In the case where a realtor wants to put an offer in on a home (not one of their own listings) , and offer a commission reduction to the Seller, can the Seller agent (the Listing agent) advise the Buyer’s agent that they are not allowed to reduce commission ?
Yes, and many do. The Buyer agent does not have the ability to require the Listing agent to renegotiate their commission under the Listing agreement. They are not a party to that deal. They will do this when there are other potential bidders, because this information must be disclosed to the others and this might frighten them off, thereby reducing competition.
Consequently, no disclosure is required if they don’t get the Seller to consent to the reduction. This keeps other Buyers “in play”. The Listing agent is entitled to keep the entire commission if the Buyer’s agent declines to accept it. However, once they have stated that, the Buyer’s agent will change their mind about this whole approach.
The Listing agent often wants to have the property sold for the highest price possible:
1) they achieve a higher commission,
2) they are able to advertise a higher price sold,
3) higher pricing may be helpful to the neighbourhood.
In some rare situations, for example the Seller and the Listing agent are only interested in the “bottom line” and there is no other competition for the property, then, they may agree. Of course, this matter needs to be negotiated at the outset, not after the fact.
Brian Madigan LL.B., Broker