Compensation Reduction if Listing Agent also represents Buyer
Compensation Reduction if Listing Agent also represents Buyer
Sometimes when you are representing a Seller, and have an opportunity to also represent the Buyer, your client may request a discount in the total compensation.
It’s important to understand how compensation really works before promising to reduce compensation that hasn’t yet been earned.
Compensation comes from the sales proceeds, which comes from a qualified Buyer obtaining a loan or having the cash to complete the purchase. If you as a listing agent attract the Buyer yourself and you decide that you want to represent both parties, it’s important to first think this through.
If you’ve never represented both parties, it’s important to discuss this with your Market Center Leadership Team Leader or Contract Support Manager.
Think about the following:
- Does this potential Buyer meet all of the criteria your Seller is looking for?
- If not, would you want to negotiate for both parties, or would that seem a departure from your ethical commitment to be a fiduciary with your Seller, an agreement that you’ve already entered into?
- Do you feel that you do less work when you represent both parties, or possibly do you do more work? Or perhaps it’s the same as any other transaction? Think about these things before you agree to anything.
- Keller Williams Realty’s and your liability is greater on a dual agency transaction!
- Your personal responsibility is greater on a dual agency transaction, i.e. how do you feel if this deal cancels?
- Should you decide that you have a Buyer that fits the criteria that your Seller is looking for and your role is bringing them together to complete this transaction in a way that all parties feel fairly represented and you’d like to reduce your compensation, you will need approval from your Team Leader should you reduce below 5%. Below is the link to the form for Policy for Compensation Reductions and/or Credits.
Consider these things:
- Many agents will not represent both sides of a transaction as a business standard.
- Many will decide on a case by case basis.
- Many will refer a Buyer to another agent in the same Market Center and receive a referral fee instead of representing both sides.
- Add an additional term in the listing agreement stating your name as listing agent. “In the event that ________ (your name) also represents the Buyer in this transaction, Keller Williams Realty would be a Dual Agent and total compensation would be _______.
- Please be sure to use proper wording when stating the reduction on your listing agreement.
- For instance, don’t say “If Listing Agent also represents Buyer, then compensation to be 4.5%.” You should say “If [Your Name] also represents Buyer, then compensation to be 4.5%.” This way, there would be no misunderstanding.
- Because your KW Market Center is technically the “Agent,” then another Agent in your Market Center (which could be considered as “Listing Agent”) could represent a Buyer and you would have to reduce your compensation when you wouldn’t have to.
- Be sure to disclose a Dual Variable Rate commission on your MLS property profile.
Classes on Dual Agency are taught in the Market Centers Monthly. Please attend before you enter into a Dual Agency situation.