Don't brokers have enough to manage without worrying about whether their commissions are going to be cut by their fellow brokers? With discount brokerage, fee-for-service brokerage, and single agency, Realtors® are already besieged with fee restructuring issues. Now a new problem is looming on the horizon - punitive co-brokerage fees.

Some agencies in parts of the Northeast are attempting to impose reduced co-brokerage fees on competing brokers, insisting that they take as little as 2/3ds their normal split to less than half. One Ohio franchise has taken two brokers to court over the issue, accusing the brokers of reducing co-broker fees in a conspiracy to eliminate competition and retain market dominance, a violation of anti-trust laws.

Since modern real estate brokerage began in the early 20th century, there has been one aspect of the transaction that has been honored by all brokers, a close or even split of brokerage fees. Although the seller's broker never publishes their split, common knowledge determines the typical split between the buyer's broker and selling broker. But that is changing. Brokers are initiating punitive commission structures and blaming their actions on everything from bad markets to competing with 100 percent commission firms to buyer's agency.

In most markets, brokers offer about 3 percent to co-brokers, without revealing what their split is (which could be anywhere from one to four percent.) In some markets, brokers and agents will negotiate for as little as four percent commission from the seller, taking one percent for themselves to get a listing, and offering three percent to the co-broker to sell the home. That has been done for years. What is different is that now commission splits are being used as punishments against co-brokers.

Some brokers claim that when their company is representing the seller in the transaction, that they deserve a larger commission cut because getting listings is harder than representing buyers.

Buyers' brokers counter with the fact that listings are free advertising for the broker every time someone sees a sign in the yard or views a listing on Realtor.com. Buyers brokers have to spend significant sums to first educated the customer about buyers' agency and then to become recognized in the marketplace.

Some agencies, such as Jackson Simpson Real Estate Inc. in Hampton, New Hampshire refuse to split commissions with buyers' agents at all. "If a buyer's agent is advertising that a buyer can use their services and it doesn't cost them anything, I disagree with that," says Jack Simpson owner. "You don't get something for nothing. Why should my seller pay the buyer's agent's commission? If they want representation, they can pay for it. That is what my seller is paying for."

Simpson will not negotiate fees with buyer's agents. Even if the buyer does agree to pay a buyer's agent, Simpson will not allow the payment to come out of the transaction proceeds. He keeps the whole commission fee, he says.

Says one buyer's agent, "When a broker will not allow a buyer's agent to be paid out of the transaction proceeds, he is sending a clear message that he doesn't believe buyers should have representation in the transaction."

Some brokers claim that agents who are paid on the 100 percent franchise system have an unfair advantage. These franchises often attract the best agents who are able to keep as much as 75 percent of their commission after paying franchise fees and office costs. They feel they should be able to recoup their "training costs" when they lose good agents to 100 percent franchises. Other brokers hang on to their good agents by simply allowing a more favorable commission structure.

What happened to the 50/50 split? The even-steven split among brokers has traditionally served not only the real estate community well, it has been beneficial to buyers and sellers. With commissions being paid out of the transaction proceeds by the buyer's lender, buyers and sellers are both able to have representation in the home transaction without paying fees up front. Buyers, who are challenged to come up with down payments and closing costs, have not had to worry about paying their advocate out of their own pocket at closing. Sellers benefit because they not only have their listing agent working to sell their homes - they can rely on the sales power of every real estate associate in their area and beyond to bring buyers to the table.

With "double dip" in-house sales counting for approximately one third of all real estate transactions, the majority of brokers still require the assistance of a competing broker to bring a buyer to the table in most home transactions.

In view of this basic fact of life - that sellers' brokers need buyers' brokers to sell homes, it is incredible that some brokers are attempting to force punitive co-brokering contracts on their fellow brokers.

Muffie Hendricks, a RE/MAX agent in New Hampshire says that many brokers are now trying to induce 70/30 splits. By stating the commission structure as two percent in the MLS listing, some brokers are offering higher commissions to agents and brokers who agree to a 50/50 split on future transactions. She has a problem with that - it's price fixing, she says in her area where six percent commissions are the norm.

"In our area, one brokerage sent out a letter that said that they would only put a 2% cobroke fee in the MLS listing, but if we signed a "50/50 letter" they would pay more," explained Hendricks. "Basically they were saying, if you split 50/50 with us, we will with you. Now several top agencies are using this letter. I do not, and my broker does not, feel that this is a fair way to treat co-brokes, and we also feel that this is in violation of anti-trust, since we should not be discussing what we or others are being paid. I feel a reasonable fee should be paid. Many have signed. I cannot."

Hendricks calls on homes with low split offers and tries to negotiate higher splits for herself before showing the home to buyers. She has never had to take less than a two and a half percent commission split.

As a buyer's agent, she knows that commissions are a problem and not something she wants to burden her buyers with. She does tell them up front that she wants to be paid 3 percent and negotiates with them to pay any difference she isn't paid through the transaction proceeds. That puts buyers in an uncomfortable position. They don't want to pay the fees, yet they want the representation afforded by having their own advocate.

"It's a Catch-22," says Hendricks.

What about buyers and sellers? Could commission squabbles possibly be good for either side of the transaction? Do sellers know that adverse commission splits could be affecting the number and quality of offers they may recieve on their homes? Do buyers realize that they may be excluded or discouraged from seeing certain homes on the marketplace because of adverse commissions? No agent would admit to refusing to show a home because of a commission problem, but, it happens.

Claire Emory, manager of DeWolfe in New Hampshire would like to see a return to normal commission splits. She says, "We normally split 50/50 with everybody. That is the appropriate spirit for the real estate community."

Emory acknowledges that her agency has been known to send out a letter asking for a reciprocal 50/50 split and that the agency has put in the MLS homes with an adverse commission split. "We have done that at times. I personally believe that buyers' agents should get more."