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The "uncooperative" broker’s fee
What happens when an offer contains a special provision that increases the fee?
by Dennis R. Schmidt
Q I recently agreed to take a listing for the sale of an owner’s home for a broker’s fee that is less than my normal fee. Since appointments were required for showing this home, I received a call from an out-of-town agent (who is not a member of our MLS) asking to show the home. I informed the agent of the amount of the cooperating broker’s fee, and that agent informed me that she normally received a higher fee for her services. I told her that the cooperating fee being offered could not and would not be raised.
Several days later, I received an offer from the buyer this agent showed the property to. The offer had language in special provisions making the offer contingent upon the seller or his agent agreeing to pay the cooperating agent a fee equal to that agent’s usual fee. Should I present this offer to the seller? Isn’t this a violation of the Code of Ethics?
A You should present this offer to your client in order to satisfy your professional standards and fiduciary responsibilities. It would be appropriate to point out the special provisions in the contract and remind your client of the terms of your listing agreement regarding fees and your right to set cooperating brokerage fees. Your client could reject the offer or decide to accept the offer and agree to change the listing agreement to accommodate the increased cooperating broker fee, or the seller could otherwise agree to pay the fee requested by the cooperating agent. Under these facts, you would have no obligation to pay an additional fee to accommodate the cooperating agent unless the owner would agree to adjust your total listing fee to cover that increase.
Standard of Practice 3-1 provides that listing brokers establish the terms and conditions of offers to cooperate and that the terms of compensation, if any, shall be ascertained by cooperating brokers before beginning efforts to accept any offer of cooperation (i.e., before presenting an offer). Standard of Practice 16-16 provides that cooperating brokers shall not use the terms of an offer to attempt to modify the listing broker’s offer of compensation (nor to make the submission of an executed offer contingent on the listing broker’s agreement to modify the offer of compensation).
Depending upon the evidence presented, it is entirely possible that an ethics hearing panel could find that the agent violated Article 16 by encouraging or urging the buyer to pressure the seller to try to modify the listing agreement by making the offer contingent upon an increased fee being paid to the cooperating agent–an unwarranted interference with the listing broker’s relationship with his client. It is also possible that the evidence presented might lead the hearing panel to conclude that the request for payment of the fee was initiated by the buyer and that there was no attempt by the buyer’s agent to pressure the seller to modify the listing.
It should be noted that paragraph 12A(1)(b) of the TREC contract forms allows for the negotiation of concessions from the seller to the buyer so that the buyer might have sufficient funds to pay the buyer’s broker any difference in the fee agreed to in the buyer-representation agreement that exceeded the amount offered by the listing broker.
Dennis R. Schmidt is associate counsel for the Texas Association of REALTORS®.
Photos © Stockbyte.
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