Recently I had a situation come up in a sale that made me realize that real estate is changing.
Real estate has always evolved as laws and human nature shape the outcomes.
In this case, I had listed a property with a listing side commission, and did not have a co-operating fee for another broker baked into the price. We clearly disclosed this to all agents who inquired on the property, so they would know to inform their clients that their buyer agent’s fee would be the buyer’s cost.
Many in the industry are not prepared for this yet, as the standard of always charging a seller a ‘full fee’ and expecting them to pay for the buyer’s representative is still standard practice.
However, in 2024 the standard regarding Co-operating fees was changed by the National Association of Realtors; which resulted from a huge lawsuit that NAR settled. This lawsuit claimed the industry ‘price fixed’ the commissions, leaving consumers with little choice. A large part of this was the expectation that sellers offer a buyer agent fee when they pay commission.
Now, buyers are expected to be told that if the elect to use a buyer agent, they may be responsible for paying their agent. But old habits die hard, and for many buyer agents they have taken the approach that very little has changed.
Disclosure and discussion are what changes things going forward though, so today we are discussing what both sellers and buyers should be aware of regarding Commission sharing fees between brokers.
1) What “co-operating broker fee” actually means
In a typical real estate transaction, there are two brokerage “sides”:
- Listing brokerage: hired by the seller to market the property.
- Buyer’s brokerage (co-operating brokerage): represents (or assists) the buyer.
Historically, many listings offered a set amount (or percentage) that the listing brokerage would pay a buyer’s broker for bringing a buyer—often published online. That compensation offer is commonly called the co-operating broker fee.
For investors, the important practical reality is:
- The buyer’s broker is not automatically “free.” Their compensation is paid somehow—either through the listing broker’s offer, which is paid by the seller, or through a separate buyer-broker agreement that the buyer pays.
- Compensation must be agreed to and documented. Because it is no longer assumed that a buyer agent will be paid a fee from the seller/seller’s broker, this needs to be discussed and put in writing ahead of time.
- Sellers should be aware that they are not under a requirement to pay a Buyer Broker fee. Whether a buyer broker fee is offered should be discussed between the listing agent and the seller.
- A seller can offer to discuss it during negotiations, instead of a blanket percentage up front. This may cause some list agents in the industry frustration, as many prefer to keep ‘both sides’ of the listing fee and try to avoid working with a buyers agent. Un-coupling the sides of the commission permit possible savings to the seller, and removes the ethical conflict from the list agent to co-operate with another broker.
2) How the money usually flows
A) List Broker offers a fee to Buyer Broker
The listing brokerage may offer compensation to a co-operating buyer broker, often communicated between the two brokers.
Investor pitfall: assuming every listing “covers” buyer broker compensation. Some listings offer less than expected or none at all, especially for certain asset types.
B) Buyer-broker agreements
If you sign a buyer-broker agreement, you may be agreeing to pay your buyer’s broker a set fee or percentage if you purchase a property during the agreement term—even if the listing offers little or no compensation.
Investor pitfall: signing an agreement casually, then later trying to “go direct” to the listing agent to save money. That can create a payment obligation and an ethics problem for the agents involved.
C) Feed credits, concessions, and seller-paid costs
Sometimes parties negotiate credits to offset costs, including agent compensation, but these must be disclosed and permitted by lender/transaction rules when financing is involved.
Investor pitfall: asking for “off-the-record” credits or side deals. Those are a fast path to compliance issues and can create loan fraud risk in financed deals.
3) “Ethics” isn’t just manners – it’s enforceable standards
When you’re dealing with Realtors (members of the National Association of REALTORS®) and CCIMs (Certified Commercial Investment Member), they are governed by a Code of Ethics that applies beyond state licensing law. Even when someone isn’t a Realtor, state licensing laws still imposes duties around honesty, disclosure, and agency.
Here are the ethical themes investors run into most:
A) Honesty and disclosure
Realtors can’t knowingly misrepresent facts about a property or transaction terms. Investors sometimes operate negotiation mode; that’s fine—but the professionals involved can’t play games with facts.
Practical takeaway: if you’re negotiating a contracts, keep it clean: document issues, communicate clearly, and avoid exaggeration.
B) Agency clarity: who represents whom?
In both PA and MD, the biggest messes happen when the buyer thinks someone is “their agent,” but that person is actually working for the seller (or acting as a transaction facilitator).
Practical takeaway: before sharing your strategy (max price, urgency, 1031 timelines, portfolio plans), confirm what role that agent is engaging with you in.
C) Interference and “poaching” clients
Ethically, agents must respect existing agency relationships. If you are already represented, another agent should not encourage you to ditch your agent midstream to chase a commission.
Investor pitfall: “I’ll just call the listing agent directly; they’ll cut the commission.” If you have an active buyer-agency relationship, that can put the listing agent in a bad ethical position—and you in a contractual dispute.
4) State Laws: what investors should watch in practice
Even though many investor transactions feel similar across state lines, differences show up in disclosure forms, agency structures, and “customary” practice.
Pennsylvania (PA) investor notes
- In PA, ‘Dual Agency’ is legal, if properly disclosed to the parties involved
- Depending on brokerage practice, you may encounter transaction licensee / facilitator-like roles (terminology varies), which are not the same as representation.
- Investors should know who the agent is representing in the transaction. DON’T assume that if you are going directly to the list agent, that they are representing you. Even if they are the only agent in the deal, they can exclusively represent the seller, and just assist the buyer as a ‘Transaction facilitator’.
Maryland (MD) investor notes
- MD does not permit dual agency by the same agent in a transaction. Two agents from the same office can assist in the same transaction, but only after proper disclosure.
- If investors go directly to the listing agent, they are NOT representing you, as they have already engaged in an agency relationship with the seller to list the property. Hence, since dual agency is not permitted in MD, they are acting as a transaction facilitator and not your agent as a buyer.
Bottom line across both states: treat agency and compensation as “front-end” deal terms, like inspection, financing, and closing timeline.
Closing thought: investors win when compensation and ethics are openly discussed
Co-operating broker fees are not “mystery money.” They’re a negotiated cost of acquisition/disposition—just like financing points, transfer taxes, title fees, and repairs.
When you treat compensation and agency as clear business terms upfront—and keep negotiations clean and documented—you protect your ability to ensure a smooth and successful transaction.
Many investors we work with appreciate the up-front discussions about compensation, deal terms and industry standards that are changing. The approach we always take is to do right by our clients, as it will always come back. If you are an investor looking to sell or buy in PA or MD, please CONTACT US for a consultation.
Sources
–https://www.redfin.com/blog/pennsylvania-real-estate-commissions/
