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


MD, Member, California Bar / FreeAdvice Contributing Attorney

Answered 15 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.


No Secret Profit or Undisclosed Compensation

The courts have unequivocally held that an agent



• 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



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.


IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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