Diane Bullock, REALTOR®
When considering selling your home, one of your foremost tasks is consulting with a licensed real estate professional. In addition to providing guidance and the necessary tools for listing and marketing your property for sale, a Listing Agent will provide a home seller with information regarding the pros and cons of offering cooperating compensation to a buyer representative.
There has been a lot of news recently about cooperative compensation because of a legal settlement involving the National Assocation of REALTORS®. These reports can be confusing for home sellers to know exactly what it means for their upcoming transaction.
To break that down, let’s first explain the issue of compensation.
When listing your home with a real estate brokerage, you will sign a written brokerage agreement that outlines what services your agent will provide to you and what fee they will charge. This amount is their compensation, which could be listed as a flat fee, a percentage of the home price, or some combination.
Cooperative compensation is when the seller’s brokerage agrees to share their compensation to pay for some or all the buyer’s brokerage fees.
You may wonder why you would want to compensate the buyer’s broker. On one hand, this may reduce the amount of compensation you owe for the transaction. On the other hand, if a seller does not compensate a buyer’s broker, that buyer will be responsible for paying their broker out of their own pocket. This reduces the number of potential buyers for your home, which reduces your chances of receiving the best offer.
Things to Keep in Mind Regarding Cooperative Compensation
- Under the settlement, you still have the choice of offering cooperative compensation to the buyer’s broker. You may consider doing this as a way of marketing your home or making your listing more attractive to buyers.
- Your agent must clearly notify you and obtain your express approval for any compensation offered or paid to a buyer’s broker.
- This notice must be in writing, include the rate or amount of the payment, and be presented to you before any payments are made.
- You as the seller can still make an offer compensation, but your agent cannot include it on a Multiple Listing Service (MLS). MLSs are local marketplaces used by both buyer brokers and listing brokers to share information about properties for sale.
At its core, the settlement agreement did not change the seller’s ability to offer to compensate a buyer’s broker. Rather, the settlement agreement only prohibits the seller and/or their agent from advertising how much compensation they are offering to a buyer broker on the MLS.
Sellers should understand that offering to compensate a buyer broker is optional but may be in their best interests to obtain the widest pool of buyers for their property. Talk to your broker about what approach to cooperative compensation is right for you and your transaction.
