Commission Rebates/Splits

I recently received the following "Ask the Broker" question from Tammy, presumably a licensed real estate Agent:

"I was wondering if i sold a home for a 3% commission 679,000 house (my split) but credited back 7900(of my commission) to the seller to give to the buyer through escrow should my broker charge me on the entire 3% when i did not receive a 3% commission. I basically lowered my commission so did not receive a 3%."

The basic issue here is that the commission belongs to the BROKER, not the individual Agent. Many Agents don't realize that, and thus unknowingly or naively treat commissions as their "own." In fact, commissions paid directly to a licensed real estate Agent without going through that Agent's Broker is illegal in Arizona. Thus the full 3% commission Tammy mentioned as being her "split" actually belongs to Tammy's Broker.

That said, whether or not the Broker is willing to forego his/her 'charge' on the $7,900 that an Agent (who in reality is an Agent of the Broker) credited back to the client is a matter between the Agent and his/her Broker. In other words, it's going to depend on whether the Broker's attitude is that 'splits' are based on 'earned' commission or 'realized' commission. I would recommend to Tammy that she first carefully read the Independent Contractor Contract that she signed with her Broker. If the issue is not addressed, she should really contact her Designated Broker, explain the situation, and ask for clarification of his/her policy on commission 'rebates'.

I hope this helps, Tammy. It's a great question that could affect many home Buyers, Sellers and Agents! And regardless of how it works out, we hope you'll let us know how it works out for you.

...randy