Whenever a seller and the listing firm agree to a commission that is lower when the property is sold by an agent within the firm as opposed to a higher commission when a cooperating broker is compensated, specific disclosure must be made in the MLS. For example:

Jones Realty contracts with Seller Smith to advertise Smith’s property for sale. The listing contract provides:

If Jones Realty through the efforts of one of its own agents, procures a buyer, then Seller Smith will pay Jones Realty 6 bananas.

If Jones Realty must share the commission with a broker who is not employed by or affiliated with Jones Realty, Seller Smith will pay Jones Realty 10 bananas.

If a $250,000 offer was made through an agent affiliated with Jones Realty and another $250,000 offer was made through an agent with Bottom Line Realty, and assuming that the terms were comparable, which offer would Seller Smith likely take?

Correct! The offer made through the Jones Realty agent because Seller Smith would pay fewer bananas!

Because this type of arrangement may place a buyer working with a cooperating broker at a disadvantage, the cooperating broker and his buyer have the right to know the amount of the difference there is between the “in-house transaction” and the “cooperating broker transaction.” In this case, the difference is four bananas.

In the Wilmington MLS, this type of commission arrangement is disclosed by answering “Yes” to the Variable Rate radio button.

Cooperating brokers should be looking at each listing to discover whether the listing is subject to a “Dual ore Variable Commission” arrangement. If the listing is subject to one, call the listing broker and ask: What is the difference between the “in-house” commission and the cooperating broker’s commission? (Remember, in this case it was 4 bananas!). Alternatively, the listing broker could place the commission difference in the Non Public Remarks so the cooperating broker would not have to make a phone call to the listing broker.

The cooperating broker would explain to the buyer that if the seller received two offers for the same price based upon comparable terms, it is likely the seller would take the other offer. The buyer could be counseled to make an offer that is higher than the listed price that might include the 4 banana difference.

I hope this helps to explain the Rule that is provided below.

Section 5.11 Dual or Variable Rate Commission Arrangements: The existence of a dual or variable rate commission arrangement (i.e., one in which the seller/landlord agrees to pay a specified commission if the property is sold/leased by the listing broker without assistance and a different commission if the sale/lease results through the efforts of a cooperating broker; or one in which the seller/landlord agrees to pay a specified commission if the property is sold/leased by the listing broker either with or without the assistance of a cooperating broker and a different commission if the sale/lease results through the efforts of a seller/landlord) shall be disclosed by the listing broker by choosing Variable Commission “Yes.” The listing broker shall, in response to inquiries from potential cooperating brokers, disclose the differential that would result in either a cooperative transaction, or, alternatively, in a sale/lease that results through the efforts of the seller/landlord. If the cooperating broker is a buyer/tenant representative, the buyer/tenant representative must disclose such information to their client before the client makes an offer to purchase or lease.