| Who brings the buyer | Rate | Seller pays |
|---|---|---|
| Separate cooperating broker | 4 percent | 20,000 dollars |
| Listing brokerage (both sides) | 3 percent | 15,000 dollars |
| Difference | 1 percent | 5,000 dollars |
| Disclosure | Required in many MLS rules | To cooperating brokers |
Glossary · Commissions & fees
Dual or Variable Rate Commission
A dual or variable rate commission is a listing arrangement where the total commission a seller pays changes depending on how the buyer is found. A seller might pay a lower rate if the listing agent also brings the buyer and a higher rate if a separate cooperating broker does. Because it can create a conflict of interest, the arrangement must be disclosed and is always negotiable.
Also known as: Variable Rate Commission
How does a dual or variable rate commission work?
The listing agreement sets two possible commission rates. If the listing brokerage represents both the seller and the buyer, the seller pays the lower rate. If a different cooperating broker brings the buyer, the seller pays the higher rate. The agreement spells out both figures.
The structure can save the seller money when one brokerage handles both sides, because there is no separate cooperating broker to compensate. The seller and brokerage negotiate both rates before listing.
Because the outcome depends on who brings the buyer, the arrangement can influence how offers are viewed. Many MLS rules require that the existence of a variable rate commission be disclosed to cooperating brokers so their buyers can make informed offers.
Why must a variable rate commission be disclosed?
The arrangement creates a potential conflict of interest, because the listing agent may earn differently depending on who brings the buyer. Disclosure to cooperating brokers, often required by MLS rules, lets buyers understand the setup and make informed offers rather than compete on hidden terms.
Without disclosure, a cooperating broker and their buyer might not know the seller could accept less from the listing brokerage's own buyer. Revealing the variable rate keeps the playing field transparent.
Disclosure obligations vary by MLS and market. Sellers considering this structure should understand what they must reveal and how it may shape agent behavior and negotiations.
What is the difference between a dual and a flat commission?
A flat commission is one rate no matter who brings the buyer. A dual or variable rate commission sets two rates, with the lower one applying when the listing brokerage represents both sides. The variable version ties the seller's cost to the source of the buyer.
With a single flat rate, the source of the buyer does not change what the seller pays. With a variable rate, it does, which is why disclosure matters so much.
Both structures are negotiable and legal when handled transparently. The right choice depends on the seller's priorities and comfort with the disclosure and conflict-of-interest issues involved.
Worked example. For example, a seller signs a listing agreement with a variable rate: 4 percent total if a separate cooperating broker brings the buyer, or 3 percent if the listing brokerage represents both sides. On a 500,000 dollar sale, that is 20,000 dollars with an outside buyer's broker versus 15,000 dollars if the listing brokerage brings the buyer. The seller saves 5,000 dollars in the second case, and the arrangement is disclosed to cooperating brokers.
Common mistakes with Dual or Variable Rate Commission
- Failing to disclose the variable rate to cooperating brokers when MLS rules require it.
- Overlooking the conflict of interest created when the listing agent earns differently based on who brings the buyer.
- Assuming the lower rate always applies without confirming which situation triggers each figure.
- Not understanding how the structure can influence how offers are presented and treated.
- Treating the rates as fixed rather than negotiating both figures before signing the listing agreement.
Related terms
Term
Real Estate Commission
The fee paid to brokerages for their services in a transaction, typically a percentage of
Define TermCommission Split
How commission income is divided, both between brokerages and between an agent and their b
Define TermDual Agency
When a single agent or brokerage represents both the buyer and the seller in the same tran
Define TermDisclosure
The seller's legal obligation to reveal known material defects and facts about a property.
DefineDual or Variable Rate Commission FAQ
What triggers the lower rate in a variable commission?
The lower rate typically applies when the listing brokerage represents both the seller and the buyer, so no separate cooperating broker needs to be paid. The higher rate applies when an outside broker brings the buyer. Both figures are set in the listing agreement and are negotiable.
Is a variable rate commission legal?
Yes, when handled transparently. The main requirement is disclosure. Many MLS rules require that the existence of a variable rate commission be revealed to cooperating brokers so buyers can make informed offers. Rules vary by MLS and market, so sellers should confirm local obligations.
Why is a variable rate commission a conflict of interest?
Because the listing agent may earn a different amount depending on who brings the buyer, they could have an incentive to favor their own brokerage's buyer. Disclosure exists to keep the arrangement transparent so all parties understand the terms before making offers.
How does this differ from dual agency?
A variable rate commission is about how much the seller pays based on who brings the buyer. Dual agency is about one agent or brokerage representing both sides at once. They can overlap but are separate concepts, each with its own disclosure requirements.
Can a seller negotiate both rates?
Yes. Both the higher and lower rates in a variable commission are negotiable, just like any commission. Nothing about the figures is fixed by law. The seller and brokerage agree on both numbers, and the trigger conditions, in the listing agreement before signing.
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