Question: Must a listing broker, when asked by a buyer’s broker, disclose what amount of compensation the listing broker has been authorized by the seller client to offer buyers’ brokers? Doesn’t the listing broker have a duty to disclose this amount when asked?

Article 3, Standard of Practice 3-1 of the REALTOR® Code of Ethics says that “terms of compensation, if any, shall be ascertained by cooperating brokers before beginning efforts to accept the offer of compensation.” Doesn’t this mean the listing broker must disclose the amount, if their seller client directs the listing broker not to disclose until the buyer’s broker submits an offer on behalf of their buyer?

Answer: Not necessarily. The answer to this question will depend on very specific facts, and to some extent, will depend on market conditions. In the present market, where there is a shortage of available housing, the seller client might direct their listing broker not to disclose any amount of compensation but to disclose that there could be seller-authorized cooperating compensation. The seller might want their listing broker to encourage the buyer’s broker to submit an offer which includes any of their buyer’s requests for concessions from the seller, one of which could be buyer’s broker’s compensation.

There is an argument that the listing broker could answer the buyer’s broker honestly that, while the listing broker is authorized to offer cooperating compensation off the MLS, the seller wants to see whether the buyer is asking for any concessions as part of the buyer’s offer to purchase. In addition, the seller and the listing broker may want to avoid paying more than the buyer has agreed to pay their own buyer’s brokerage. It is also important to note, according to the practice changes, the buyer’s broker may not accept more compensation than that agreed to in the buyer brokerage contract with the buyer. This seems like it would be lawful direction on the seller’s part, in which case, the listing broker could abide by this direction.

The buyer’s broker and the buyer have already negotiated the compensation for the buyer’s brokerage according to the terms of their own written agreement, which, depending on the circumstances, could be included as part of the buyer’s offer, along with other costs that are often negotiated in the transaction.

As market conditions change and more homes come to the market, sellers and listing brokers might change their strategies for marketing their properties to attract more buyers. However, steering is strictly prohibited for brokers who are REALTORS®, so buyer’s brokers must show their buyer clients any available listings that meet their buyer’s criteria and seller’s brokers need to present all offers so the sellers can make decisions based on the merits of the entire offer.

Whatever the market conditions, sellers and listing brokers must respond in a consistent manner to all buyer’s brokers who are inquiring.

Consumer Guide: REALTORS’® Duty to Put Client Interests Above Their Own