Wednesday, May 28, 2014

Commission Overrides

Most people are familiar with the typical residential commission situation, where the listing agent controls the rate and the offering to the buyer's agent.  That is, the owner signs a listing contract with the real estate broker, and he/she offers a BBC (buyer broker commission) to cooperating agents who represent buyers.  Sometimes half is offered, but often less than half is posted; the theory there is that the expenses of marketing a listing outweigh the costs of servicing a buyer.

The commercial market doesn't work that way, in most cases.  Many properties are not advertised on the MLS, because many commercial brokers don't choose to belong.  Therefore, the custom is for the agent representing the buyer to confirm the commission with the listing broker, usually in writing.  It is not uncommon for the buyer's agent to ask for a "full" commission (also known as an override) from the owner, for bringing in the buyer.  Here the theory is that the agent who controls the buyer controls the transaction.

I'm not advocating for one method over the other, but I'm pointing out the difference, because there is often a "shoot the messenger" atmosphere when we ask the owner to pay an override.  Although it's negotiable, like all real estate commissions, an owner who wants to fill his or her space may feel pressured into paying it.

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