What Is a Variable-Rate Commission?

The REALTOR® Code of Ethics defines a variable-rate commission arrangement as a listing in which one amount of commission is payable if the listing broker’s firm is the procuring cause of sale or lease and a different amount of commission is payable if the sale or lease results from the efforts of the seller, landlord, or a cooperating broker. The Code of Ethics and NAR’s Handbook on Multiple Listing Policy require listing brokers to disclose a variable-rate commission to potential cooperating brokers as soon as is practical.

In response to inquiries from potential cooperating brokers, REALTORS® are also required to disclose the difference between the two rates. In addition, once a cooperating broker knows that a variable-rate commission has been offered, the cooperating broker must disclose this information to his or her client before the client makes an offer to purchase or lease. In this situation, a buyer or tenant who makes an offer that’s identical to an offer from a buyer or tenant who’s represented by the listing broker’s firm is at a disadvantage, since the commission on the other offer will be lower. In light of new MLS guidelines, REALTORS® should disclose this in a written agreement to the cooperating broker or in some other writing such an email, letter or text which can reflect when it was delivered to the cooperating broker.