Dual variable commissions are so many things and all of them still need to be disclosed. In the olden days, dual variable commissions were fairly cut and dry: the seller agreeing to pay one total commission if you sell the property in-house and a different total commission if a cooperating broker brings the buyer. Think 5% for co-op deals, 4% if your own agent finds the buyer. That's it.
Things got a tiny bit more complicated in the "bad old times"—the short sale and foreclosure market. It was common for listing agents to charge 5.5-6% of the sales price while offering 2-2.5% to the selling agent. The rationalization here was that listing agents had a lot more work to do on the back end.
The amount of additional paperwork and time that short sale transactions required made it impossible to make the math work for listing agents during that time. I listed and lost a lot of short-sales and always tried to get another .5-1% to pay for a short-sale negotiator.
Weaponizing Commissions
The 2024 NAR Settlement opened an entire new frontier in dual variable commissions by giving sellers scalable commission options that didn't exist before. Effective August 17, 2024, listing agents may no longer post buyer-agent compensation on MLS platforms, but sellers and listing agents can still negotiate and offer compensation off the MLS through direct communication.
If you haven't yet seen it in your market, it's probably because the option hasn't been explained well enough to sellers yet—with great wisdom comes great power; if this catches on it potentially changes the game.
Imagine a seller now offering:
• 2.5% commission to the listing broker
• 3% commission to the buyer's agent for all-cash, short-close deals
• 2.5% for standard purchase transactions
• 2% for long escrows or difficult financing (e.g., seller financing)
This tiered approach is considered a form of dual or variable commission arrangement under California Association of REALTORS® (C.A.R.) and MLS rules. The purpose is transparent: sellers use these incentives to motivate quicker or more certain transactions, rewarding all-cash offers with higher commissions while reducing payouts for riskier deals.
The problem? Most agents listing properties don't understand they're creating a legal disclosure obligation when they structure compensation this way.
Quiet Crisis
Most agents still don't understand what they're supposed to disclose. They used to check the MLS box out of habit, but since that's no longer an option, the NAR settlement requires a new process to be put in place. Listing brokers can't finesse the conversation when selling agents call asking.
And since selling agents now must have written contracts with buyers specifying fees before showing properties, a new way of communicating commission needs to be normalized. Anything is better than getting my Encyclopedia Brown outfit on to cross-examine a listing agent on commissions.
Danger: Fair Housing in the House
Here's where it gets really dangerous. You can structure commissions based on objective transaction terms—cash versus financed, inspection contingencies, closing timeline—without restriction. But if your dual commission strategy inadvertently creates disparate impact on protected classes, you've got a fair housing violation regardless of your intent.
Disparate impact refers to a policy or practice which is neutral on its face but which disproportionately affects a group of people. The Fair Housing Act allows disparate impact claims to challenge policies that appear race-neutral but have discriminatory effects—and intent is irrelevant.
Consider this scenario: if your scaled commission approach results in systematically lower buyer-agent compensation for transactions with financing contingencies, and research shows certain demographic groups are statistically less likely to be cash purchasers, you've created a fair housing problem. The mechanism is simple: your neutral policy (lower commissions for financed deals) has a disparate impact on a protected class. And there's no defense; ignorance of the law is not an excuse, and we all know how tetchy the government gets about housing discrimination.
The Good Old Days
Before the settlement, disclosure was built into the system. The MLS handled the heavy lifting—cooperating brokers could see compensation offers right in the listing details. If you had a dual variable arrangement, checking that MLS box triggered automatic visibility. The system worked because everyone played on the same field with the same visible rules.
For Now
Now? Compensation talks happen off-MLS, directly between agents in one-on-one conversations. If you've got a dual variable or scaled commission deal, you're personally on the hook for telling cooperating brokers about it—and you'd better do it before they submit an offer, or you're risking ethics complaints and blown deals.
