Ask Phyllis: a blog series of frequently asked real estate questions.
Gross vs. net commission
Dear Phyllis,
We sold our home last year, and the process was a nightmare. We faced numerous inspection issues, causing us to fall out of escrow multiple times. To make matters worse, the buyer’s agent was vacationing in Europe during the inspection period, which slowed down the process. His lack of availability led to over a week of back-and-forth, trying to address the buyer’s long list of inspection requests. Eventually, after several negotiations, we gave the buyer over $50,000 in credits.
Throughout, we felt that our real estate agent wasn’t fully representing our interests, and the buyer’s agent seemed barely involved. Our agent explained that their assistant handled much of the negotiating, making the entire experience highly stressful. Although we weren’t required to pay the buyer’s agent’s commission under the new real estate guidelines, our agent recommended we do so. After two canceled escrows, we reluctantly agreed.
My main complaint was with the commission structure. In hindsight, we should have paid based on the selling price minus the $58,000 in credits we conceded, using the net sale price rather than the gross. Should we have specified the commission based on the net sale price instead of the gross selling price?
Ron
Dear Ron,
I completely understand your frustration. Buying or selling a home is one of life’s most challenging and stressful experiences, and I’m very sorry that these issues further complicated yours. The buyer’s agent’s unavailability during such a critical period, like the inspection process, is highly unprofessional. Ideally, the brokerage’s manager or Broker should have stepped in to ensure smooth communication and negotiation.
I see why you’re concerned about the commission structure. When you agreed to the $58,000 in credits for the buyer, it may have been possible to negotiate that the real estate commission should be based on the net selling price rather than the gross selling price. For instance, if your home sold for $2,000,000, you could have specified that the commission be calculated on the adjusted price of $1,942,000, accounting for the credits. Based on net rather than gross, this commission structure could have been discussed or stipulated as part of the final negotiation.
