Is it true that agents won’t show a house if the commission is say, 2% instead of 3%?

Question of the Week:

On MLS agents can see their potential % if they bring a buyer. I have heard that if this % is say 2% rather than 3%, than many agents do not show this house to their client at all. Can someone comment on this?

Answer:

Great question. It’s one that can be touchy for some agents. Let me give you a straight answer…which will take a bit of a long explanation.

If the buyers have signed a Buyer Agency Agreement, we are legally bound to represent their best interest. One of the ways we do this is by showing them every property that matches their criteria regardless of the cooperating commission.

If the buyers have signed a Customer Service Agreement, the relationship is different. Although we do not legally represent the best interests of the buyer, we have to treat them fairly and honestly and we cannot misrepresent anything. Since we are not legally bound to represent the buyer’s best interest, we do not have to show them every property that matches their criteria. This form is usually signed under special circumstances and is typically not the ‘regular’ way a realtor works with a buyer.

Going back to the Buyer Representation Agreement; it should be signed at the beginning of the home searching process since it protects the buyer and ensures he receives the best customer service. Within the agreement, there is a section where it outlines the commission to be paid to the cooperating agent. Typically this is 2.5% in Toronto. If we show the buyer a home with a cooperating commission that is less than that, we’re supposed to advise the client of this before showing the home and they would be responsible for the deficiency in the commission. In other words, if the vendor offers 2% and the buyer signed an agreement with 2.5%, then the buyer would be responsible 0.5% of the fees to be paid to the cooperating agent.

Having said all this, many agents will not ask their buyer clients to pay for the difference. Or many agents choose not to work with a Buyer Representation Agreement from the beginning of the home search process. They are therefore paid whatever is offered to the cooperating agent. Given this, there are many agents who will not show homes that offer less commission than what is considered the ‘usual’ in the area.

I always advise my seller clients to offer the usual cooperating commission. It will generate more showings which typically means a faster selling time and higher selling price if the marketing is done propertly. Unfortunately some agents choose to look after their fees above all else and will not show properties offering less than the usual cooperating commission.

What’s important to consider, is that if you choose a good agent, the marketing plan he/she will implement will certainly net you more money in your pocket regardless of the fees. So the difference between 2% or 2.5% becomes irrelevant since ultimately you will walk away with more money in your pocket.

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