Bay Area Real Estate Wiki

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====== 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