Hi Everyone,
Here’s the follow up information from our class:
There was a question about how a selling agent can discuss commission with his/her buyer. I have received lots of help from my fellow co-bloggers over at RainCityGuide. Jim Reppond’s answer is the best so here it is:
While the NWMLS does not explicitly forbid a selling agent from discussing the commission structure with the Buyer that they represent, it DOES prohibit the “discussion of commission” between the Buyer’s Agent and the SELLER when it is listed with another broker who is a cooperating member of the NWMLS. (UNLESS there is a specific written agreement in place GIVING PERMISSION to the Buyer’s Agent from the BUYER to negotiate commissions on their behalf with the Seller, usually in the form of a Buyers Agency Agreement). Now JUST as important, is the selling agent’s Managing Broker and/or their company’s internal policy. Which is often, “Do not discuss commissions with your CLIENTS without the express consent of the Managing Broker”. In other words, they do NOT want their agents to be negotiating commissions with Buyers OR Sellers that might undermine the efforts of their company or their other agents. They also want to make sure their agents are well versed in the subtleties of what is permitted and what is prohibited in such discussions. You could still loose your job if you disregard this, so it’s still a big deal. And then finally, many relocation companies specifically prohibit the discussion of commissions AS WELL AS the huge referral fees the relocation company is requiring the agent to pay them WITH ANYBODY. They don’t want the employee complaining to their company that the relocation company is gouging their great-and-well-loved agent and not bringing any value to the table. Having commission discussions with these relo-referrals will most certainly get you black-listed from that relocation company. Furthermore, they often prohibit the use of Buyers Agency Agreements, causing more problems than I can describe.
In the context you referred to: “The question was in the context of showing a listing and if the selling office commission offered is less than what the selling agent would like to make, then perhaps a discussion about a buyers agency agreement was in order so that the agent could make in commission the amount he/she wanted to make with that client.”
This discussion should have happened EARLY in the agency relationship. Agents are required to show properties to clients that meet the client’s criteria and are available REGARDLESS of the commission offered, UNLESS an agreement is already in place. Telling the client “I can’t show you that property until you sign a Buyers Agency Agreement” after a Buyer has already requested to see it is asking for problems. And refusing to show those properties (like short-sales and bank owned properties with reduced commissions) without an agreement already in place is definitely a no-no. Furthermore, the phraseology used in the Buyers Agency Agreement needs to be vetted by the Brokerage’s attorney or you could be challenged in court.
The short answer, “Consult with your broker and follow their advice.”
Thanks, Jim!
A student mentioned that MLS rule number 101 would be helpful so here is a PDF of the MLS rules. Commission rules start on page 21. See 101 (G).
We wanted to follow up on the announcement regarding commissions on a short sale if the home loan is held by Fannie Mae. See page two of this PDF:
Effective March 1, 2009, closing of preforeclosure sales may not be conditioned upon a reduction of the total commission to be paid to real estate agents to a level below what was negotiated by the listing agent with the borrower, unless the fee exceeds 6 percent of the sales price of the property in aggregate. Servicers are reminded that they must continue to obtain any approvals that may be required by interested third parties in connection with preforeclosure sales.
So what about Freddie Mac? The National Assoc of Realtors put together a working group and has been talking with Freddie Mac to match Fannie Mae’s guidelines on commission but of this date, we have not received written confirmation from Freddie Mac. There’s apparently a podcast out there with the current NAR president saying that he’s secured Freddie’s commitment to match the commission promise but I cannot locate a press release to confirm.
Rich, did you find the article about that plumbing story that scared me? If so, please forward the link and I’ll post it here.
Finally, Michelle Swanson with Canyon Park Mortgage, our student teacher, typed up the letter she read during class for everyone. Here it is:
Dear Suzie Q,
It was nice talking with you the other day about the French family. It is so sad that they were having financial difficulties and Mrs. French then lost her job. Although she continues to diligently look for employment in her field, she is battling the 8.2% unemployment rate in the Seattle area. Attached please see her notice of lay off and information on the unemployment rate in our area. They have incurred additional debt right from the start of purchasing this home due to repairs that had to be completed just for them to move in. Attached, see the cost breakdown of repairs they have and continue to incur due to this home and receipts of said work. The county records show this home as a 3 bedroom when in fact it in now a two bedroom. See the attached photos. I am thrilled to have a bonafide offer with the buyers approved on a FHA 203k rehab loan that will cure all these potential pitfalls that you would have to deal with upon foreclosure like, replacing the roof & gutters as well as making the 2 bedroom back to a 3 bedroom in this rough neighborhood. This offer will save you the cost of foreclosure as well as repair. The market values continue to decline in our area as well as inventory is going up along with the rise of foreclosure in the area. See the attached documents including the trend graphics report & time on market report.
Suzie Q, even if this transaction doesn’t come together, I wish you well.
Warmest Regards,
Marti “the Realtor”
Thank you, Michelle!
…and thanks to everyone for a fun class yesterday.