Can a Broker be Forced to Reduce the Agreed Upon Commission?
Posted on January 19, 2002 by Michelle Lind, Esq
A contract has been accepted and is in escrow. At the last minute, the seller refuses to close unless the brokers agree to reduce their commission.
1. Does the listing broker have a fiduciary duty obligation to reduce the commission to allow the home to close?
No, the listing broker has no fiduciary duty to reduce the commission to allow the transaction to close. The seller would be liable to the buyer for breach of contract if the seller refused to close. The listing broker would then be entitled to pursue a lawsuit against the seller for the agreed upon commissions.
2. If the listing broker agrees to reduce the listing commission, is the buyer’s broker’s commission reduced too?
No, the buyer’s broker’s commission is not effected by the listing broker’s agreement with the seller. Unless otherwise agreed, the listing broker is obligated to pay the buyer’s broker the amount of commission offered in the MLS, regardless of any subsequent agreements between the listing broker and the seller.
3. Do the Commissioner’s Rules A.A.C. R4-28-1101(D) have any bearing on this situation?
No. A.A.C. R4-28-1101(D) states: A licensee shall not allow a controversy with another licensee to jeopardize, delay, or interfere with the initiation, processing, or finalizing of a transaction on behalf of a client. This prohibition does not obligate a licensee to agree to alter the terms of any employment or compensation agreement or to relinquish the right to maintain an action to resolve a controversy.” Therefore, this Commissioner’s Rule does not apply in this case because the dispute involves the seller and the brokers and not just the brokers themselves. A.A.C. R4-28-1101(D) applies primarily to procuring cause disputes.