We all know how busy we can get and sometimes things just happen – but slow down and double check your work. A one-second mistake can cause a major predicament later.
I’ll go through a few scenarios and possible outcomes to show you that it can be well worth your time to take your time.
Scenario 1: Who gets what and where did you put it?
After several meetings with sellers regarding the listing of their home, you finally secured the deal. You immediately sit down to get the terms you discussed with the sellers into the Florida Realtors Exclusive Right of Sale Listing Agreement (ERS). Amongst the things you discussed, your listing brokerage expects to receive a 3 percent commission and you intend to offer 3 percent to the cooperating brokerage, assuming there is one. You enter that information into paragraph 8 of the ERS which deals with compensation. For Section 8(a), which deals with the brokerage commission, you enter 3 percent. In paragraph 9, cooperation and compensation to other brokers, you also enter 3 percent.
A short time later, buyers make an offer through their agent, your sellers accept the offer, and the transaction goes smoothly toward closing.
When the seller reviews his closing statement, however, he refers to his copy of the ERS which states that the seller will pay the broker 3 percent of the total purchase price. He says the closing statement numbers are wrong. He agreed to pay 3 percent – not 6 percent as stated on the closing statement. The buyer’s broker is demanding his 3 percent per the offer of compensation you entered into the MLS. What now?
Possible outcome: Assuming a compromise can’t be reached, this is a civil dispute between the seller and the listing brokerage. A court might decide that the seller is right – he only agreed to pay 3 percent, and the listing brokerage offered 3 percent to the cooperating brokerage, leaving the listing brokerage with nothing for compensation.
As such, if the listing brokerage’s office wants to collect a 3 percent sales commission for their office and another 3 percent for any cooperating brokerage, then the listing should reflect that the seller agreed to pay a 6 percent commission. In this case, 6 percent should go into the line in paragraph 8(a) which covers what the seller is going to pay the listing brokerage and 3 percent should go into paragraph 9, compensation to other brokers.
Scenario 2: MLS vs. listing agreement: Which wins?
The listing agreement states that the seller is to pay 5 percent total compensation, with 2.5 percent going to the cooperating brokerage. However, when the agent enters this information into the MLS, he accidentally inputs 3 percent for the cooperating brokerage.
When the transaction closes, how much does the cooperating brokerage receive? Your local board could find that it’s entitled to the offer of compensation as stated in the MLS, the 3 percent, regardless of what the listing agreement says. This would leave the listing brokerage with 2 percent for their real estate services.
The incorrect MLS entry was a simple typographical error, but it could result in the listing brokerage retaining less compensation than intended.
Taking your time to make sure that you’re correctly completing a listing agreement and transposing information into the MLS takes additional time, sure – but it can be well worth it.
This article was written by Meredith Caruso who is Manager of Member Legal Communications for Florida Realtors