Realtor® Legal Tip – Commissions in the REPC! What?!
August 29, 2017
Author: Curtis Bullock
May the Buyer ask the Seller to pay a commission to the Buyer’s brokerage in the REPC? Yes, if done correctly.
Suppose Realtor® A has the listing. Realtor® A’s brokerage is offering a 1% BAC through the MLS. Realtor® B’s buyer makes an offer that includes language in an addendum that asks the seller (*not the listing broker) to pay Realtor® B 2% which would be in addition to the listing brokers 1% BAC. Is this a violation of the Code of Ethics?
Answer: No, there is no violation here. This case study comes directly from the NAR Code of Ethics Manual as described in Case #16-17.
As noted in this case summary, since Realtor® B’s buyer asked the seller (not the listing broker) to pay the commission, no violation of the Code of Ethics occurred. No attempt was made to alter the BAC in the REPC. Also, if Realtor® B’s buyer had demanded that a portion of Realtor® A’s commission be paid to Realtor® B there would likely have been a violation.
Article 16, Standard 16-16 states “Realtors, acting as [buyer representatives] or brokers, shall not use the terms of an offer to purchase to attempt to modify the listing brokers’s offer of compensation to [buyer representatives] nor make the submission of an executed offer to purchase contingent on the listing broker’s agreement to modify the offer of compensation.”
Since the request for payment of Realtor® B’s fee was made directly to the Seller, and not the listing broker, Realtor® B was not in violation of Article 16. The offer also did not ask the seller to modify the listing agreement with Realtor® A which would have been an unwarranted interference with contractual relationship (see case study #16-16 on page 346).
Also, if the offer included language that asked the listing broker to change or increase the 1% BAC, there likely would have been a violation of Article 16. But that did not happen here.
Here is some sample language that could be included in an addendum if the Buyer wanted to ask the Seller to pay a brokerage fee to the Buyer’s brokerage – “Seller agrees to pay a brokerage fee in the amount of X% of the acquisition price to Buyer’s Brokerage. Such brokerage fee shall be in addition to any other compensation being offered.”
See my comments below for more explanation. This legal tip is not intended to represent specific legal advice. Please consult your broker or legal counsel for further questions.