If no commission is taken, does agent still owe broker?

Question

Suppose this scenario:

Agent takes 75% broker takes 25% split

Agent is part of a deal where commission is 3% but foregoes it so it's factored into the asking price instead (like instead of offering $100k and taking a 3% fee they offer $97k and 0% fee, basically the same offer just structured differently)

Does the agent still owe the broker money? Thanks!

Russell Brazil · Answer

The entirety of the commission belongs to the broker....so you as the agent can not actually forgo the commission without the brokers permission.

Mike Cumbie · Answer

Depends on the agreement between brokerage and agent.

Nathan Gesner · Answer

@Ryan Dodge every transaction belongs to the Broker. If the Broker is worth their salt, they will have a written agreement with the agent stating specifically what fees the agent will charge and when/how the agent can deviate. For example, I require my agents to charge X% with authority to reduce it X% in specific situations. If they want to reduce it lower than that, they must have my approval in writing.

What you're suggesting is that the agent charge no fee, thereby conducting business under the Broker's license without compensating the Broker. In my neck of the woods, I call that theft. I would fire the agent and demand payment of my share of the commission or take them to court, if necessary.

Steve Vaughan · Answer

Sounds shady to me, and I have much experience on the shady side and am not an agent.

I buy this way all the time as 'compensation' for the additional risk of going solo.  I don't have a broker with E&O insurance or anyone to back or advise me.

I don't have a broker the other agents know and hopefully won't try to play.  Just ask @Russell Brazil what happens when an unrepresented buyer submits an offer on one of his listings.

All this to save 25% of $3k? Just submit through regular channels.

Ryan Dodge · Answer

The example was just theoretical, I've always just paid the % I just wanted to be sure I wasn't doing it in a stupid way.

Thanks for the input everyone!

Henry Lazerow · Answer

If you produce a lot normally and are at a reputable firm most managing brokers would let it slide. If you are at a small firm or just doing this part time I could see getting charged being fair. You are using their insurance, etc.

Steve Morris · Answer

"Does the agent still owe the broker money? Thanks!"

In most cases, the broker is responsible for agent's RE activities as much as agent is.  Broker should review all paperwork as soon as submitted.  Agent owes duty of full disclosure to his broker.

Having said that, most brokers will allow you buy property for personal at a greatly reduced fee (like enough to pay for admin and E&O).

What agreement did you have with your broker?

Greg H. · Answer

Absence being spelled out in your agreement, look at it this way.  Your broker is ultimately responsible for your actions.  Liability is much greater in a transaction where you are the principal as well.  Would you expect a business to take on that kind of liability for free?

Brad Miller · Answer

As was already said it depends on your agreement with your broker.  Most expect to be made whole regardless of the transaction.  So in your case the broker would expect their 25% even if you forgo your commission.

If no commission is taken, does agent still owe broker?

Most Popular Reply