Commissions illegal with unrepresented buyer?

[wildonion773]

In Minnesota are listing agreements legal when an unrepresented buyer is involved? This question only applies when an unrepresented buyer is involved and no dual agent is involved.

If a buyer does not have an agent, the seller and seller’s agent typically agree in the contract to split the buyer’s agent commission. A buyer does not have access to this contract which means the commissions are secret.

This creates an unfair bargaining situation. The buyer must include in his offer some or all of the buyer’s agent commission even though no services are provided. By preventing independent buyers from competing for the buyer’s agent commission, the seller and seller’s agent are effectively overcharging independent buyers and eliminating any competition.

This seems to result in collusion (as defined below) between the seller and the seller’s agent.

collusion - where two persons or business entities enter into a deceitful agreement, usua! lly secret, to defraud and/or gain an unfair advantage over a third party, competitors, consumers or those with whom they are negotiating. Collusion can include secret price or wage fixing, secret rebates, or pretending to be independent of each other when actually conspiring together for their joint ends.

[Some Random Guy]

In Minnesota are listing agreements legal when an unrepresented buyer is involved? This question only applies when an unrepresented buyer is involved and no dual agent is involved.

Nope.

If a buyer does not have an agent, the seller and seller’s agent typically agree in the contract to split the buyer’s agent commission. A buyer does not have access to this contract which means the commissions are secret.

The buyer is purchasing the home from the seller (contract 1). The seller has a contract with the agent (contract 2). Buyer is not in a contract with the agent, so it doesn't matter to the buyer what the agency contract contains or what the commissions are.

This creates an unfair bargaining situation. The buyer must include in his offer some or all of the buyer’s agent commission even though no services are provided.

Huh? The buyer can offer any price he wants for the home. The Seller will accept any price he chooses. But when the seller is deciding to accept an offer he is considering the percentage that he (the seller) has agreed to pay the agent in exchange for the agents role as a seller's agent.

There is nothing unfair about this. If I am selling clothing and have to pay for television advertising, then I will factor the advertising cost into my selling price. You as a clothing purchaser will get laughed at if you try telling me you want a discount because I paid too much for the TV spots.

This seems to result in collusion (as defined below) between the seller and the seller’s agent.

Nope. In this case, the seller's agent is THE SELLER'S AGENT! It is a clearly defined role whereby the agent is acting in the best interests of the seller and has no obligation to the buyer.

[wildonion773]

Some Random Guy,

May I ask if you are a lawyer or a real estate agent?

The main issue is the buyer has no control over the buyer's agent commission. Agents like it this way because they earn a double commission when an unrepresented buyer is involved. In effect, the seller's agent gets paid for the unrepresented buyer's time and effort.

I do not believe the double commission sytem is in the best interest of the seller either. It simply reduces the sellers profit and bargaining ability. A seller could LOSE a sale because of the agents greed when a buyer can't afford to pay the double commission.

[Some Random Guy]

The main issue is the buyer has no control over the buyer's agent commission. Agents like it this way because they earn a double commission when an unrepresented buyer is involved.

There is no buyer's agent commission in this case. Seller and Seller's agent have an agreement to pay the Seller's agent a commission. IF a buyer's agent existed, then Seller's agent and Buyer's agent would have an agreement to split the commission.

But since there is no buyer's agent, there is no Buyer's agent commission. Yes, the seller's agent gets more money and yes the buyer is not represented - but its legal since the buyer has no legal right to tell the seller how much to pay his agent.

I do not believe the double commission sytem is in the best interest of the seller either. It simply reduces the sellers profit and bargaining ability. A seller could LOSE a sale because of the agents greed when a buyer can't afford to pay the double commission.

Seller may negotiate rates with the real estate agent. He does not need to pay full price. Same goes for the buyer and his agent.

[wildonion773]

Some Random Guy,

I have heard these arguments from real estate agents who like their double commissions.

But I am looking for a legal opinion regarding the collusion aspect between the seller and seller's agent. The current system limits competition for the buyer's agent commission to agents only. These issues appear to be illegal.

[Some Random Guy]

I have heard these arguments from real estate agents who like their double commissions.

Since the answer isn't what you want to hear, then it cant be true?

But I am looking for a legal opinion regarding the collusion aspect between the seller and seller's agent.

You are apparently unclear on what collusion means. In a fully disclosed agency relationship, collusion is not possible. the agent is acting ON BEHALF OF the seller. They are, with full disclosure, acting as one entity in this transaction. Collusion is when two entities try to appear independent but are secretly acting in concert.

[HomeGuru]

Originally Posted by wildonion773

Some Random Guy,

I have heard these arguments from real estate agents who like their double commissions.

But I am looking for a legal opinion regarding the collusion aspect between the seller and seller's agent. The current system limits competition for the buyer's agent commission to agents only. These issues appear to be illegal.

**A: please explain exactly what you are talking about.

[wildonion773]

Some Random Guy,

Your replies cleary show you to be an agent, not an attorney. I am looking for a legal opinion from someone with a law degree. I am not interested in agents trying to justify a greed-based commission system.

[Some Random Guy]

Some Random Guy,

Your replies cleary show you to be an agent, not an attorney.

Actually I did not claim to be either an attorney or real estate agent, and in fact I am neither.

Your responses show that you will deny the truth of any answer that does not suit your needs.

Please go pay a lawyer to answer your questions for you. Then compare his answer to this one: There is, by definition, no collusion when two parties are acting in an agent-client relationship that is fully disclosed to the third party with which they are negotiating.

If there is anything illegal going on here, its not collusion. Pick a different reason for this to be illegal.

[Ohiogal]

Good grief. Some Random Guy is correct legally. Oh and yes I am an attorney. You however are whining because you didn't get the answer you wanted to justify whatever it is you do or do not want to do.

[HomeGuru]

Originally Posted by wildonion773

Some Random Guy,

Your replies cleary show you to be an agent, not an attorney. I am looking for a legal opinion from someone with a law degree. I am not interested in agents trying to justify a greed-based commission system.

**A: I am a real estate attorney. But since I do not like your attitude good luck.

[wildonion773]

What I am hearing so far -

A represented buyer can compete for the buyer's commission.
An unrepresented buyer can not compete for the buyer's commission.

A home seller can choose whether to pay for real estate services or sell the house themselves.
A home buyer must pay for real estate services whether or not they use an agent (they have to cover the double commission in their offer).

If this is really legal, then it seems like some additional laws are needed to prevent this by giving the buyer complete control over the buyer's agent commission.

[wildonion773]

Below is the definition of collusion I included in my original post. Does this meet the legal definition of collusion?

collusion - where two persons or business entities enter into a deceitful agreement, usually secret, to defraud and/or gain an unfair advantage over a third party, competitors, consumers or those with whom they are negotiating. Collusion can include secret price or wage fixing, secret rebates, or pretending to be independent of each other when actually conspiring together for their joint ends.

Assuming this is correct, the seller and seller’s agent work together to prevent an unrepresented buyer from competing for the buyer’s agent commission. As a result buyers must include the cost of the double commission in their offers even when they do the work of the buyer’s agent themselves. In effect, the seller’s agent is paid for the buyer’s time and effort. This appears to qualify for an "unfair advantage" as the buyer has no control of the buyer's agent commission.

The Realtor code of ethics states the seller’s agent must represent the seller’s best interest. But the current double commission system only benefits the agent’s pocketbook and artificially inflates housing prices for everyone else. Legal? Maybe. Ethical? Definitely not.

[seniorjudge]

wildonion....

Repeating your question will not get you a different answer.

You have gotten free excellent legal advice.

Go argue with a lamp.

[Zigner]

Originally Posted by wildonion773

Below is the definition of collusion I included in my original post. Does this meet the legal definition of collusion?

collusion - where two persons or business entities enter into a deceitful agreement, usually secret, to defraud and/or gain an unfair advantage over a third party, competitors, consumers or those with whom they are negotiating. Collusion can include secret price or wage fixing, secret rebates, or pretending to be independent of each other when actually conspiring together for their joint ends.

Assuming this is correct, the seller and seller’s agent work together to prevent an unrepresented buyer from competing for the buyer’s agent commission. As a result buyers must include the cost of the double commission in their offers even when they do the work of the buyer’s agent themselves. In effect, the seller’s agent is paid for the buyer’s time and effort. This appears to qualify for an "unfair advantage" as the buyer has no control of the buyer's agent commission.

The Realtor code of ethics states the seller’s agent must represent the seller’s best interest. But the current double commission system only benefits the agent’s pocketbook and artificially inflates housing prices for everyone else. Legal? Maybe. Ethical? Definitely not.

An agent represents someone (acts as their AGENT). At that point, you are dealing with ONE entity. Once you look at it from that perspective, your entire collusion theory falls apart.