In 2024, a number of changes were put in place regarding how brokerage compensation is paid. REALTORS®, lenders, mortgage brokers, and closing attorneys are still adapting to these changes, which has resulted in cooperating brokers not being paid or not receiving the full amount of agreed compensation. For example:
▪A purchase and sales agreement states that the seller is paying the cooperating broker but the attorney transmits the funds to the listing broker instead.
▪A closing attorney assumes that compensation to a cooperating broker was included in the listing side of the transaction. The attorney disburses too much money to the seller and must pursue the seller for the balance owed to the cooperating broker.
How can situations like these be prevented?
▪Make sure that the amount of your compensation and who will pay it are clearly explained in the purchase and sales agreement and/or your buyer contract. Debates over contradictory language about compensation and concessions can create obstacles to your being paid.
▪If you want your compensation to be based on the net, make sure to define clearly how it will be calculated. What will be deducted from the gross to create net: concessions, repairs, prepaids, etc.? The more vague the language, the more likely that there will be mistakes and disputes.
▪Submit your closing statement early and follow up with the law firm to make sure that they understand who is compensating you. If both the buyer and seller are paying part of your compensation, explain that also to the closing office.
▪Ask your client for a copy of the closing statement and review it to make sure that your brokerage’s compensation is listed correctly.
▪Attend the closing. Even though it’s become less common for brokers to attend closings, it can help if you anticipate any problems.
If a problem occurs, and the attorney wrongly refuses to resolve it, you can contact the Rhode Island Disciplinary Board.
REALTORS®: for more information, please contact the RIAR Legal Department at 401-432-6945 or email [email protected].