The Fine Print: Commission Reduction in Listings

Reading Time: 3 minutes


You've probably seen this in the "remarks" section of a listing before:

It seems to appear in about 10% of listings (I pulled 200 active listings on TRREB and NAR).

The question: Is this "remark" enforceable?

In typical lawyer fashion, my answer is: maybe.

In order for this "remark" to be enforceable, the listing agent must have this arrangement documented in their Listing Agreement.

Remember, the Listing Agreement is the primary contract when it comes to commission paid by the seller.

In addition to the above requirement, this arrangement must also be disclosed. By adding it to private remarks of the MLS listing, you are disclosing it to other agents - but what about the potential buyer?

For those that don't have access to the REALTOR® only remarks, written disclosure by email or text message would need to be used.

So in order for this remark to actually be enforced, it needs to be:
1) Documented in the Listing Agreement
and
2) Disclosed to the Buyer and REALTORS®

It's worth noting that this cannot be retroactively added after receiving an offer from said buyer.

So...

We've established that there is a way to properly execute this kind of arrangement. But there's another consideration:

Is it in the seller's best interest? - Remember, as an agent you have a duty to act in your client's best interest.

If that "commission reduction" is still being paid by the seller but is simply redirected to the listing agent, the seller receives no benefit and risks losing the potential offer.

If it does result in savings for the seller, the same risk of losing the offer applies, and now the Listing Agent has made their job harder - trying to get a deal done with an undercut co-op commission.

This is equivalent to offering a co-op commission significantly less than competitors. In theory (and by law) this should not affect whether agents help their clients purchase these properties, but in reality, we know it happens.

So while the question I often get is "can this be enforced?", the real question we should be asking is "why would a listing agent do this?".

If the answer is "to compensate the listing agent for introducing the property to the buyer?" - then why not do it with a representation agreement for that property only?.

If the potential buyer refuses to sign, it's often a red flag anyways. Simply have them come back represented - if they're serious, they will.

Key Takeaway

A commission reduction remark is enforceable - if it's documented in the listing agreement and disclosed to the buyer before an offer.

But after reading the above, why would you do this?


Written by
Zachary Soccio-Marandola
Real Estate Lawyer

Direct: (647) 797-6881
Email: zachary@socciomarandola.com