Tuesday, February 14, 2017

Commission Rates in Real Estate Brokerage are Discretionary to the Broker and Property Owner

A Lieb School student recently took a final exam for our Conflicts of Interest ONLINE course and explained how commission rates are set by the Department of State.

They are NOT.

In fact, the Department of State says the following about commission rates:

Commission Rates

The commission or compensation of a real estate broker is not regulated by statute or regulation, therefore the amount and terms are negotiable. A real estate broker shall never offer a property for sale or lease without the authorization of the owner. Therefore, prior to the listing or marketing of a client’s real property, it is incumbent upon the real estate broker and the client to mutually agree on a reasonable rate of compensation. 

As a result, real estate salespersons and property owners should carefully negotiate commission rates where they also set the consideration that the real estate brokerage will provide to the property owner in exchange for higher or lower rates. To illustrate, a real estate brokerage that is willing to create a video about the property should be able to demand a higher rate than a real estate brokerage who will not create any digital advertising.