Commission Clawbacks

In relation to Clawbacks in listings “1% reduction for properties show to buyer by listing agent…..”.

Here’s RECO’s view.

“Dear Mr. XYZ:

On behalf of the Real Estate Council of Ontario (RECO) I acknowledge receipt of your email.

In the scenario outlined the listing brokerage would need to provide full disclosure with respect to any proposed commission reduction and obtain appropriate written direction from the seller. Keep in mind that the listing brokerage has certain obligations to their seller client and must consider how this arrangement is in the seller’s best interest.

A brokerage would also need to make all potential purchasers aware of the reduction via the public remarks on MLS. Further, the commission payable should be clearly documented and agreed upon to avoid misunderstandings.

RECO does not endorse the practice and encourage you to contact your real estate board about potential conflicts with existing MLS rules. A brokerage should consult with a solicitor if they have doubts with respect to the enforceability of such a term legally as RECO does not provide legal advice or opinion.

Thank you for contacting RECO.”

This commission reduction needs to be documented, first with the Seller and then communicated to the Buyer. There are several ways to do this correctly:

1) public MLS,

2) email to Buyer,

3) text to Buyer etc.

No changes can be made between Offer registration and the time of acceptance.

This type of practice can be handled appropriately and with full disclosure should work.

In this case, the Buyer never signed up with the Listing Agent, nor received any communication related to the proposed “clawback”. That’s not OK. This Listing Agent will have to go along with the standard commission offered.

Brian Madigan LL.B., Broker

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