Is Commission The Motivation?
By Jim Palmer Jr.

In a recent rebuttal to a class action lawsuit, National Association of Realtors® attorneys cited a recent study that completely blows one of the arguments out of the water. One major point of the flawed lawsuit claims that many brokers are motivated by the amount of cooperating commission that a selling broker offers in an MLS listing rather than always doing what is good for the buyer. They claim that brokers seek out higher offered commission splits and steer buyers away from homes that have lower commissions even though those listings may fit the buyer’s criteria. The rebuttal cited an in-depth-study that found this argument to be a false premise. In fact, the nationwide study proved that no MLS in the country offered a search field for the amount of commission paid, making it extremely difficult for brokers to create showing lists based on offered commission. Not to say that some selfish brokers don’t look to see what the cooperating commission split is, but in general this type of action was proved to be the exception and not the rule.

This begs the question, “are listing brokers wasting their time and are motivated sellers wasting their money by offering monetary incentives to brokers who can bring an offer before a certain date?”

I have squelched this idea many times in my real estate career simply because I don’t believe most brokers are extra motivated by extra cash.  Most of them really do have their client’s best interest in mind and won’t steer their client to any specific listing just because of the offered commission rate. In these cases where the seller is very motivated, they would be better off to reduce the listing price rather than to attempt to kindle a spark of greed by waving extra cash around.

Another strategy might be to offer (in the listing remarks) that the seller will pay all or a portion of the buyer’s loan costs. It is common on FHA or VA loans for the buyers to ask for that concession and for sellers to agree to pay up to 3 or 4% of the purchase price. This strategy is legally allowed and even encouraged on government guaranteed loans and appeals to buyers who have limited cash on hand. Many conventional loans also allow this creative strategy which directly benefits the buyer and allows the seller to have an edge in a more difficult buyers market.