Blog Topic

Perhaps these are mere coincidences - or could it be a reflection of the times?

I received two unrelated phone calls from two unrelated agents on two unrelated transactions in one week. But they had one thing in common - MLS Commission dispute involving REO properties.

Listing properties for lenders is anything but routine for many agents. Also, different lenders have different ways of doing things. Sometimes they change their conditions in the middle of the listing period or even ask the listing agent to put rather unusual conditions in their counteroffers which tend to scare away or frustrate some buyers. I wonder if the lenders' less than routine way of selling the properties threw some agents off a little and got them out of their "comfort zone" and caused them to make mistakes.

Whatever the reasons may be, I'm seeing more and more MLS commission disputes.

As realtors, when we use the MLS to market a property (for sellers in the case of a listing agent) and to look for a property (for buyers in the case of a selling agent), we're bound by certain rules within the MLS.

There's an MLS rule that deals with a listing agent's right to modify or revoke an MLS listing after it has been published - in case you've not paid attention to it until now.

The two phone calls that I received both involved the exact same issue - when is an agent allowed to modify the terms of the listing?

Case #1

Listing agent shows Comp. at 3%. Selling agent saw the listing while it was at 3% and procured a full price offer, called the listing agent to let him know that he's got the offer, and waited for the listing agent to tell him where to send it too. This triggered a duty by the listing agent to compensate the selling agent 3% of the purchase price should the transaction close escrow. But the listing agent told the selling agent right then that he had already reached an agreement with the lender to change the Comp to 1% before the selling agent called him but he didn't get around to changing it. Later the listing agent made the change from 3% to 1%. The transaction closed escrow. The selling agent waited until the escrow had closed before he demanded the 2% difference.

The case went to arbitration. The listing agent defended his position by arguing that MLS rules allowed the agents themselves to have an independent agreement regarding the listing and he and the selling agent had an oral agreement that the selling agent would accept the 1% even though it was not put up until later. Yes, MLS rules do have that exception but his problem is the agreement was oral and ultimately it was a credibility contest and he lost. Lesson learned. If you're going to have an independent agreement, get it in writing to protect yourself.

Case #2

The issue and facts are similar to Case #1 except that the change of terms didn't involve the Comp but additional compensation that was expressed in the form of bonus to the selling agent which got taken away from that listing after the selling agent has procured the offer but before the lender made the counteroffer.

Despite the fact that in a typical transaction the buyer had no involvement or say in the commission paid to the agents, the lender strangely put a condition in the counteroffer asking the buyer to agree to and be okay with the removal of the bonus commission from the listing. Now a selling agent is normally not a signatory to the purchase contract. Even if the buyer accepts this condition, buyer's agreement is not binding on the selling agent. You cannot ask the buyer the agree to something in the MLS to which he's not a part of.

Both cases involved changing of terms in the MLS and neither appeared to the permitted under the circumstances, absent an independent agreement between the listing and selling agents that's it''s okay to make the change after the selling agent had relied on them before he learned of the decision to make the change.