How do I correctly request a listing agent to increase the offer of compensation?
QUESTION: I am representing a buyer who is interested in an MLS listing in which the listing agent is offering compensation to buyer agents that is a percentage point less than the fee the buyer agreed to pay me according to our buyer agency agreement. The buyer doesn’t have the cash to pay the difference, so she only wants to look at the property if the listing agent will agree to increase the offer of compensation by one percent. Is there a form I can use to request the listing agent to increase the offer of compensation, and if there is, should it be referenced in any offer the buyer may make and/or presented with the offer?
ANSWER: The Confirmation of Compensation, Agency, and Appointment (Form 220) may be used in situations like yours where a cooperating broker is seeking compensation other than what is being offered in the MLS. As set forth in the Guidelines for completing Form 220 (Form 220G), it may also be used in a number of other situations, including when the cooperating broker is not a member of the MLS where the property is listed, or when the subject property is listed but it hasn’t been placed in an MLS.
Form 220 should not be attached to or referenced in an offer because that likely would run afoul of the NC Real Estate Commission’s Rule prohibiting the inclusion of any provision in a preprinted offer form concerning the payment of a commission to a broker or firm. In addition, since it can’t be made a part of the offer, it should not be submitted together with the offer because of the possibility that the seller could accept the offer while at the same time the listing agent refuses to sign the Form 220 agreeing to an increase in the offer of compensation. Instead, the Form 220 should be submitted to the listing agent in advance of submitting any offer. As noted in the Form 220 Guidelines, Standard of Practice 3-1 of the Code of Ethics requires a REALTORS® acting as a cooperating broker to ascertain the terms of compensation before beginning efforts to accept an offer of cooperation from a listing agent.
Finally, keep in mind that Standard of Practice 16-16 prohibits REALTORS® acting as subagents or buyer agents from making the submission of an executed offer to purchase contingent on the listing agent’s agreement to modify the offer of compensation. To steer clear of any possible allegation that you’ve violated that prohibition, we recommend that if you submit a Form 220 to the listing agent for their consideration, you should make it clear that although your buyer is interested in the property, she has not yet executed an offer. Also, it should be safe to tell the listing agent that the fee the buyer has agreed to pay you is one percent more than the listing agent’s offer of compensation, but you should leave unstated the fact that the buyer will only make an offer if the listing agent agrees to a one percent increase in the offer of compensation. If the listing agent agrees to the increase, great; if not, advise the buyer to move on to another property!
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