Broker Commissions Explained.

Q: Do you “work” (are you the legal agent) for the person who pays you?
A: Not necessarily. Payment is only one of several factors which the courts will examine in deciding whether an agency relationship exists. It is possible for you to be someone’s agent and, therefore, owe the agency duties to that principal even though the principal is not paying the agent’s fee.

Q: Who pays the cooperating broker’s commission?
A: The listing broker. The only commission agreement the seller has is a listing agreement with the listing broker. That contract obligates the seller to pay the listing broker a commission or service fee when the listing broker performs under the listing agreement. In many cases, the listing broker will offer to compensate potential cooperating brokers either through a Multiple Listing Service system or through a co-brokerage agreement with the cooperating broker. Once the listing broker offers to compensate potential cooperating brokers through a Multiple Listing Service or through a co-brokerage agreement, the obligation to pay that co-broke is the listing broker’s. Although it has become a common practice for the seller’s attorney to make a commission check payable to the listing broker and another commission check payable to the co-broker, this is a matter of convenience for the listing broker. Properly, the seller’s attorney should make a commission check payable to the listing broker for the amount of the commission which the seller agreed to pay through the listing agreement. The listing broker would then pay the cooperating broker.

Q: Is it possible for more than one agent to represent a buyer at the same time?
A: Yes. As an example, a buyer may have an exclusive representative in certain towns and another exclusive representative looking for real estate in another town. In addition, it is possible for a buyer to provide several real estate licensees with open buyer representation agreements. These would function in a similar fashion to open listing agreements and would allow a buyer to work with several agents even within the same geographical area.