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When I have an active listing of a home for sale, I’ll hold it open and enjoy meeting prospective home buyers and answering their questions about the property. One weekend, I had three different buyers tell me that they wanted to write an offer but didn’t have their own agent.  Some of them thought that perhaps the listing agent could write up their offer – hopefully causing the price to fall. One home buyer, though, wanted to write the offer without the help of any real estate agent at all. Her thought was that the price would sell for less since only one agent was involved and that agent, the listing agent, would get just half of the commission. That’s not how it works.

When a listing agent gets a signed listing agreement with the seller, the agreement is that the listing agent will receive the entire commission, and if there is a co-operating agent, that person will get the stipulated amount. Often it’s half of the full commission amount, but sometimes it’s more and sometimes it’s less. The wording in the listing agreement reads as follows:

Broker is authorized to cooperate with and compensate brokers participating through the multiple listing service(s) (“MLS”)
by offering to MLS brokers out of Broker’s compensation specified in 3A, either ___ percent of the purchase price, or $________.

The seller pays the listing agent. The listing agent pays anyone else who may be qualified to receive a commission.

There’s another nuance, too. The co-operating licensee must also be a member of the MLS in which the property is being marketed.

So a real estate licensee who’s not a member of the MLS needs to do a little extra paperwork ahead of time to see if the listing agent will pay a commission to him or her.  But the listing agent does not have to agree to it – does not have to agree to pay non-members of the MLS.

Why is that?

The multiple listing looks to consumers to be just a big database of homes for sale.  That’s what is on the surface, however it misses the point. The reason the multiple listing service  exists is fundamentally that the MLS is a broker-to-broker offer of compensation if the cooperating agent or broker brings a buyer to the table and it results in a successful sale.

Not a member of the MLS? This offer is not for you. (But maybe it could be – check with the listing agent first.)

What if there is no other agent involved in the Silicon Valley real estate transaction? In that case, the listing agent or broker gets the full commission.

To recap, the commission amount is set between seller and broker (agent) when the listing papers are signed, and the listing agent pays a buyer’s agent, if there is one who’s entitled to receive it.  The commission agreement sets forth the possibility that another agent will be involved from another brokerage, and if that happens, there will be compensation shared.  If not, the listing agent gets the full commission.

It may be possible to find a listing agent who wants to “double end” a sale so much that he or she would give a buyer a small rebate (not the whole commission). To the best of my knowledge, this is not common, though.