Question: Do I have to show a property to my buyer client if no cooperating compensation is offered (or what is offered is ‘too low’)?

Answer: First, look to the duties owed to your client under the Real Estate License Act. Section 15-15 (a)(2)(F) advises that the duties of a licensee include “acting in a manner consistent with promoting the client’s best interests as opposed to a licensee’s or any other person’s self interest.” With no brokerage agreement where the buyer might come out of pocket, the duty of the agent would be to show the property regardless of compensation because the agent’s duty is to the buyer client over self. The Code of Ethics echoes this sentiment in Article 1: “When representing a buyer, seller, landlord, tenant, or other client as an agent, REALTORS® pledge themselves to protect and promote the interests of their client…”

Remember that Section 1450.770 (e) of the Rules under the Real Estate License Act state that “No licensee shall use real estate contract forms to change previously agreed commission payment terms.” Code of Ethics Article 16, Standard of Practice 16-16 also states that “REALTORS®, acting as … buyer/tenant representatives or brokers, shall not use the terms of an offer to purchase/lease to attempt to modify the listing broker’s offer of compensation to … buyer/tenant representatives or brokers nor make the submission of an executed offer to purchase/lease contingent on the listing broker’s agreement to modify the offer of compensation.” You could ask your client for direction, but if they want to see the property, you must show it if there is no agreement to the contrary between the brokerage and the client.

However, if you have a buyer brokerage agreement in place that calls for the buyer to be responsible to pay your compensation in the event there is no offer of compensation from the listing agent (or the offered compensation does not cover the whole amount as set forth in your buyer brokerage agreement), you could mention to your buyer that this particular property does not include an offer for seller or listing agent to pay cooperating compensation (and provide a reminder as to the compensation terms of the brokerage agreement that they have agreed to). Buyer can then decide if they want to view the property. If the buyer is interested in making an offer, buyer or buyer’s attorney might then request that the seller pay the buyer’s broker compensation as part of the purchase contract.

Question: If I am a buyer’s agent in a transaction, may I use the terms of the purchase contract to make sure that my company’s portion of the commission will be paid to my company? May I refuse to present the contract until the listing office agrees to modify the cooperating compensation?

Answer: Assuming the buyer’s broker does not have a written agreement with their buyer to be paid, the general answer to these questions would be “no”, under the Illinois Real Estate License Act of 2000 (the Act), the administrative rules of the Act and the REALTOR® Code of Ethics (the Code). Section 1450.770 in the rules under the Act states as follows: “No licensee shall use real estate contract forms to change previously agreed commission payment terms.” (referring to an MLS offer of compensation). Standard of Practice 16-16 under Article 16 of the Code states: “REALTORS®, acting as…buyer/tenant representatives or brokers, shall not use the terms of an offer to purchase/lease to attempt to modify the listing broker’s offer of compensation to…buyer/tenant representatives or brokers nor make the submission of an executed offer to purchase/lease contingent on the listing broker’s agreement to modify the offer of compensation.”

Now, let us analyze what these provisions mean in the context of a hypothetical transaction where the property is listed in the MLS, your company is a MLS participant, you have the prospective buyer and you are not happy with the amount of compensation the listing firm is offering through the MLS. You have a statutory duty under the Act to serve your buyer’s best interests over your own. So, if you were to write your buyer client’s offer on your area’s commonly used purchase contract form, adding a provision to that form that seeks to change the MLS offer of compensation by stating that the seller will owe a certain percentage or dollar amount that is greater than the MLS offer, you have potentially violated both the Act and the Code.

It is always important to keep parties to the various related contracts straight in your mind. The parties to the purchase contract are typically the seller and the buyer. Neither the listing and selling brokerage companies, nor their agents are parties to that purchase contract. Therefore, it may be very difficult, if not impossible, for the brokers to seek enforcement of such a provision in the purchase contract even if it were allowable. On the other hand, the MLS unilateral blanket offer of compensation is a “contract” between the listing office and the cooperating office when the cooperating office performs by being the procuring cause in a successful sale with your buyer client. So, if you are the cooperating agent, it is best to seek any modification to the MLS offer of compensation at your first contact with the listing agent. Recognizing that the listing office might not agree to alter its MLS offer, you may still have agency duties to your buyer to move forward if the subject property is best for them.

Finally, let us suppose that your company has an exclusive brokerage agreement with this buyer client. The exclusive brokerage agreement calls for your company to be paid through the MLS offer of compensation. However, there is an additional provision that states that your total commission is “X” percent and if your company does not receive the entire amount from the listing side, the buyer will owe your company the difference. Let us also assume that your buyer understands all of this completely. So, the buyer includes a provision in the purchase contract that says the seller will pay the amount due the buyer’s brokerage firm. The buyer is a party to the contract and the buyer and seller can agree to most anything they see fit during the course of their negotiations. There still may be some questions as to the legal right of the buyer to seek enforcement of these provisions should the sale close, but at least you have not violated the Act or the Code because the action was not yours, but your client’s.

It is also important to note that, as the agent for the buyer client, you may not refuse to present an offer in order to encourage the listing side to capitulate to your demands. Buyers and sellers can do almost anything they wish in the course of contract negotiations, but you should be careful that when you are involved in negotiations, that you are following your client’s direction, not your own. Should you have further questions on situations like this, you and your broker might wish to consult your company’s legal counsel.