Understanding Cooperative Compensation

Listing brokers can’t lower payments to selling agents after a purchase offer is made.

Q. I am representing a buyer for a property listed in my MLS. The full-price offer my client submitted was countered, and the listing agent lowered the cooperative compensation listed in the MLS by half a percent. I made a copy of the MLS listing showing the cooperative compensation when the offer was first submitted. What is the rule on making changes to cooperative compensation after a purchase offer has been submitted?

A. Changes in cooperative compensation are covered by Article 3 and Standard of Practice 3-2. However, it’s worth keeping in mind that sharing commissions, as opposed to the details of cooperation, is not itself an ethical obligation. Article 3’s duty requires that “REALTORS® shall cooperate with other brokers except when cooperation is not in the client’s best interest. The obligation to cooperate does not include the obligation to share commissions, fees, or to otherwise compensate another broker.”

Standard of Practice 3-2 provides direction on how and when cooperative compensation can be changed, both to be effective and to determine whether a violation of Article 3 might have occurred. “Any change in compensation offered for cooperative services must be communicated to the other REALTOR® prior to the time that REALTOR® submits an offer to purchase/lease the property. After a REALTOR® has submitted an offer to purchase or lease property, the listing broker may not attempt to unilaterally modify the offered compensation with respect to that cooperative transaction.”

While an ethics or arbitration hearing panel would make the decision, it seems clear from your situation that the change in cooperative compensation made by the listing broker after you submitted the purchase offer would not change the amount you were already entitled to in this transaction. It also seems that the listing broker attempted to unilaterally lower the offered compensation and would be in violation of Article 3. Once you have submitted the offer to purchase, the cooperative compensation in that transaction can’t be changed without your agreement. That understood, it’s equally important to remember that simply asking selling agents if they’d be agreeable to renegotiation of the cooperative compensation payable isn’t a Code violation.

Have a dilemma? Send your ethics questions to ethics@realtors.org.

This originally appeared in print under the title, "Rules of Cooperative Compensation"