Legal Update

Question:

This question is regarding how commission is owed by the buyer to the buyer`s agent and can be implemented into the offer to purchase. For example, if the seller is offering 1% in the MLS as a buyer`s broker`s compensation, but the buyer agency agreement states the commission to be 2.7%, can the buyer ask the seller to pay 1.7%, in addition to the buyer`s broker`s compensation on MLS, toward the buyer`s agent`s closing costs to be used to compensate the buyer`s agent?

The broker’s understanding is that negotiating commission interferes with the seller/listing broker`s listing contract, but if there is a disparity between the buyer`s broker`s compensation in the MLS and the buyer agency agreement, can the offer to purchase be used to make the buyer’s broker whole?
Answer:

A buyer’s firm may receive commission from three sources or a combination of three sources:

    The buyer, per the buyer agency agreement.
    The listing firm, per the MLS or another compensation agreement.
    Or the seller, per the offer to purchase.  

Buyer agency fees

A buyer`s broker may ethically suggest or recommend that the buyer ask the seller to pay some or all of the buyer`s firm’s fee pursuant to Article 16 of the Code of Ethics and NAR Case Interpretation #16-17. The buyer may condition the offer upon the seller paying the buyer`s firm’s fee on behalf of the buyer, as a seller`s expense at closing. Wis. Admin. Code § REEB 24.05(1) provides that the buyer`s broker must have the prior written consent of the buyer and the seller to collect the fee from the seller because the seller is not the buyer’s broker’s client. The WB-36 Buyer Agency Agreement authorizes the buyer’s firm to accept compensation from the owner/seller.

In another point of clarification, it is a violation of the REALTOR® Code of Ethics if the offer is used to modify the listing broker’s offer of compensation, but it is not a violation of the Code of Ethics for a buyer to ask the seller to pay the buyer’s firm at closing on behalf of the buyer.

Buyer agency and MLS offers of compensation

If the buyer agency commission in the WB-36 Buyer Agency Agreement is greater than what is offered in the MLS, the buyer has in essence three choices:

    First, the buyer can pay the buyer’s firm the difference between the buyer agency fee and the MLS offer of compensation.
    Second, the buyer can direct the buyer’s firm to waive the MLS offer of compensation and ask the seller to pay the buyer firm’s commission.
    Third, the buyer can ask the seller to pay the difference between the MLS offer of compensation and the buyer agency fee stated in the WB-36 Buyer Agency Agreement.  

Read more

See Legal Update 05.09, “Buyer Agency Practice,” online at www.wra.org/LU0509,  and Legal Update 99.06, “Revised WB-36 Buyer Agency/Tenant Representation Agreement,” online at www.wra.org/LU9906, for further discussion of the issue.
   ...more