Handling a Listing When the Seller Does Not Offer Cooperative Compensation

QUESTION: A potential seller is willing to pay our firm a commission to list his property, but he is not willing to authorize cooperative compensation. Our firm is willing to proceed on this basis. Which form or forms do we need that seller to sign? Also, once we take the listing, what should I tell buyer agents when they ask me about cooperative compensation?

ANSWER: As in any other transaction, meet with the seller and execute the Exclusive Right to Sell Listing Agreement (Form 101) after you’ve discussed its terms. Insert your fee in paragraph 7(a) of that form. When you get to paragraph 8, you can either leave it blank or check the third box and attach an addendum stating that cooperative compensation will not be offered by your firm. The seller can initial the sentence at the end of paragraph 8 confirming the seller’s understanding that cooperative compensation is not required. However, getting those initials is not crucial given that the seller is not offering cooperative compensation.

In paragraph 16 of Form 101, you may, but are not required to, insert something like the following: “Seller acknowledges that this agreement does not authorize Firm to offer cooperative compensation to seller subagents or buyer agents.” In circumstances where the seller has not authorized cooperative compensation in Form 101, it is not necessary for the seller to sign a Cooperating Compensation Agreement (Form 220).

If the seller later receives an offer that is contingent on cooperative compensation, the seller can sign a Form 220 at that time and check “Seller” in paragraph 1 of that form to indicate that it is the seller who will be paying the buyer agent and not your firm. Since the seller is agreeing to pay the buyer agent directly, there is no need to update Form 101 with the seller. The checkbox for “Listing Firm” in paragraph 1 of Form 220 is only to be used when your firm has been authorized in an agency agreement to offer and pay cooperative compensation to buyer agents or seller subagents. It also worth noting that Form 220 states clearly in paragraph 2 that the fee in Form 220 is only earned if the seller and buyer enter into a contract to purchase the seller’s property. If no purchase contract is signed, then the fee in Form 220 is not earned nor can it become payable.

As for your second question, tell buyer agents who inquire about cooperative compensation that it is not offered by your firm or the seller. If the buyer agent informs you that their client is only willing to present an offer if cooperating compensation can be negotiated, you should relay that information to the seller along with the offer’s proposed terms so the seller can make a decision.

Release Date: 08/01/2024