Rejecting the Broker Offer of Compensation…Why do we do THIS?

You’re the Agent of the Buyer. You have a Buyer Agency Contract with your client to pay you 3.0% of the Purchase Price at closing as your Buyer Agent Broker Fee. You draft an Offer to Purchase on a property listed by a Broker member of the Multiple Listing Service you belong to. The Offer of Compensation made by the listing  broker to your broker is 3.0%.   Why does your buyer client’s Offer include a provision that states their broker (you) reject the Offer of compensation from the listing broker, and require the Seller to pay your 3.0% buyer agency fee at closing?  These are the mythical reasons we still  do what we’ve been doing for years:

  1. If I don’t accept the broker’s offer of compensation the broker can not take me to arbitration and recover the commission on the grounds that I did not procure the buyer. Not true since January 2005 when Article 17, Standard of Practice 17-4 was amended. If you didn’t procure the buyer you’re not safe from arbitration. You might have the money in your account but you are at risk.
  2. The listing broker might reduce the commission without my permission. This can’t happen. Article 3, Standard of Practice 3-2. Once the Offer is submitted, the fee to the cooperating broker is set as disclosed. You can agree to receive less, but a unilateral reduction is violation of the code of ethics…you can collect in arbitration.
  3. I will get my check at closing instead of waiting fro the listing broker to send it to my broker a week after closing. Back in the day that was true. Today the title company issues the check to the selling broker and a check to the listing broker.
  4. That’s the way we always do it. and That’s the way my broker told me to write the Offer.  Yes. That’s probably why,  but it’s not reasonable.

Are you interested in an idea as to why we might not want to include that language

  1. When the Buyer Broker fee is paid by the Seller as part of the Offer, the fee is as open to negotiation as the price, closing date, included items, and everything else that might make a difference to the Seller’s bottom line.

If you have another opinion based on a fact, I’d like to hear your thoughts.

 

 

Author: Tom Meyer Real Estate Broker, Madison, WI

I believe every every Offer to Purchase can present the unique ability of the person the contract is written for. The person who is most compelled to be cooperative, most qualified, most sincere, most committed, least risk adverse, can have an Offer drafted to show their true ability and commitment. Home sellers are likely to look favorably upon those offers which give them the most comfort. Licensees who know how to craft Offers as unique as the individual buyer are worth their weight in gold.

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