Net or Gross Based Commission?

Question, Charles: This seems to vary from broker to broker, but what is your policy regarding commission: As a listing agent, do you take the 6 percent off of the listed price (e.g., 350K), or off of the actual price (i.e., the price minus any concessions, e.g., sewer repair, house inspections, etc., which might amount to 7K — 343K)? I ask because I’ve run into agents who do both, though those who take their commission off of the list price instead of the lower price, after concessions, usually never say anything unless the seller notices it.

It should not vary from broker to broker. RMLS rules are very clear. According to RMLS:

Indicating Compensation in RMLS™ Listings

Compensation information not allowed in remarks section. It has come to our attention that several listings state in the remarks section, “No commission on seller concessions”, “Compensation on net amount”, etc. This information is not allowed in the remarks section. RMLS™ Rules and Regulations Section 6.2, Cooperative Compensation Specified on Each Listing, states “…The compensation specified on listings published by RMLS™ shall be shown in one of the following forms: a) by showing a percentage of the gross selling price; or b) by showing a definite dollar amount….”

The Listing Broker may offer compensation other than what is published, provided that they inform the other broker in writing in advance. Notification of a change in compensation must be independent of the RMLS™ listing. Further, the modification in the specified compensation may not result from an agreement among all or any other RMLS™ Participants.

Please review your listings and remove any wording in the remarks section that would indicate that compensation is to be paid on net selling price or to exclude seller concessions.

Gross sales price is easy to determine. It is the recorded price of the sale. How do you determine net? Obviously repairs and credits can be calculated. But how about a piece of personal property? We were planning on taking the counter-depth stainless fridge and 15″ LCD TV out of our old house. We ended up leaving them in lieu of repairs. What were those items worth? You’d have to determine the value of each piece of personal property to figure out commissions based on net and you’d have to decide if the personal property that was included in the original offer was a concession or part of the sale. The Earnest Money Agreement states that personal property included in the sale is of “no value.”

The example in the question at 6% is $420 net versus gross (2%). Gross may be an imperfect method but I don’t see how net is feasible across the board as it is a moving target. You have to have something firm to go by. That said, that is the rule. We talk through the process with our sellers. Both agents are entitled to commission based on gross and only once have we had a buyer’s agent enforce it when we have suggested otherwise. He probably pocketed $100 and looked like an ass for it but it was his right.

8 Comments on “Net or Gross Based Commission?

  1. Seems like a grossly silly, and grossly unfair, rule to me, but obvious given RMLS’s position. I don’t understand your last example, though:

    “The both agents are entitled to gross and only once have we had a buyer’s agent enforce it when we have suggested otherwise. He probably pocketed $100 and looked like an ass for it but it was his right..”

    Enforce what? Are you saying that Charles Turner’s policy is to charge the commission based on net, not gross?

  2. To follow up: Why wouldn’t a seller, then, after being asked for let’s say 7K back in concessions after the inspections, simply counter by lowering the listing price by 7K to 343K? This would make more sense for the seller, no, as she would be paying less in commission?

  3. I fixed the typo that made it unclear:

    Both agents are entitled to commission based on gross and only once have we had a buyer’s agent enforce it when we have suggested otherwise. He probably pocketed $100 and looked like an ass for it but it was his right.

    In that case, we took the portion out of our commission and did not charge it back to the seller.

  4. Tiffany, go get yourself a Jack Russell:O) Boredom over and oh so much fun and so darn cute. And if you are single, a great guy/girl magnet…

  5. Bearlee – It’d be nice if you could act like an adult and not impersonate me, like you or one of your minion post-alikes did in the previous post. It’s either you or Wangbob or naywanker. Checking the IP addresses would determine this and allow Charles to ban the offending parties.

  6. Sorry, Tiffany, but it ain’t me. You seem to dig yourself a big enough hole without my assistance. I have better things to do with my time than impersonate someone so I can have ‘converse’ with them. I did think it was out of character for you to apologize, I should have pointed that out instead of offering advice…

  7. Welcome to the Portland Real Estate Blog three ring circus. In the main ring we have Portland Real Estate. In the ring to your left have those that believe the Portland real estate market is in the tank and has 30% of value or more to give back. In the right hand ring, we have those that see Portland as a strong and growing housing market. Realtor, Charles Turner has the role of Blog Tamer. The audience is made up of all demographics with a universal interest in the Portland housing market. Some potential participants don’t participate out of fear of being mauled.

    Some of the participants are getting a little agitated. The comment that Tiffany says isn’t hers was sent from a different IP address than her other comments. It is not an IP address associated with another commenter but that doesn’t mean that it isn’t.

    I’m not having a lot of fun doing this right now. The sarcasm, impersonation, meanness and attacks need to stop. If you can’t do it, don’t comment.

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