Archive for the ‘Commissions’ Category

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

Wednesday, November 14th, 2012

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,, 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.

Upfront Fees Charged by Real Estate Agents

Thursday, November 8th, 2012

In some cases, whether you’re a buyer or a seller, your agent may ask you for an upfront, or pre-closing, payment. There isn’t necessarily anything wrong with this practice. In fact, the fee may be a part of a comprehensive plan by your agent that will give you an advantage over other buyers or sellers in your area. But make sure you ask your agent a few questions first:

1. Is some or all of the fee refundable if a transaction is consummated (i.e., the agent succeeds in selling your home or finding you a new one)?

2. What is the fee for? For sellers, is it to help market the property? For buyers, perhaps it’s a fuel surcharge if your agent will be shuttling you all over town? Or is it simply an “administrative” fee designed to increase broker revenues?

3. Is this fee charged by all agents who work for your broker, or just this particular agent?

4. Under what circumstances, if any, will the agent (or perhaps supervising broker) waive or negotiate the fee?

5. Perhaps most importantly, shop around! Are other agents in your area asking for an upfront fee? If so, is it in the same ballpark as your agent’s fee?

New York Realtors® Weigh-In on Commissions

Wednesday, May 12th, 2010

Earlier this month The Real Deal writer Melissa Dehncke-McGill asked agents in the Big Apple to opine on what’s happening nowadays with real estate commissions. Here are some of the most notable quotes…check out the full article for more insights:

On 6% commissions: “Some pay less and some pay more. Everyone wants to pay less, but I have had some [sellers offer] incentives. For example, someone who needs to move and will pay more if it is sold within X amount of time. I have seen a little bit of that.”

More on 6% commissions: “Every agent and company has different approaches in listing commissions. While our base commission has basically stayed the same, we are working to persuade sellers to offer high co-broker commissions to help encourage other brokers to show our inventory. We are even adjusting co-broker commissions on new development contracts signed years ago and on developments that are just coming to market.”

On “rescuing” a deal: “Lately we’re seeing an increasing amount of buyers asking what our commission is and requesting to leverage it in order to bridge a gap between a buyer’s offer and the seller’s counteroffer. The practice of sellers asking to help bridge a gap is common and, because I represent them, I’ll work with a seller in certain circumstances. However, a buyer asking how much we are making just shows how cutthroat the market can be today and how buyers feel they hold the upper hand.”

On co-brokes: “From a co-broke perspective it betters the chances of [brokers] bringing their buyers to your property when it’s at a full 3 percent commission as opposed to 2 to 2.5 percent, which we are seeing a lot of listings being sent out at.”

On direct deals (buyer without an agent): “There are more direct deals happening now than before. There were always agents during the peak of the market that didn’t co-broke because they had buyers coming directly to them. … [Now], I have seen more direct buyers coming to the properties because they have more resources at their fingertips.”

Chicagoland Realtors®, what say you?