Duty of REALTORS® to Ascertain the Terms of Compensation

QUESTION: An agent at my firm received an offer on one of his listings from a REALTOR® who is not a member of our MLS. The offer was accepted and the transaction is about to close. My agent contacted the closing attorney and notified him that the selling agent never secured any sort of confirmation of compensation and that, as such, the entire commission called for in the listing agreement should be paid to our firm. When the selling agent heard about that request, she contacted me and said that since her name and her firm’s name were both shown on the “Confirmation of Agency/Notice Addresses” page of the contract, her firm deserved to be paid. Who is entitled to compensation in this situation?

ANSWER: A REALTOR® who is acting as a cooperating broker is obligated by the REALTOR Code of Ethics to ascertain the terms of compensation before beginning to accept an offer of cooperation. Submission of an offer to a listing firm would constitute such a beginning. See Standard of Practice 3-1 of the Code of Ethics, a copy of which can be accessed here.

If the selling agent is a member of the MLS in which the property is listed, the blanket offer of compensation offered by the listing agent extends to all MLS participants. However, if the selling agent is not a member of the MLS, the agent would need to be able to demonstrate the existence of an agreement with the listing agent to compensate them for their services. That agreement can either be express or implied from the circumstances. While there is no requirement that the compensation agreement between the brokers be in writing, a written agreement is obviously preferable. Standard Form 220 can and should be used for this purpose.

In your case, it appears that the selling agent never raised the subject of compensation with the listing agent and certainly did not do so prior to submitting an offer for the listed property. It therefore does not appear that your firm is under any duty to share cooperating compensation with the selling agent’s firm.

Release Date: 6/8/2023; revised 12/18/2023

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Filed Under: Fees/Commissions,