Commission Splits…whose business is it anyway?

This post isn’t really relevant to inn buyers reading my blog, rather the inn buyer’s agent (if you, the aspiring innkeeper aren’t already working with ME!). I can’t tell you how frequently I am asked by Maine licensed real estate agents what our commission split is. I continually inform them that the commission we offer to cooperating brokers is posted in the MLS. If it’s a listing that is not in the MLS, I inform them of the percentage we agree to pay if their client wishes to pursue my listing. The split is irrelevant. A seller agrees to pay a certain percentage to a listing agency to secure a buyer. We, as the listing agency, agree to compensate a selling agency a portion of that commission. We inform the selling agency what that percentage of the total sale will be offered either by posting in the MLS, or if not in MLS, by email or verbally. Period. End of discussion, or so it should be.

According to the Maine Association of Realtors legal counsel:

Commission Splits: Questions continue to circulate about commission splits. Please remember that it is inappropriate to speak in terms of 60/40 or 50/50 splits. The only commission that a selling agent (buyer agent, seller sub-agent or transaction broker) needs to know about is what is the percentage of the sales price which is being offered to them if they are the cooperating broker who has procured the sale. The total listing commission is immaterial. It is none of the cooperating broker’s business, and it does not matter whether it is a commercial or residential property.

The available commission is contained in the MLS offering, and the buyer agent should go over that amount with their buyer client and make arrangements for the buyer to make up any difference between what is offered and what the buyer has agreed to pay in the buyer representation agreement. That difference, if any, might be made up directly by the buyer. Or it might be made up by the buyer making their offer contingent on the seller contributing a certain sum to the buyer’s closing costs, out of which the buyer may then pay their agent.

It is against the Code of Ethics to condition the making of an offer on the listing agent changing their offer of compensation. If an agency feels that they want to change what they are offering as a commission to a cooperating agent in the MLS, they can do that on a case by case basis with the permission of the cooperating agent (usually happens during negotiations). Or they can do it on a blanket basis by sending a letter from the DB of one agency to the DB of another agency letting the agency know that in spite of what the MLS shows as an offer of a share to a cooperating agent, prospectively (cannot apply to properties already shown), the agency will be paying “x” to that agency. This should be done as a business decision by one agency, and never with any discussion with any other agency.