AAR’s Professional Standards Department responds to member calls regarding every aspect of a real estate transaction. One topic that tops the charts is the question of commission and, specifically, the reduction of commission in a short sale transaction. In her book Arizona Real Estate: A Professional’s Guide to Law and Practice, Michelle Lind, general counsel for AAR, offers insight into these types of commission questions:
“Assume the following facts: The property is listed in the MLS as a short sale subject to lender approval. The buyer submits an offer through the buyer’s broker. The listing broker submits the offer and and short sale package to
the lender. The lender responds that it will approve the short sale if the total commission is reduced by 2%. Both buyer and seller demand that the brokers reduce their commission to allow the transaction to close escrow…
Question: If the listing broker agrees to reduce their commission, must the buyer’s broker agree to split the reduction?
Answer: No. The buyer’s broker’s has no obligation to agree to split the reduction in commission. The buyer’s broker is entitled to the cooperative compensation offered in the MLS at the time the broker produced the offer.”
Excerpt from Chapter 4: Broker Employment Agreements – Page 80 (Second Edition)
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