Dual commissions and dueling offers - by Marlene Aron

Marlene Aron, Metrowest Commercial Real Estate

Just when you think you’ve seen it all in the commercial real estate brokerage business something new pops up and another lesson is learned.

Many brokers take listings and offer a seller a dual commission schedule. One fee schedule is a lower percentage of the selling price if there is no co-broker splitting of the commission and the other percentage of the selling price is higher if another broker brings a buyer to your listing.

Here is what happened. Two offers came in at almost the same time. The seller was advised that there would be two offers and asked not to respond until both had been submitted. The offers were very similar and the seller decided to counter to both at the same price and said terms would be addressed with whomever met the counteroffer. Both buyers agreed to meet the price of the counteroffer. The seller believed a buyer who would occupy the property might be a better buyer, but because that offer was a co-broke sale they would net less due to the dual commission schedule. Here was another way to handle this situation - The sellers could have countered to both buyers with the SAME NET selling price to them. In other words, the co-broke counteroffer could have been higher due to the higher commission fee differential which would have made the seller’s net the same for both offers.

Here is what happened - The co-broker representing the owner-occupier buyer was then asked to get his client to raise his offer. The dual commission schedule had been disclosed upfront to the cobroke agent, so he understood his offer netted the seller less. The co-broker was unhappy, but was given the opportunity to raise the offer. The buyer would not go up the 1% difference so the sellers picked the other offer which netted them a higher selling price.

Why am I sharing this story? Our reputations are very fragile in the commercial real estate industry and somewhere, sometime there will be a party who does not get the deal and blame the broker. It was after the offer was accepted that I realized this deal could have been handled differently. I hope this information helps someone in the future who gets caught dealing with dual commissions and dueling offers.

Marlene Aron is senior associate broker at Metrowest Commercial Real Estate, Southborough, Mass.