Table of Contents
Commission and Fees
Nature of Commissions
Who Earns the Commission
When a Commission Is Earned
Procuring Cause
Types of Compensation
Sharing Commissions
Disclosure of Compensation
Commissions in Dual Agency
Failure to Earn Commission
Commission and Fees
Real estate commissions are compensation paid for brokerage services.
Nature of Commissions
Negotiable between broker and principal
Not fixed by law
Earned based on contract terms
Usually paid at close of escrow
Who Earns the Commission
Commission is earned by the broker, not the salesperson
Salesperson is compensated by their employing broker
Broker must be properly licensed at time services are rendered
When a Commission Is Earned
Broker produces a ready, willing, and able buyer
Buyer agrees to seller’s terms
Unless agreement states commission is contingent on closing
Procuring Cause
Broker whose efforts directly result in the sale
Determines commission entitlement when multiple brokers involved
Common in open listings
Types of Compensation
Percentage of sales price
Flat fee
Hourly or consulting fee
Retainer plus success fee
Sharing Commissions
Only licensed brokers may share commissions
Salespersons may be paid only by their employing broker
Fee-splitting with unlicensed persons is prohibited
Disclosure of Compensation
Compensation arrangements must be disclosed when required
Dual agency compensation must be disclosed to both parties
Referral fees must be disclosed
Commissions in Dual Agency
Must be disclosed and consented to in writing
Broker may receive compensation from one or both parties
Cannot favor one party over the other
Failure to Earn Commission
Buyer or seller defaults (depending on agreement)
Listing expires before performance
Broker breaches fiduciary duty
Required disclosures not made