{"id":6227,"date":"2022-03-02T12:07:05","date_gmt":"2022-03-02T18:07:05","guid":{"rendered":"https:\/\/nwfl4sale.com\/dual-or-variable-rate-commission\/"},"modified":"2022-03-02T12:07:05","modified_gmt":"2022-03-02T18:07:05","slug":"dual-or-variable-rate-commission","status":"publish","type":"post","link":"https:\/\/nwfl4sale.com\/dual-or-variable-rate-commission\/","title":{"rendered":"Dual or Variable Rate Commission?"},"content":{"rendered":"
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Most if not all Florida MLSs provide participants a way to disclose whether their listing agreement for sale or rent contains a dual or variable rate commission arrangement. However, many members don\u2019t fully understand the \u201cdual or variable rate\u201d definition.<\/p>\n<\/div>\n
ORLANDO, Fla. \u2013 The National Association of Realtors\u00ae\u2019 Code of Ethics obligates all Realtors to disclose the existence of dual or variable rate commission arrangements to cooperating brokers as soon as practical. Most MLSs enable participants to make this disclosure when completing an MLS entry form.<\/span><\/span><\/p>\n What is a \u201cdual or variable rate\u201d commission arrangement? It\u2019s defined in Article 3, Standard of Practice 3-5, as \u201clistings where one amount of commission is payable if the listing broker\u2019s firm is the procuring cause of sale\/lease and a different amount of commission is payable if the sale\/lease results through the efforts of the seller\/landlord or a cooperating broker.\u201d<\/span><\/span><\/p>\n Under these agreements, the property owner typically owes less commission if the listing broker handles both sides of the transaction, and a higher commission if another brokerage firm procured the buyer or tenant. Technically, it could also apply if the owner has agreed to pay more if the listing broker has both sides, although those types of listing arrangements are extremely rare.<\/span><\/span><\/p>\n Now that we\u2019ve looked at the correct definition from the Code of Ethics, what\u2019s the wrong<\/em> definition?<\/span><\/span><\/p>\n Many members think that it\u2019s when the amount of compensation the listing broker receives is different from the amount offered to the cooperating broker. When the cooperating broker discovers this \u2013 often when they see it on a closing statement \u2013 they think it\u2019s an undisclosed dual or variable rate. But it isn\u2019t.<\/span><\/span><\/p>\n A dual or variable rate is analyzed solely from the seller\u2019s perspective: Do they owe a different amount if the listing broker handles both sides? In this example, no. The amount the listing broker gets and the amount the cooperating broker gets are different. However, the total amount the seller owes is the same, regardless of whether the listing broker has both sides or not.<\/span><\/span><\/p>\n Is it okay for a seller and listing broker to agree to this uneven split? Yes. The listing agreement and amount of commission described in it is negotiable, so those terms are up to them.<\/span><\/span><\/p>\n What can a buyer\u2019s representative do if they believe the amount offered is too low? In short, they can ask the buyer or listing broker if either is willing to add commission. NAR provides a more detailed article about a buyer\u2019s broker negotiating commissions<\/a> on its website.<\/span><\/span><\/p>\n This rule actually describes a total of three possible disclosures. The first disclosure, which we already covered, is the listing Realtor\u2019s obligation to disclose the general existence of this arrangement when the amount the seller owes is different when the listing broker represents both sides. That\u2019s where the MLS checkbox \u201cdual or variable rate\u201d comes in to help with compliance.<\/span><\/span><\/p>\n The second disclosure only kicks in if a cooperating broker asks what the difference is. When that happens, the listing member must provide a number showing the actual difference. For example, if a cooperating broker asks what the difference is, the listing side would need to respond with a statement like \u201cseller will owe X% less (or $Y less) if our company has both sides of the transaction.\u201d<\/span><\/span><\/p>\n