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Case Interpretation Relating to Article 3:
Timing of Commission Negotiations
REALTOR® A signs a listing agreement with Seller B for the sale of her home. The home is priced at $1,000,000, and REALTOR® A files the listing with the MLS, offering a certain percentage of cooperative compensation.

REALTOR® C sees the listing and knows it would be a perfect fit for her buyers, but unfortunately it’s out of their price range. She discusses it with them, and they ask her to submit an offer for $900,000. REALTOR® C explains the risks in submitting an offer so far below asking price, but the buyers are in love with the home and ask her to submit the offer anyway.

REALTOR® C submits the offer to REALTOR® A, who discusses it with Seller B. Seller B is concerned about accepting an offer so far below the home’s asking price, so REALTOR® A offers to reduce her commission, as articulated in the listing agreement, by 1% if Seller B wants to accept the offer of $900,000 and ensure a quick sale. Seller B agrees to accept the offer and reduce the commission she pays to REALTOR® A by 1%.

REALTOR® A informs REALTOR® C that their offer was accepted, but that REALTOR® A is now being paid 1% less in commission. “Listen,” she explains to REALTOR® C, “it seems like both of our clients are happy with the price if it means the sale moves quickly. Would you be willing to split the difference on my reduced commission and I pay you 0.5% less in cooperative compensation than I specified in the MLS?”

REALTOR® C agrees to accept 0.5% less than the commission specified in the MLS. After closing, REALTOR® C files an ethics complaint against REALTOR® A, alleging a violation of Article 3, as illustrated by Standard of Practice 3-2.

At the hearing on the matter, REALTOR® C argued that by asking her to accept 0.5% less in cooperative compensation after the offer was submitted, REALTOR® A was unilaterally modifying the compensation with regard to that transaction. The Hearing Panel disagreed and found no violation of Article 3, noting that Standard of Practice 3-3 specifically authorizes listing and cooperating brokers to enter into an agreement to change the compensation for a transaction at any time, and that the Code of Ethics would never interfere with the negotiation of commissions between listing and cooperating brokers. The Panel also noted that REALTOR® C could have said no to the reduced commission, and in that instance REALTOR® A would have been obligated to pay the commission stated in the MLS.
We hope you enjoyed Issue #18 of Ethics Exchange 2021 brought to you by the Greater Milwaukee Association of REALTORS® (GMAR). The GMAR created this newsletter, each issue dedicated to a unique issue, because the REALTOR® Code of Ethics, on which our industry is built, is the foundation of what it means to be a REALTOR®.
Your proactive support of the Code of Ethics will assure your fellow REALTORS®, as well as members of the public, that every member of GMAR operates under the highest ethical standards.
Questions, comments or concerns regarding this issue can be directed to
Scott Bush at the GMAR Office (414-778-4929 or [email protected]).