The Multiple Listing Service® is a system that real estate brokerages use to share information with each other about properties that are for sale. It provides us with opportunities to quickly share details about our listings with all local agents who participate and it also provides us with a large inventory of homes that we can introduce our buyer clients to.
One of the characteristics of an MLS® listing is an “offer of compensation.” The listing brokerage agrees to share the negotiated commission with any other brokerage that might bring a buyer who agrees to purchase the property. That offer of compensation is published with the listing data on the member based MLS® system. In most cases, the compensation offered gets lower as the price of the home goes up. Most commonly, we’ll see something like what you see below.
3% on the first $100,000, 2% on the second $100,000 and 1% on the balance of the sale price.
Recently, I noticed an MLS listing priced at $399,900 with the following compensation offer.
0% on the first $350,000, 25% on the next $50,000 and 3% on the balance of the sale price.
If you were about to make an offer on this house would you want to know that your agent could be earning nearly two times the commission available on most listings in this price range? Would you want to know that your agent would earn an extra $250 for every additional $1,000 you agreed to pay?
Should you be entitled to full disclosure on this extraordinary and unusual compensation offer?
I think most buyers would want to know and I’m also of the opinion that they’d be entitled to know. Don’t be afraid to ask your buyer’s agent how he or she is paid and instruct them to advise you if you’re about to make an offer on a property that has any selling incentives or extraordinary compensation offers available on it. Better yet, understand that you’re really paying the fee and agree up front on how much it will be.
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