Dual or Variable Rate Commission

Q: I am a buyer’s agent. I called the listing broker to schedule an appointment to show a house she has listed in the MLS. The listing broker told me that an agent in her firm  might be presenting an offer on it tonight. So that my buyers can make their best offer, I’d like to find out whether the seller and the listing broker have an agreement where  the seller pays the listing broker a lesser commission if the property is sold in-house. How do I go about it?

A: Ask the listing broker. What you are describing is known as a dual or variable rate commission arrangement, that is, where one amount of commission is payable by the  seller if the listing broker’s firm is the procuring cause of the sale and a different amount of commission is payable by the seller if the sale results through the efforts of a  cooperating broker. In fact, the listing broker has an affirmative ethical obligation to disclose such an arrangement to you as soon as practical. (See Article 3, Standard of  Practice 3-4 of the REALTOR® Code of Ethics.) The listing broker must also specify the resulting differential if you ask about it. For instance, if the commission payable by the seller to the listing broker is 10 percent for an in-house sale versus 12 percent for a co-broke sale, the differential is 2 percent. The seller gets a 2 percent break on in-house  sales. A listing broker need not disclose the total negotiated commission rates, only the difference between them. A buyer’s agent must, of course, pass the information along  to the buyer prior to the time the buyer makes an offer to purchase. The reason for all of this is simple – Article 3 of the Code requires REALTORS® to cooperate with one another, including providing information on listed property. Dual or variable rate commission arrangements give in-house offers an advantage over all others, which might  influence a buyer putting together an offer and might affect how the cooperating buyer’s agent presents it to the seller. The same rules apply to lease transactions. Finally,  check with the MLS, as the MLS rules probably also require disclosure of a dual or variable rate commission arrangement by a key, code or symbol in the MLS.