What’s a Co-Broke and Why Should a Seller Care?

You probably won’t see anything in your listing agreement about a co-broke. Same thing when you look at property listings on a broker’s website, Realtor.com, or any other public property listings site. Absent a disclosure statement at closing that you may or may not receive, you may never have to understand what a co-broke is or why it matters.

That could be a mistake that you, as a seller, don’t want to make. [We’ll cover the issue from a buyer’s perspective in a separate post]

The MLS. You presumably know that soon after you fill out your listing agreement with your listing agent, your property information will soon be submitted to the local multiple listing service, or MLS. In a sense that is the master property database of properties being offered for sale by agents on behalf of their seller-clients in your area. It’s a proprietary database, meaning you have to be a real estate agent (and a member of that MLS) to have access to the database. With the (controversial) growth of property listing sites on the Internet, you can find property information all over the web. Some of it originates from your local MLS, while some is submitted directly by brokers. But none of it includes every last data field contained in the proprietary MLS database. For example, none of the the public property listing sites say anything about a co-broke.

Commission Sharing. Suppose your listing agent has offered to help sell your home in exchange for a 5% commission. Ever wonder where that 5% goes? Typically half goes to the brokerage/agent representing the buyer, with the other half remaining with the listing agent and his/her brokerage. The listing agent typically “splits” that remainder with his or her brokerage. Sometimes it’s a 50/50 split, sometimes not. But what you should be thinking about is the original commission division between the seller’s side (listing agent and brokerage) and the buyer’s side (buyer’s agent and brokerage). [In a future post I’ll talk about situations where the buyer does not have a separate agent representing him or her.]

The Co-Broke. What determines whether half, or more, or less of the gross commission figure is shared with the buyer’s agent/brokerage? It’s the co-broke! (finally, 3 paragraphs in, he tells us!) When your listing agent enters your property information into the proprietary MLS database, there is a private field (meaning only persons with access to the actual, proprietary MLS database can view it) that contains the co-broke figure. It’s typically a percentage of the purchase price, but in some cases it may also include a flat dollar figure. By means of the co-broke, the listing agent “offers” agents representing prospective buyers part of the gross commission as an incentive to bring prospects to the property for a showing and, hopefully, to close a deal. This is how most agents who are representing a buyer in a deal get paid (there are of course exceptions to the rule). So your listing agreement may provide for a 5% commission, and your listing agent may enter “2.5%” into the private co-broke field on your property’s MLS listing. Again, this figure can only be seen by agents with access to the MLS database, and it is not set in stone.

So you now know what a co-broke is. But who cares? You should! Sometimes a listing agent, perhaps hoping it will draw extra attention to a listing, will offer more than what is customarily offered in a particular area. So instead of 2.5%, he or she may offer a co-broke of 3% or more. Conversely, an agent, possibly at the direction of the seller, may have reasons to lower the customary co-broke, offering buyer agents 2% or less.

What’s important is that you, as the seller, with a direct interest in all financial and marketing aspects of your home sale, should know what co-broke your agent is offering. Ask your listing agent (or prospective listing agent if you are wisely doing this due diligence before you hire an agent) what he or she will be offering as a co-broke. Is it at least in line with the local norm? Is it, or should it be, higher? If it’s lower than the local norm, why is that? If there is no local norm, ask your agent to articulate his or her thinking when setting the co-broke figure. You want to make the co-broke your business, sooner rather than later, because it may directly impact how quickly (or not so quickly) your home sells. More about this when we discuss the co-broke from the buyer’s perspective.

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