Is the MLS co-broker fee owed if the seller terminates the contract?

Release Date: 07/19/2018 Will Martin, Martin & Gifford, 



QUESTION: I helped a buyer client put an MLS listing under contract. Just before closing, the listing agent called me to say that the seller had decided not to sell the property. The seller has offered to reimburse the buyer her Due Diligence Fee and all of her Due Diligence Costs, and although she is upset, the buyer is likely to accept the seller’s offer rather than seek specific performance of the contract. My question to you is whether I am entitled to the fee that the listing agent offered in MLS? I think I did my job!


ANSWER: When an MLS participant lists a property in MLS, he or she makes a blanket offer of compensation to all other MLS participants. Entitlement to the compensation is determined by the cooperating broker’s performance as the “procuring cause” of the sale or lease. So what exactly does the phrase “procuring cause” mean? According to NAR policy, procuring cause in broker to broker disputes is defined as an “uninterrupted series of causal events which results in the successful transaction.” The phrase “successful transaction” is defined as “a sale that closes or a lease that is executed.” We agree that you did your job, but unfortunately, if the transaction doesn’t close, a cooperating broker in a situation like yours simply does not have a contractual claim to the cooperative compensation offered by the listing firm.

Having said the foregoing, we offer the following additional thoughts. First of all, the listing firm may well be entitled to recover its fee from the seller according to the terms of the Exclusive Right to Sell Listing Agreement (form 101). If the listing firm receives all or part of its fee from the seller, would it then be obligated to pay you the cooperative compensation offered in MLS? It may be argued that since the transaction never closed, you still don’t have a contractual basis to recover the cooperative compensation from the listing agent according to MLS rules. However, your firm may have an “unjust enrichment” claim to the offered compensation, on the theory that it would be unjust to allow the listing firm to retain the entire fee at the expense of your firm, since it was the efforts of your firm in procuring a ready, willing and able buyer that triggered the listing firm’s entitlement to its fee in the first place.

Secondly, your firm may possibly have a claim to your fee against the seller as a so-called third-party beneficiary of the listing agreement. To establish a claim based on the third party beneficiary doctrine, you would have to prove that the listing agreement was valid and enforceable, and that it was entered into for your firm’s direct, and not incidental, benefit. Form 101 specifically authorizes the listing firm to cooperate with and compensate other brokers and specifies the amount of compensation that will be offered. Although your firm is of course not identified by name in the listing agreement, it could be argued that your firm is one of a class of persons for whose benefit the listing contract was made.

The claims described above are novel claims as applied to the facts of your situation and would be handled through the court system rather than the arbitration facilities of an association of REALTORS®. We would strongly recommend that you speak with an attorney before you consider pursuing either of them.

NC REALTORS® provides articles on legal topics as a member service. They are general statements of applicable legal and ethical principles for member education only. They do not constitute legal advice. The services of a private attorney should be sought for legal advice. © Copyright 2018. North Carolina Association of REALTORS®, Inc. This article is intended solely for the benefit of NC REALTORS® members, who may reproduce and distribute it to other NC REALTORS® members and their clients, provided it is reproduced in its entirety without any change to its format or content, including disclaimer and copyright notice, and provided that any such reproduction is not intended for monetary gain. Any unauthorized reproduction, use or distribution is prohibited.

Can You Justify Your Commission When Asked to do so?

Use your Expertise to Justify the Commission You Charge

Everyone wants to feel appreciated, but your clients need to see the value in what you bring to their real estate transaction. 

Remember: It is really is ALL ABOUT THEM!

You don’t want to come off as self-important, but you do want to educate customers about what it is that you do, and most importantly why you are worth what you charge to coach them through the sale.

So what are the reasons YOU are worth the commission? And what will you say when a sellers says… “I’ll consider using you to list my home if you will reduce your commission”?

What are you going to say?  The dazzling response of... “well… uhmmm” just isn’t going to get your point across. You have to be prepared to answer the hard questions:

#1. You have access to better information to assess the property’s value. A full time REALTOR’s intimate knowledge of the local market is priceless information. This is the first place you will earn your commission. A 1% decrease in commission on a $300,000 home is $3,000, but a $10,000 low miscalculation in pricing is a $7,000 gain!

#2. You know what makes homes sell and what buyers are looking for. You have a keen eye for the small changes in staging, paint colors, and needed repairs to bring maximum return for the seller prior to placing a property active on the market. You are skilled in portraying a storyboard with photos and room descriptions to highlight the attributes and attract internet shopping buyers.

You can market to agents with buyers who are actively looking in your area, and you may have have a full service relocation arm of your firm which is constantly bringing new buyers into our area. You will only market your listings to qualified buyers, and all showings will be secured through a ShowingTime Service, where you will know every time a showing occurs and feedback can be sent directly to the sellers phone via email or text.

#3. You understand the appraisal process. Many consumers don’t even understand why an appraisal is done on a home when it is being purchased. Federal rules now prohibit many forms of communication between the appraiser and the buyer, seller, and agents. A full-time knowledgeable REALTOR can give an appraiser “legal” supporting data to keep the appraisal up and in line with the contract price.

#4. You are a professional negotiator. Being able to negotiate your commission is the first indication to a seller of how good you are. Saving a seller $5-10,000 through proper negotiation skills will more than recover the commission reduction the seller is asking for. Also if they use you as their Buyer Agent, your mad skills in negotiating will save them money there as well!

#5. You do most of the thinking for your clients. You can supply peace of mind by handling the most taxing parts of the transaction for them. Your client’s won’t have to tax their brains to take the time to learn the ins and outs of the selling process because you already have the knowledge. They can focus on the bottom line while you engage with those who want to take a piece of it.

#6. You are properly trained. It’s impossible to do what you do, and at the skill level you perform without the proper training required to understand the nuances of the real estate industry. Not only are you properly educated, licensed, trained, coached, and managed to properly assist seller and buyers, but you are required to take regular continuing education classes to keep your skills in-line with current market trends. And in addition because you are a full-time REALTOR you have the years of experience to help your clients through even the toughest transaction.

The REALTOR Brand has been around for over 100 years, and you are carrying on a legacy of professional and exemplary service. You are backed by an industry with leaders who lobby for better training, private property rights, and laws which protect the consumer from fraud. So when you are asked the question… “will you reduce your commission” you can proudly and with confidence say “ NO, But let me tell you why”.

4 old school tricks to ignite your business the last half of 2018….

OK…. OK…..OK, I know we are in the world of Technology, Apps, Social Media, and Smart Phones…  But Hey, Back in the day it was old school baby! Thermal paper fax machines, MLS Books…. (YES BOOKS made out of paper and you actually had to turn the pages…by hand), The pink “while you were out” message slips (that’s right, no voice mail), and bag phones the size of an allowable carry-on. And to the surprise of many, some of the prospecting methods we used to look for new business can and does still work today.

Here are a few tried and true methods to add more digits to your income by the end of the year.

Expired and Withdrawn listings: Yes they do still exist even in a robust market. I suggest selecting a target area where you want to obtain listings and start by pulling expired and withdrawn from the MLS every morning. Print a copy of the listing and write a hand written note asking if they still want to sell, and suggesting a meeting so you can help them discover why it didn’t sell with the first agent.  Go by the house, knock on the door, and if they answer turn on the professional charm, if no answer… leave the note, MLS sheet and a business card.

Geographical Farming: This was the one thing I got the most listings from, (other than personal referrals)… Pick an area, gather data, design a newsletter, and Voila!… you immediately become the neighborhood expert. It is much easier these days to compile the data you need, and then on-line design a newsletter than it was in 1988… so why aren’t you doing it?   

FSBO’s:  Arrrrg! They know it all… and are the most difficult sellers to work with right? Not really… if you approach them the right way. Always open with “ My goal is to help you get your house sold” … help them with suggestions for staging and pricing, but also let them know their home is only active on the market when they are there to show it. With you it is active 24-7. Put them on a frequent drip campaign and call them often to check in, plus keep them in mind for your buyers. BONUS TIP: Even if you don’t get their listing you my gain their confidence so they will use for for their next purchase!

Face to Face:  YES this is the ultimate old school prospecting method… no texts, no email, no Instagram or FaceBook. Just old fashion eye to eye, relationship building conversation. Lunches, coffee breaks, drinks, card games, bowling, fishing, golf, dinner clubs, pool leagues, hunting clubs, book clubs, knitting groups, church groups, volunteering, or anything you like to do things…. Just get out there and mingle, make new friends, rekindle old relationships, and always let them know you are never too busy for any of their referrals!

Last but not least…. Work your book of business till it bleeds referrals! Your friends and family, and past clients all love you, but if you don’t remind them how important they are to your success they forget. These 3 groups (friends, family, past clients) should become your #1 source for new business… if it’s not, you are missing thousands of dollars in lost opportunity every year.

So there you have it… 4 “old school” prospecting techniques for today’s high tech market!

For more info on Realtor Rescue Coaching Programs go to www.RealtorRescue.biz

What Do REALTORS Need To Do When Selling Their Own Home?

 Release Date: 07/05/2018
Bill Gifford, Martin & Gifford, PLLC

QUESTION: My husband and I were have been talking about downsizing. A friend just called and asked if we might be willing to sell our house to her. She is not planning to hire a real estate agent. Are there any rules that apply when a licensed agent sells their own home? Can I help my friend fill out a written offer? Are there any disclosure requirements?

ANSWER: The Real Estate Commission’s Agency Agreements and Disclosure rule (A.0104) states: “A broker who is selling property in which the broker has an ownership interest shall not undertake to represent a buyer of that property (except for sales of certain commercial real estate).” As the Real Estate Commission has written, this type of representation would create an obvious conflict of interest. To avoid any appearance of impropriety, you should encourage your friend, preferably in writing, to seek representation, either from an attorney or another licensee. However, if your friend decides to proceed without representation, you can proceed with selling your home to her if you follow certain guidelines.

First, you need to give her a Working With Real Estate Agents brochure. Under the rules, that delivery must occur at “first substantial contact” with a prospective buyer, and in no event later than three days from the date of first substantial contact. Be sure to check the box in the brochure indicating that you are representing the seller.

Second, although the license law and the Commission’s rules do not require disclosure of your status as a licensed agent, Article 4 of the REALTOR® Code of Ethics does. It states: “In selling property they own, or in which they have any interest, REALTORS® shall reveal their ownership or interest in writing to the purchaser or the purchaser’s representative.”

Third, as a seller of residential property, you have an obligation to deliver a Residential Property Disclosure Statement to the buyer. While you are permitted to check the “No Representation” boxes on that form, real estate licensees have disclosure obligations that exceed those of other sellers: licensees are required to disclose all material facts in any transaction in which they are involved, even their personal transactions (see also, Article 2 of the REALTOR® Code of Ethics). You should be sure to disclose all material facts to your buyer no later than the time an offer is made.

Finally, since you cannot represent the buyer in her purchase of your home, you cannot provide her with any sort of advice in her completion of an Offer to Purchase and Contract. At most, you can show your friend the blanks in the form that need to be filled in. If she asks for guidance, you should remind her to seek that guidance from an attorney or from another licensee.

NC REALTORS® provides articles on legal topics as a member service. They are general statements of applicable legal and ethical principles for member education only. They do not constitute legal advice. The services of a private attorney should be sought for legal advice. © Copyright 2018. North Carolina Association of REALTORS®, Inc