Agent crediting part of commission to buyer

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Agent crediting part of commission to buyer

Is it legal for a buyer’s agent to credit a part of their commission to the buyer at close of escrow?

Asked on May 17, 2009 under Real Estate Law, California

Answers:

MD, Member, California Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

Well, was it in cash? Was the buyer an agent, as well?

The California Department of Real Estate oversees such matters.  Here is the information that is relevant to your question.

 

http://www.dre.ca.gov/

 

No Secret Profit or Undisclosed Compensation

The courts have unequivocally held that an agent

 

cannot:

• acquire any secret interests adverse to the principal;

• make a secret personal profit out of the subject of the agency; or

• conceal the agent’s interest in the property being conveyed or encumbered.

If an agent is aware of the amount at which a property may be sold and purchases at a

lower amount, reselling and pocketing the difference, the agent will be compelled to

disgorge the secret profit.

Claiming or receiving a secret profit or any form of undisclosed compensation is cause

for discipline under Business and Professions Code Section 10176(g). The obligation to

disclose all compensation regardless of the form, time, or source of payment is imposed

upon real estate licensees whether acting in a real property or real property secured

transaction.

 

Negotiability of Commission

In the sale of residential property of not more than four units, including a mobilehome,

Business and Professions Code Section 10147.5 requires that the listing (or whatever

document initially establishes the broker’s right to a commission, or increases the

amount or rate of the commission) contain, in not less than 10-point boldface type, the

following provision before the compensation clause:

Notice: The amount or rate of real estate commissions is not fixed by law.

They are set by each broker individually and may be negotiable between

the seller and broker.

 

Agreement between brokers.

 

 

An agreement between brokers cooperating in the sale of real property for a division of the commission is not illegal nor against public policy. It will be construed and enforced the same as other contracts not required to be in writing but no partnership or joint venture is created by such an agreement.

Commission as negotiated.

 

 

The amount of commission is set out in a broker’s contract

of employment. In the absence of any evidence of incapacity to read or any fraud to

prevent the reading of it, the party signing the written contract is bound by its express

terms and conditions. Ordinarily, the compensation of the broker is negotiated at a

certain percentage of the purchase price obtained by the owner. If no amount of

compensation is mentioned in the contract of employment, the law recognizes an

implied promise on the part of the owner to pay the usual or customary commission

charged in the neighborhood for like services.

Both the listing agreement and the deposit receipt usually expressly provide for payment

of a commission if the owner accepts an offer procured by the broker at a price which is

less than the price specified in the listing agreement.

 


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