less commission.

The buyer's agents used MY inspector too! HA!

Posted by Greg Nino, Houston, Texas (RE/MAX Compass, formerly RE/MAX WHP) over 9 years ago

This is very helpful information Donna. I had never looked into this, but the situation could present itself to any one of us on any given day. Good heads up so that we can be prepared.

Posted by Sheldon Neal, That British Agent Bergen County NJ (Bergen County, NJ - RE/MAX Real Estate Limited) over 9 years ago

These are very good points, and things that are misunderstood.  We have some non-MLS real estate licensees here, and they sometimes forget to ask about compensation.  Oops.

Posted by Brenda Carus (Century 21 Zwygart Real Estate) over 9 years ago

WOW, great post Donna!! I am going to look at our listing agreements...it's been several months since I have filled one out....thanks for the clarification!

Posted by Teresa Harris, Denver . Lake Norman . Charlotte (Lake Real Estate, LLC) over 9 years ago

John, Very much so!

Greg, Interesting situations you were in.  Curse those Dallas agents thinking they know it all!

Sheldon, Thank you for your comments.  Hope it helps you not get in a bad situation in the future!

Brenda, Oops on their part, not yours.  At least I volunteer the information when they call instead of waiting for them to ask, but I would hate for the buyer to love the house and then the agent get upset because they didn't ask.

Teresa, Every state has different agreements, but the Texas one is written is plain English... but only known to the seller.

Posted by Donna Harris, Realtor,Mediator,Ombudsman,Property Tax Arbitrator (Donna Homes, powered by JPAR - TexasRealEstateMediationServices.com) over 9 years ago

Maybe I am just not as intelligent (or as hungry) as agents in Texas, but if I had buyers in an area I was unfamiliar with I would REFER them to one that was. I think it is a dis-service to the buyer.

Posted by Ellie McIntire, Luxury service in Howard County & Catonsville (Ellicott City Clarksville Howard County Maryland Real Estate) over 9 years ago

We get this a lot here in my area with agents from Atlanta. Our GAR contracts do not include a coop for non cooperative brokerages. With in our MLS board which is one of the few that is still privately owned we are not required to pay commission to any agent not a part of our MLS.

We have had buyers call the office and ask to see a property and then you will receive a contract from an out of town agent on the property you showed the agents clients. In my early years it bothered me but now I just check the stips if the commission was not wrote in ss then we do not have to pay a commission. It helps to attend all those continuing ed classes.

Posted by Jacque Applegate (Elite Realtors of Georgia) over 9 years ago

Ellie, That would be the common sense thing, however, that's not what happens in practice.

Jacque, I get so irked when I get an offer from an agent with the buyers' name that I showed them, considering I won't show my listings without an approval letter in hand and the assurance from the buyer they are not working with another agent. It still happens.

Posted by Donna Harris, Realtor,Mediator,Ombudsman,Property Tax Arbitrator (Donna Homes, powered by JPAR - TexasRealEstateMediationServices.com) over 9 years ago

Hi Donna,    You make some good points and I've said the same things before but now I always give the same compensation to all agents if they are willling to handle their part of the transaction the way another board agent would.  This gives my sellers more potential buyers looking at their homes, something we all need these days. 

Posted by Ricki Eichler McCallum, Broker,GRI,ABR, - Your Coastal Bend Home Source (CastNet Realty) over 9 years ago

 

OK. As a homeowner (and a licensee in the same state) who has been trying to sell my own home (200 miles from the Detroit area where we now live) for 3 years here in Michigan I want to let you know the attitude in this post infuriates me. I understand it. I sympathize. However, if I found out my listing agent was anything less than cooperative and fair with ANY licensed agent with a ready, willing and able buyer I would have to be physically restrained. As I have watched my property decrease in value between 40-50% I would welcome a space alien agent as long is he had serious buyer and U.S. currency. Buyers in Michigan are a rare bird these days.

I'm not saying many of your points and concerns are not valid. I agree that it is frustrating that in some deals we end up doing way more than half the work and still have to evenly split the commission. If we are being honest, we would admit that  is what often happens, even when the cooperating agent is from our own board. When we agree to list someones property we take on the responsibility to do the extra work if that is what it takes to get the listing sold.

Perhaps these turf wars, limiting of information and reluctance to share information is part of the reason that our industry doesn't really have the respect of the public (someone has to keep the politicians company with low approval ratings). While we claim to desire to serve our buyers and our sellers best interests to our utmost ability I have not found that to be my experience. It's true the real estate business gets more complicated everyday and the average seller and buyer don't typically comprehend the complexities. While I agree most buyers are better off being represented by a local competant agent, that is NOT our call to make. Buyers have a complex set of reasons as to who they can trust to guide them in the transaction. Sellers just want to get their place SOLD. It is our job to respect thier choices and fufill our obligations to bring both sides together and make it happen.

Posted by Cecilia Nault (Professional One Real Estate) over 9 years ago

Great point.  I wasn't even aware that this was reality.  Thanks for the post.  I might decide to join the other mls.

Posted by Mike Henderson, HUD Home Hub - 303-949-5848 (Your complete source for buying HUD homes) over 9 years ago

Dear Donna,

Excellent post.

I am afraid though that the concepts don't always work in the real world. I had an agent show a listing of mine. I was unavailable The buyer wanted the property. He was going to call his agent, out of our MLS to write the contract. My agent tried to explain. The buyer would not buy unless his agent received full commission. I gave my agent part of the list fee.

An agent with our company showed her listing. the buyers wanted it. They called a relative, out of our MLS to write the contract. No negotiation!

Sometimes we have to give it up to get the sale for the seller.

Barbara

 

Posted by Barbara Delaney (Park Place REALTORS, Inc.) over 9 years ago

Donna,

Good post and a good reminder to everyone!

As for your comment to Jacque, how about using an Exclusive Buyer Agreement?

Lucky :)

Posted by Lucky Lang, SRES, Davenport, Iowa Real Estate (Mel Foster Co.) over 9 years ago

I am not so sure that whether they are MLS subscribers or not has any impact on whether their service warrants compensation, as that is a bit arbitrary, but the point that simply bringing a guy to show a house does not constitute a level of service to earn compensation, that I agree with. I would have to say that limited service deserves limited compensation... if the agent, whatever MLS they are members of, or not, provides the service level that their buyer expects, and which would otherwise be provided by an agent in your own area, then they should be paid... if they bring the buyer, and do less than that level of service, they should be given a referal fee. Either way, with them, you had no buyer.

Also, I am not sure this discrimination based on MLS membership would not amount to unfair trade practices or might not fall within anti trust laws. We should be careful to remain within the law.

Posted by Paul Silver, Rhode Island full service real estate firm over 9 years ago

Great post Donna.  Agents should also be aware of compensation agreements to other agents outside of their MLS areas and the agreements their boards have or don't have.  When in doubt, put it in writing.

Posted by Gabe Sanders, Stuart Florida Real Estate (Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales) over 9 years ago

Ricki, The problem is they can't "handle" their end of the transaction is they're in Houston or Corpus or El Paso... Texas is a very large state. We're not like one of those states that has 1 MLS for the entire state and you can show one side of the state in the morning and the other side in the afternoon.

Cecila, And you're in a completely different situation than many other parts of the country, especially Texas.

Mike, If your board is part of the same MLS, you shouldn't have to join another one.

Barbara, I understand what you're saying as you cannot never let the compensation come in the way of the buyer and seller, however, if the "outside MLS people" didn't have procurring cause, you should have taken it further.  The only way to stop it from happening is to let people know it can't happen.

Lucky, Buyer's Reps have nothing to do with anything.  It's about procurring cause. You don't need a contract with a buyer to prove procurring cause.

Paul, Again, Texas is a large state.  How do you expect someone to do their job from hundreds of miles away?  And it's definitely not against any anti-trust laws as we're willing to work with non-MLS members, but they have not signed the agreements with the board and the MLS to abide by the rules set, and hense, are not entitled to the compensation set in the MLS, which is why they need to ask what compensation is for non-MLS people.

Gabe, Exactly!

Posted by Donna Harris, Realtor,Mediator,Ombudsman,Property Tax Arbitrator (Donna Homes, powered by JPAR - TexasRealEstateMediationServices.com) over 9 years ago

This presents a conundrum for the definition of earning a commission. NAR and the local boards, with varying degrees, have established procuring cause to define the earning of a commission when there are disputes between the parties. Therefore, once a cooperating agent has met that definition, he/she has done the job of which he/she is being paid to perform. From my understanding, representation has nothing to do with earning a commission. So, if an agent simply showed a home and negotiated a successful contract, he/she has done the job. If a listing agent never heard from that agent again, it seems to me that the cooperating agent has still earned the commission according to the industry.

Posted by Stephen Graham (Inactive) over 9 years ago

Recently, a local real estate licensee who is not a local board member called a seller of one or our listings directly, to request a showing.  Luckily, our loyal seller called the listing agent to be present during the showing.  This company has been known to lie to sellers in order to get them to list with them instead.  Even though a real estate licensee is not bound by a code of ethics, you would think that they would at least put forth a little professional courtesy.  Several times these agents have called to show our listings, without negoitating a commission first.  Our solution; We called the broker/owner of the company and advised him that if his agents expect to get compensated they will call our listing agents for appointments and not speak to the seller. 

Posted by Steve Hermann (Coldwell Banker Heritage REALTORS) over 9 years ago

Interstingly, there seems to be yet another confusion about terminology. Many posters here have called the money they are paid as a buyers representative commission. It is compensation. And, as such, we can discuss it with other agents...... legally. Compensation is offered by the Listing Broker to the selling Broker. Commission is paid by the seller to the listing Broker. I cannot discuss with you the commission I charge as a listing agent but I can and very well may have a discussion about the compensation you offer thru the MLS. What you offer may or may not be what I would like. However, any such discussion and subsequent agreement must occur BEFORE the offer is written. Afterwards is too late. And yet, if an out of area Realtor writes an offer on my listing I will probably pay what is offered in the MLS ( unless they make my life miserable ) as a professional courtesy and I may even kiss them at the closing.

Posted by Ron Tiller (Star Referral - Grand rapids MI) over 9 years ago

Donna - I hadn't thought about that.  Thanks for the information!  :)

Posted by Debi Ernst, GRI, e-PRO, Broker/Sales Associate (St. Charles County, Missouri - Prudential Alliance Realtors) over 9 years ago

Stephen, I disagree to the extent that procurring cause is what leads to a successful CLOSING and then compensation has been earned.  Your example has the agent sitting back drinking margaritas after the contract is executed.

Steve, They contacted the seller directly?  How completely wrong!  Good thing I always instruct my clients not to talk with another agent and to direct them all to me.

Ron, I agree that many people mix up the terminology. Some just don't know better.

Debi. You're very welcome!

Posted by Donna Harris, Realtor,Mediator,Ombudsman,Property Tax Arbitrator (Donna Homes, powered by JPAR - TexasRealEstateMediationServices.com) over 9 years ago

Donna - I am merely using the guidelines set forth by the REALTOR boards, including NAR. You and I may disagree with their definition of procuring cause, but we all agree to it when we become REALTORS. Representation does not necessarily equal compensation, just as cooperation does not necessarily equal compensation. It's all about procuring cause, and my aforementioned scenario would most likely meet that definition.

Therefore, withholding compensation from a cooperating broker may go before the board; and, the hearing panel will use this definition to establish who is entitled to a commission. It's important that we have a firm grasp of this before we take action.

As you have stated, REALTORS who are not members of your local board may not be entitled to a commission. But, that is a paradox, insomuch as procuring cause is supposed to be the determinate. Also, if the agent is not a REALTOR, then a court will determine who is entitled to a commission -- and REALTOR rules do not dictate the ruling.

Here's a good article pertaining to the potential problems with procuring cause. In most situations, the services provided after successfully negotiating a contract have nothing to do with earning a commission.

I hope this helps you in making an informed decision.

Posted by Stephen Graham (Inactive) over 9 years ago

Very good post.  I have understood this but I put 3% local and 3% non-MLS participating and here's why ... bottom line is I must look after my sellers best interest.  I have always felt that if I put 2% for non-MLS agents, it is possible that, when I point that out to the agent, they may not show my house or may inform the buyer that they have to cough up his/her 1% (to=3 ... and may bad-mouth me in the process) and I risk them moving on to another property.  Not everyone may do this ... it's my approach.  I concur with your outline and examples above, but am willing to take the risk to get my sellers property sold.

I am in Austin and have personally purchased property in Port Aransas.  If I have a friend who wants to purchase in Port A, then I either hook them up with a local Port A Realtor (with a referral) or, if it is in the 2 complexes I know well (and own in), then I will represent in those.  I also have a couple Realtor relationships down there and have paid one of them a fee to run a market analysis for me; it felt like the right thing to do.

Posted by Julie Nelson, Smart real estate. (eXp Realty) over 9 years ago

Things are different here in Maryland, much different...

Posted by Mike Klijanowicz, Associate Broker @ Cummings & Co. Realtors (Cummings & Co. Realtors) over 9 years ago

Hi Donna,

Great post and reminder.  I love the saying!  It's definitely important for the agent to understand how they are going to be paid by their client - all the more reason to have a buyer agency agreement.  Also, I agree 100% that agents should only attempt to represent clients who they can knowledgeably assist.

Best regards,
Mike

Posted by Mike Hughes, Services Newton, Brookline, Lexington, Waltham & W (Mike Hughes Team - Hughes Residential) over 9 years ago

Not only do non-MLS agents lack some important tools, they also tend to be non-fulltime agents, meaning they may not be on top of the latest issues.

Posted by Brian Schulman, Lancaster County PA RealEstate Expert 717-951-5552 (Coldwell Banker Residential Brokerage, Lancaster PA) over 9 years ago

Donna,

 

Here is the million dollar question... I had a listing in Richardson last year.  I had some people call me to see the home.  The clients stated that their agent was out of town and since I live in the area I was glad to do so.

Well those buyer's ended up making an offer on the house... It turns out their agent is a Lawyer who also has his real estate license...BUT he does not have access to the MLS nor access to our listings.  In the offer he wanted the full 3%, even though I have in the listing agreement that it will X amount (did I mentioned that I opened the house for his clients 3 times!)... That is when the lawyer in him came out... He stated that the listing agreement is not subject to him as a buyer's agent because it is between the listing agent and the seller (well I was stumped on that one... and since I can't practice law whose to say he is wrong)... He mentioned that if the full 3% was not there then he would advise his clients to move on.  I spoke with KW legal team and the free TREC legal department and they all said that I was in the right but that if they walk away from the deal then ultimately my seller's are getting hurt.

 

Now what would you do when faced with that dilemma?  I of course have my seller's best interest in mind agreed to the commission split and let my seller's walk away happy.

 

To this day it still leaves a bad taste in my mouth.

Posted by Nick Good, www.TheGoodHomeTeam.com (The Good Home Team with Keller Williams Realty) over 9 years ago

It looks like I got behind in responding to some people's comments. Thank you for keeping this post alive.

Nick, Personally, I would have thrown back in his face that if he adviced his clients to walk away because of "money", he could have had his license stripped from him as we're not allowed to put our own interests, like money, above the interests of our clients.  You did the right thing by just letting it go, but you were right and he was wrong.  Even the person who passes the bar with the lowest possible score is still called "lawyer" but it doesn't mean they know what they're talking about.

Posted by Donna Harris, Realtor,Mediator,Ombudsman,Property Tax Arbitrator (Donna Homes, powered by JPAR - TexasRealEstateMediationServices.com) over 9 years ago

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