Clawback: Cooperating Commission Clawback

What is the relationship between the Listing agent and some consumer who attends at an Open House?

The offer of the co-operating commission is an MLS issue. Fundamentally, it has nothing at all to do with RECO.

RECO’s only concern here is the “public”: misinformation, misrepresentation, deception, trickery etc. issue, and that’s it.

  1. What is the relationship between the ultimate Buyer and the Listing Agent?

If advice is given during their meeting, then we have “agency”. If they stick to the facts, they can treat the Buyer as a Customer or as a Consumer.

  • What is the relationship to the Cooperating Brokerage?
  •  Are they looking for a referral fee?
  • Are they looking for a Sub-agency fee?

Any Sub-agency requires the consent of the Buyer.

To handle this correctly from RECO’s perspective, the Buyer has to know where they stand, and that would be ahead of time, not afterwards.

The Buyer could be out there as a “free agent” (so to speak), or might have signed a Buyer Representation Agreement, a Customer Service Agreement, or a Commission Agreement with another Brokerage. The difficulty here, is that the first meeting could be by chance with nothing to come of it (the Buyer didn’t like the Listing Agent at all), attendance at an open house, or having some sort of relationship. Nevertheless, the Buyer chose not to reveal that information, nor are they ethically compelled in any way to do so.

Then, we have the Offer and the commission repatriation issues.

I think that there might be a difference between a commission deduction and a commission “top up”, that is, 2.5% less .5%, if I show the property, and 2.0%, plus a .5% bonus, if I never expended any time on this Buyer.

The bonus, I think works, but the deduction needs to be handled very carefully.

There are some added issues: full disclosure to others needs to be made in multiple Offer situations, and full disclosure needs to be made to the Seller in all situations.

Brian Madigan LL.B., Broker

Leave a Reply

Your email address will not be published. Required fields are marked *