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Can ‘coop fees’ vary?

By Peg Ritenour, OAR Vice President of Legal Services/Administration

Questions about varying commissions offered to other brokers are frequently asked on the OAR Legal Assistance Hotline. A typical question goes something like this: There is a broker in our MLS that offers a much lower “coop” fee than is offered by me and most of the other brokers on our listings. Can we pay this broker the same amount that he pays us?

While the answer to this question is yes, the scenario involves MLS rules, the NAR Code of Ethics, and antitrust laws…which means brokers have to be very careful when they handle this situation!

Let’s look at the antitrust issue first. Of course REALTORS know that both federal and state antitrust laws prohibit price fixing. This means that you and other brokers cannot agree on what commission rate you will charge the public. These antitrust laws also prohibit boycotts — where two or more persons agree that they will not pay or will pay a lower amount — to a competitor.

Because of these antitrust laws, brokers should never discuss with one another how to address compensation issues they have with another broker and should never enter into any type of agreements as to what amount to pay another brokerage. Instead, each broker must individually determine how much compensation they wish to offer another broker, if any.

So does that mean you can’t pay one broker a different amount than you offer to the other brokers in the MLS? No, you can absolutely vary the commission you offer as long as you make that decision on your own.

If you decide to do this, you need to also make sure you follow your MLS rules and the Code of Ethics. The MLS rules specify that a broker can send another broker written notice that he is offering him a different amount on his listings than is reflected in the MLS. Under NAR Standard of Practice 3-2, any change in compensation offered has to be communicated prior to the time that REALTOR submits and offer to purchase to be effective.

So, if you want to vary the commission you offer in the MLS you can do this without running run afoul of the antitrust laws, Code of Ethics, or MLS rules as long as you make this decision unilaterally and notify the broker in writing prior to that broker submitting an offer on your listing.

Tags: legal