Buyer Options to Compensate their Brokerage Firm
When a buyer agrees to compensate their brokerage firm in a buyer’s broker agreement, there are a few ways they can fulfill this obligation using Florida Realtors forms.
ORLANDO, Fla. – Recent practice changes require Realtors® and MLS participants who are working with a buyer to enter into a written agreement prior to touring a home. There are different forms they can use to establish this relationship (Exclusive Buyer Broker Agreement, Showing Agreement, Property Pre-Touring Agreement, or a brokerage firm’s own agreement). Regardless of which form they use, the starting assumption in this article is there’s an agreement in place that obligates the buyer to compensate their brokerage firm.
Now that the agreement is in place, the buyer will need to plan how they will ensure their brokerage firm is paid. It will be important for both sides of the transaction to communicate and coordinate to ensure negotiations go smoothly. While the four options below are all written from the buyer’s perspective, the buyer may need to ask the listing side what their preferences are to ensure they get on the same page. Some of the forms below are available on Form Simplicity.
Option 1 – Buyer compensates their brokerage firm directly
The simplest path is for the buyer to pay their brokerage firm. This will likely be collected at closing and show up on the closing disclosure. This should have little to no impact on their agreement with the seller to purchase the property.
Option 2 – Negotiate a credit from the seller in the purchase and sale agreement
This second path involves the buyer negotiating a credit from the seller as part of the purchase and sale agreement. Rider FF to the Florida Realtors®/Florida Bar Residential Contract for Sale and Purchase is titled Credit Related to Buyer’s Broker Compensation. This rider enables a seller to provide a credit (dollar amount, percentage or percentage plus dollar amount) that will enable the buyer to cover some or all of the amount described in their buyer broker agreement. A second rider with the same language has been formatted for use with any purchase and sale agreement (not a Florida Realtors/Florida Bar form), titled the Seller Credit Related to Buyer’s Broker Compensation (SCCA-1).
Option 3 – Ensure a listing broker enters into a compensation agreement with the buyer’s broker
This third path involves the buyer ensuring the listing broker enters into a separate agreement with the buyer’s broker to cover some or all of the amount the buyer owes their brokerage firm. Florida Realtors form Compensation Agreement – Seller’s Broker to Buyer’s Broker (CABB-1) can be used to document the broker-to-broker agreement.
One issue the buyer should be aware of is the timing of the CABB. There’s risk if the buyer enters into a purchase and sale agreement before the CABB is fully executed. To alleviate that concern, there is a new rider the buyer can attach to a Florida Realtors/Florida Bar contract titled Rider GG Seller’s Agreement with Respect to Buyer’s Broker Compensation. Rider GG creates a window of time (3 days after the effective date, if left blank) for the buyer to ensure the CABB is executed. If the listing broker and buyer’s broker have not executed an agreement by that deadline, then the buyer can cancel the purchase and sale agreement.
There is a second rider with the same language that has been formatted for use with any purchase and sale agreement (not a Florida Realtors/Florida Bar form) titled the Buyer’s Broker Compensation Contingency Addendum (BBCCA-1).
Option 4 – Ensure a seller enters into a compensation agreement with the buyer’s broker
The fourth path involves the buyer ensuring the seller enters into a separate agreement with the buyer’s broker to cover some or all of the amount the buyer owes their brokerage firm. Florida Realtors form Compensation Agreement – Seller to Buyer’s Broker (CASB-1) can be used to document the agreement.
This path is very similar to option 3, with the main difference being the seller will enter this compensation agreement instead of the listing broker. Therefore, the same risk exists as to the timing of executing the CASB and the purchase agreement. The buyer can use the riders to purchase and sale agreements described in option 3 to create a contingency if they prefer to enter into the purchase and sale contract first and then secure the CASB.
Joel Maxson is Associate General Counsel
Note: Information deemed accurate on date of publication
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