DON’T SIGN A COMMISSION REDUCTION

Arizona Real Estate Blog

by Jon Kichen

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DON’T SIGN A COMMISSION REDUCTION

July 5th, 2010 at 2:35 pm

DON'T SIGN A COMMISSION REDUCTION…

Unless you fully agree with the change. If you sign, you agree, so don't think you can file an arbitration against the listing agent later.

Sadly, lately, there has been extreme pressure on our commissions, both at the time of listing and at the time of contract acceptance. So, what can you do, as the buyer's agent, when the listing agent, representing a short sale or lender owned property, asks or demands your acceptance of a lower commission? Must you sign it? Can you say no?

Let's explore…

You wrote an offer on a short sale listing offering you 3% in the MLS. The offer was accepted by the seller, but now needs lenders approval. After waiting weeks, the listing agent calls you and says the lender has accepted the deal, but they are cutting the commission from 6% to 4%, so you need to accept 2%. They send you an addendum for you/your broker to sign.

The Commissioners Rule, R4-28-1101.D says… A licensee shall not allow a controversy with another licensee to jeopardize, delay, or interfere with the initiation, processing, or finalizing of a transaction on behalf of a client.

So, you might interpret that to mean you cannot say no. Well, that is not necessarily the case. The balance of that section says...This prohibition does not obligate a licensee to agree to alter the terms of any employment or compensation agreement or to relinquish the right to maintain an action to resolve a controversy.

Thus, you might be faced with a difficult business decision. Say yes and sign it, and the deal probably goes through, albeit at lower compensation for you. Say no, and you have the right to say no, the deal might fall apart, and you might need to start all over again with that buyer. Or worse, that buyer might be upset and bail on you, leaving you with no buyer and no commission.

But remember, if you sign it, even with the words “under duress” “under protest” etc. you will have little or no chance of collecting any compensation later at an arbitration.

As a member of the AAR Professional Standards Committee, I can attest that I have witnessed this attempt by agents to collect the balance after they signed “under protest”, and every one failed.

This issue can pose a difficult decision for you. Be sure to call your broker for help sorting through this issue.