Commission Sharing vs. Seller Paying Both Agents: What’s the Difference?

Q: What is commission sharing, as opposed to the seller paying both their agent and the buyer’s agent? Isn’t it the same thing?

A: Commission sharing, also known as cooperative compensation, means that one agent is being paid by a party to the transaction and shares that compensation with the other party’s agent. This is the way commissions to real estate agents were usually paid prior to the NAR Settlement Agreement and the elimination of cooperative compensation offers from the MLS. Under the old system, the seller usually agreed in their listing agreement with the seller’s agent to pay a gross commission amount to the seller’s agent. Then, via the MLS, the seller’s agent agreed to share some portion of that commission with the buyer’s agent. This was commission sharing. Under today’s rules and laws, the buyer’s agent must negotiate with the buyer and identify the compensation they will receive in the Buyer Representation Agreement. The buyer may then, if they choose, ask the seller in their written offer to purchase to contribute some amount toward the total they owe the buyer’s agent. If the seller agrees, the seller is entering into an agreement with the buyer via the real estate sale agreement to compensate the buyer’s agent directly. This is not commission sharing or cooperative compensation. One party, the seller, agrees to pay both parties’ real estate agents directly.

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