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 14 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 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. 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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