Can an agent assign a commission to a loan company?

QUESTION: I am the broker-in-charge of a real estate firm.  The listing agent on one of the firm’s listings that is about to close has come to me and explained that she recently got a loan from a company in exchange for her agreement to repay it out of future commissions.  She showed me an assignment of commissions form that directs the attorney who is handling the closing to pay her share of the commission to this company.

Is it legal for an agent to assign commissions like this?  I checked the Real Estate Commission’s website and the company does not appear to have a firm real estate license.  What should I do?

ANSWER: Even though the company doesn’t have a real estate license, this kind of arrangement is allowed so long as the loan company is not practicing real estate brokerage and is merely being assigned a commission that has been earned by your listing agent.   Since the listing agreement is between the seller and the firm, commissions due under the listing agreement are payable to the firm rather than an individual broker; thus, a broker must get approval from an authorized representative of the firm in order to assign his or her share of the commission to a third party.

Assuming that your firm doesn’t have any objection to the commission being handled in this manner, you should check with the closing attorney to make sure that he or she is willing to cut a check at closing directly to the loan company.  Note that NC Real Estate Commission Rule 58A.0120(a) provides that “[a] broker shall not require or demand of any escrow agent or attorney that a broker’s commission be split with or paid to another person or entity.” Thus, although it permissible to ask the closing attorney if he or she will cut a check to the loan company, it is not okay to demand that they do so. If they are willing to cut a check to the loan company, you should provide him or her the assignment paperwork and confirm that your firm consents to the arrangement as well as the amount of the listing agent’s share of the commission.

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Filed Under: Fees/Commissions,