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.