By using Paragraph 5A of the listing agreement, the seller agrees to compensate the listing broker and the buyer’s broker, while Paragraph 5B only includes compensation for the listing broker.

Under Paragraph 5A, the seller agrees to pay the listing broker a total negotiated fee that includes compensation for both the listing broker and the buyer’s broker. From that total amount, the listing broker agrees to pay the buyer’s broker. The listing broker and seller negotiate the amount to be paid to a buyer’s broker when they sign the listing agreement. Once signed, it becomes a binding obligation on the listing broker to pay that amount to the buyer’s broker that procures the buyer. The listing broker should disclose the amount of compensation being offered to prospective buyers and their agents. When using Paragraph 5A for broker compensation, the listing broker is automatically authorized to advertise buyer’s broker compensation under Paragraph 5A(3). Remember, NAR policy prohibits offers of compensation on an MLS but offers of compensation can be made outside of an MLS.

When a buyer is ready to submit an offer, the listing broker can execute a separate agreement with the buyer’s broker for the amount agreed to under Paragraph 5A(2) in the listing agreement. The listing broker would have to go back to the seller and get the seller to amend the listing agreement to change that amount.

Under Paragraph 5B, the seller is only paying an amount for the listing broker’s fee. Under this paragraph, the seller can then negotiate with a buyer for payment of the buyer’s broker fees when offers are submitted. If the seller wants to advertise that the seller is willing to contribute to buyer’s expenses (seller concessions), the listing broker would need to obtain the seller’s authorization by checking the appropriate box in the Note below 5B.

If the listing broker is not offering compensation to the buyer’s brokers, it's very likely that buyers will request the seller to pay buyer’s expenses or buyer’s broker’s fees with their offer. An offer may contain an amount in Paragraph 12A(1)(b) of the sales contract for the seller to pay “buyer’s expenses.” The amount in this paragraph is not paid to buyer’s broker’s fees. Or an offer may have Paragraph 12B(1) for seller to pay an amount specifically towards buyer’s broker compensation or Paragraph 12B(2) for buyer to pay an amount specifically towards seller’s broker compensation.

The listing broker and seller must first determine if the listing broker will share compensation with a buyer’s broker that procures a buyer. Paragraph 5A should be used to indicate the broker’s fee that will include a total amount for the listing broker and the buyer’s broker. Paragraph 5B should be used if the seller will only pay a broker’s fee that will be retained by the listing broker and no portion will be shared. Both 5A and 5B include blank lines to allow the broker’s fee to be expressed as a percent of the sales price or a flat fee. Only one line should be filled in. The other space will be left blank. Both 5A and 5B also include a blank line for alternative broker fee structures like an hourly rate.

TREC recently made changes to Paragraph 12 in several sales contracts. Many REALTORS® are now asking if they should use Paragraph 12 in the contract or the Compensation Agreement Between Brokers (TXR 2402) to document broker compensation. This how-to guide will help answer your questions.

As of December 16, 2024, the Addendum Regarding Brokers’ Fees (TXR 2406) and the Amendment to Representation Agreement (TXR 2701) will no longer be available for use on the Texas REALTORS® website or through approved form vendors. These forms filled gaps during the transition to the new NAR MLS rules regarding broker compensation.

Yes. You can use the Compensation Agreement Between Brokers (TXR 2402). Compensation listed on a broker’s website does not create a binding obligation to pay the buyer’s broker. The brokers must still sign an agreement to create a binding contract for compensation. If the listing broker has agreed to compensate a buyer’s broker that procures a buyer in his listing agreement with a seller, the listing broker should execute a compensation agreement for the amount that was agreed to in the listing agreement.

The date of the term should provide enough time for the parties to negotiate and sign the sale or lease agreement. For compensation to be earned under the compensation agreements (TXR 2401 and TXR 2402), the owner of the property must enter into a binding agreement to sell or lease the property during the term. The parties to the compensation agreement can agree to extend the term if additional time is needed for negotiations. Note: If the sales contract was executed during the term, the compensation is still payable even if the sale closes after the term has expired.

Yes. The Department of Veterans Affairs issued a temporary rule that went into effect on August 10, 2024, that allows VA buyers to pay reasonable and customary amounts for buyer's broker fees if the property is located in an area where either the listing broker is prohibited from setting buyer's broker compensation through an MLS or the buyer broker compensation cannot be established or flow through the listing broker. If a VA buyer purchases a home that was listed in an MLS that prohibits advertising broker compensation, the buyer can pay reasonable and customary amounts for buyer's broker compensation. However, buyer's broker compensation cannot be included in the loan amount.

No. NAR’s MLS policy only requires written agreements with buyers prior to showing one to four family residential properties for sale. However, MLSs have discretion to adopt additional policies. Check your local MLS rules for specific requirements that may apply to other types of properties.

No. Texas law does not allow agents to provide services in a non-agency capacity. When providing brokerage services, such as showing property, a license holder must represent someone in a transaction. An agent can only choose to treat a party to a transaction as a customer if the agent already represents the other party.

For example, when a listing agent interacts with an unrepresented buyer who wants to purchase the listed property, the agent can take that buyer on as a client, or the buyer can remain unrepresented, and the buyer would be considered a customer. This arrangement is only possible because the listing agent is already representing the seller. However, if the agent that wants to show a property is not the listing agent, the agent cannot treat the buyer as a customer. The agent would have to represent someone, either the buyer as a buyer’s agent or the seller as a subagent. If the agent represents the buyer, the agent must get a written representation agreement to show the home. Listing agents and subagents do not have to get written agreements with buyers to show a home if they only represent the seller.

MLS policy prohibits participants and subscribers from filtering out MLS listings provided to clients and consumers based on compensation offered to buyer’s brokers. REALTORS® must provide the buyer with all property that otherwise meets the buyer’s criteria. Allow buyers to choose which properties to visit. REALTORS® should also explain to their clients that even though a property may not have an advertised offer compensation or concession up front, it’s still possible to negotiate seller concessions and buyer broker compensation when the buyer submits an offer.

Yes. Texas REALTORS® legal staff worked diligently to ensure that the updated Texas REALTORS® forms work seamlessly with the current TREC forms. Texas REALTORS® has been in communication with TREC about any potential updates to promulgated TREC forms. The association's forms allow members to continue to do business using TREC contracts while staying in compliance with updated NAR rules. If TREC contracts change, Texas REALTORS® will update our forms as necessary.

On March 15, 2024, NAR announced a proposed settlement agreement to end antitrust litigation brought on behalf of home sellers related to broker commissions. As part of the settlement, NAR agreed to make several policy changes which have been incorporated into mandated MLS rules. These new rules affect offers of compensation on an MLS and include specific requirements for disclosures and written agreements.

• Offers of compensation from sellers or listing brokers to buyer’s brokers cannot be included anywhere on an MLS platform. Any platform that uses MLS data cannot display offers of compensation from multiple brokers.
• Listing brokers must disclose to sellers and obtain seller approval for any payment or offer of payment that the listing broker or seller will make to another broker acting for buyers. This disclosure must be in writing and provided in advance of any payment or agreement to pay and must include the amount or rate of any such payment.
• MLS participants must disclose to sellers and buyers that broker commissions are not set by law and are fully negotiable. This disclosure must be contained in listing agreements and buyer representation agreements.
• MLS participants working with a buyer must have a written agreement with the buyer before touring any home.
• Working with a buyer” means providing brokerage services to a buyer, such as identifying property to purchase, arranging showings, and negotiating offers. Listing agents do not have to get written agreements to show their own listings because they are not working with a buyer; they are representing the seller.
• “Touring a home means” when the buyer and MLS participant enter the house. This includes when the MLS participant enters the home to provide a live virtual tour to a buyer not physically present. In Texas, we call this “showing” a home.
• A “home” means a one-to-four family residential property.

The written agreement with a buyer must contain three specific provisions:

• The agreement must disclose the amount or rate of compensation the REALTOR® will receive or how this amount will be determined.
• The amount of compensation reflected in the agreement must be objectively ascertainable and may not be open-ended. For example, it can’t say, “compensation will be whatever amount seller is offering”
• The MLS participant may not receive compensation for brokerage services from any source that exceeds the amount or rate agreed to in the agreement.

Note: The required contractual provisions have been made to the applicable Texas REALTORS listing and buyer/tenant representation agreements.

The listing broker and seller must first determine if the listing broker will share compensation with a buyer’s broker that procures a buyer. Paragraph 5A should be used to indicate the broker’s fee that will include a total amount for the listing broker and the buyer’s broker. Paragraph 5B should be used if the seller will only pay a broker’s fee that will be retained by the listing broker and no portion will be shared. Both 5A and 5B include blank lines to allow the broker’s fee to be expressed as a percent of the sales price or a flat fee. Only one line should be filled in. The other space will be left blank. Both 5A and 5B also include a blank line for alternative broker fee structures like an hourly rate.

Under Paragraph 5A in the listing agreement, the seller agrees to pay the listing broker a total negotiated broker’s fee that includes compensation for the listing broker and the buyer’s broker. The listing broker agrees to pay a portion of that total fee to the broker that procures the buyer. The total amount for broker’s fees is inserted in 5A(1). The portion of the total that will be paid to the buyer’s broker is inserted in 5A(2).

In a transaction with an unrepresented buyer, there will not be another broker. Under 5A(4), if there is no other broker, the listing broker retains the total broker’s fee in 5A(1). By using 5A, the seller has agreed to pay broker’s fees for the buyer-side of the transaction. Even though the listing broker is not representing the buyer, the listing broker will have to perform certain buyer-side tasks that would normally be performed by the buyer’s agent to get to a successful closing. The listing broker is entitled to retain the fees intended for the buyer-side of the transaction for this additional work.

Under 5B, the seller only agrees to pay the listing broker for the broker's services. No compensation is being offered to a buyer’s broker.

Since the seller has only agreed to pay the listing broker’s fees for the seller-side of the transaction under 5B, the listing broker may want additional compensation for the additional work required to get a successful closing. Once an unrepresented buyer transaction is contemplated, the listing broker and seller can agree to additional compensation using the Amendment to Listing (TXR 1404). The listing broker and seller can also add compensation for unrepresented buyers in the listing agreement using the blank line on 5B(1)(b).

No. Local MLSs are responsible for enforcement of MLS rules and regulations. If you suspect an MLS participant is not complying with the written buyer agreement requirement, you should contact your local MLS.

By using Paragraph 5A of the listing agreement, the seller agrees to compensate the listing broker and the buyer’s broker, while Paragraph 5B only includes compensation for the listing broker.

Under Paragraph 5A, the seller agrees to pay the listing broker a total negotiated fee that includes compensation for both the listing broker and the buyer’s broker. From that total amount, the listing broker agrees to pay the buyer’s broker. The listing broker and seller negotiate the amount to be paid to a buyer’s broker when they sign the listing agreement. Once signed, it becomes a binding obligation on the listing broker to pay that amount to the buyer’s broker that procures the buyer. The listing broker should disclose the amount of compensation being offered to prospective buyers and their agents. When using Paragraph 5A for broker compensation, the listing broker is automatically authorized to advertise buyer’s broker compensation under Paragraph 5A(3). Remember, NAR policy prohibits offers of compensation on an MLS but offers of compensation can be made outside of an MLS.

When a buyer is ready to submit an offer, the listing broker can execute the Compensation Agreement Between Brokers (TXR 2402) with the buyer’s broker for the amount agreed to under Paragraph 5A(2) in the listing agreement. The listing broker would have to go back to the seller and get the seller to amend the listing agreement to change that amount.

Under Paragraph 5B, the seller is only paying an amount for the listing broker’s fee. Under this paragraph, the seller can then negotiate with a buyer for payment of the buyer’s broker fees when offers are submitted. If the seller wants to advertise that the seller is willing to contribute to buyer’s expenses (seller concessions), the listing broker would need to obtain the seller’s authorization by checking the appropriate box in the Note below 5B.

If the listing broker is not offering compensation to the buyer’s brokers, it's very likely that buyers will request the seller to pay buyer’s expenses or buyer’s broker’s fees with their offer. An offer may contain an amount in Paragraph 12A(1)(a) of the sales contract for the seller to pay “buyer’s expenses.” The amount in this paragraph is not paid to buyer’s broker’s fees. Or an offer may have the Addendum Regarding Brokers’ Fees (TXR 2406) attached for seller to pay an amount specifically towards buyer’s broker compensation.

Under Paragraph 5A in the listing agreement, the seller agrees to pay the listing broker a total negotiated broker’s fee that includes compensation for the listing broker and the buyer’s broker. The listing broker agrees to pay a portion of that total fee to the broker that procures the buyer. The total amount for broker’s fees is inserted in 5A(1). The portion of the total that will be paid to the buyer’s broker is inserted in 5A(2).

In an intermediary transaction, there will not be another broker. One broker represents both the seller and the buyer. Under 5A(4), if there is no other broker, the listing broker retains the total broker’s fee in 5A(1). By using 5A, the seller has agreed to pay broker’s fees for the buyer-side of the transaction. Since the intermediary listing broker is representing the buyer, the listing broker is entitled to retain the fees intended for the buyer-side of the transaction.

Under 5B, the seller only agrees to pay the listing broker for the broker's services. No compensation is being offered to a buyer’s broker.

In an intermediary transaction, both the seller and the buyer have agreed to pay the broker’s fees in their representation agreements. Since the seller has only agreed to pay the listing broker the seller-side of the transaction by using 5B, the buyer would be responsible for paying the buyer-side of the transaction under the buyer representation agreement.

If the buyer wants to request the seller to also pay the listing broker for the buyer-side, the buyer can include the amount of compensation the buyer is requesting the seller pay in Paragraph 12A(1)(b) of the applicable sales contract. Any amount inserted in this paragraph will be in addition to the amount the seller is already paying the broker under the listing agreement.

Yes, if the seller authorizes the listing broker to disclose such information. The listing broker is automatically authorized to disclose and advertise the amount of available buyer’s broker compensation that will be paid by the listing broker when using Paragraph 5A of the TXR 1102 and TXR 1201 listing agreements. This authorization is found in Paragraph 5A(3). There is no checkbox or additional authorization needed.

However, the seller must separately authorize the listing broker to disclose that the seller is open to paying concessions under the sales contract, which concessions could include paying for buyer’s broker compensation if using the TXR 1101 or if Paragraph 5B is selected in TXR 1102 or TXR 1201. The listing broker can obtain the seller’s authorization by checking the appropriate box in the Note: Authorization to Disclose Seller Paying Buyer’s Expenses paragraph. Where permitted, the listing broker can disclose this information on an MLS.

For example, an MLS may have “yes” or “no” checkboxes for seller concessions. Some MLSs may also allow brokers to insert a specific amount of seller concessions. The listing broker would need to get additional authorization from the seller to disclose a specific amount. The listing broker can obtain the necessary authorization to disclose a specific amount by using the Seller’s Authorization to Disclose and Advertise Certain Information (TXR 1412).

No, you do not need a written agreement if you are hosting the open house or otherwise providing access to the property only on behalf of the seller. If your broker has a listing on that property, you, as an agent associated with that broker, can show that home on behalf of the seller and will owe a fiduciary duty to the seller of the home. If an unrepresented buyer walks in and asks to see the property you are holding open for the seller, you are showing that buyer the home while representing the seller’s interest.

Note: If that buyer expresses an interest in having you work for the buyer to view other homes or submit an offer, you would be required to obtain a buyer representation agreement with that buyer. If an offer is made on your brokerage’s listing, you will need authorization from both the seller and the buyer to act as an intermediary.

Yes. Under NAR policies, brokerages are allowed to post offers of compensation on their own websites but only for their own listings, even if their websites receive MLS data through an IDX feed. NAR rules also permit brokers to post a link to their brokerage website in MLS platforms, such as in an agent remarks field. However, the link cannot lead to the webpage with the broker’s offer of compensation. The link can lead to the broker’s website homepage. There could then be a link from the homepage that goes to the page with the compensation information. In other words, the homepage cannot have offers of compensation, but the next click could.

Note: Local MLSs have discretion to adopt additional rules. Check your local MLS rules for any restrictions regarding agent remarks.

Yes. Listing brokers may advertise offers of compensation on signage. Offers of compensation are only prohibited from being included on an MLS.

A dual or variable rate compensation arrangement is when the listing broker charges the seller a certain fee if the listing broker’s firm is the procuring cause of transaction and a different fee if the sale results through the efforts of the seller or a buyer’s broker. The blank lines in Paragraph 5 of the applicable listing agreement can be used to add terms regarding dual or variable rate compensation arrangements.

Note: Standard of Practice 3-4 of the Code of Ethics requires REALTORS® to disclose such arrangements to potential cooperating brokers as soon as practical. However, under the recent NAR policy changes, MLSs are required to remove fields regarding compensation, including dual or variable rate arrangements, from the MLS platform. REALTORS® must still disclose such arrangements off the MLS.

Yes. Unlicensed assistants may answer questions about offers of compensation. Per TREC Rule 535.5(f), an answering service or clerical or administrative employee identified to callers as such may confirm information concerning the price and terms of property advertised.

When this form was updated, Paragraph 8 was deleted. Instead of changing all the paragraph numbers, the form reserves Paragraph 8 for future use. Currently, nothing goes in Paragraph 8.

No. NAR’s MLS policy mandates use of written agreements prior to showing one-to-four family residential properties. However, MLSs have discretion to adopt additional policies. Check your local MLS rules for specific requirements that may apply to other types of properties.

MLSs will make their own rules regarding where this kind of information can be shared in the MLS. Check with your local MLS about where to include information regarding the seller’s willingness to pay some of the buyer’s expenses.

Yes. Under the NAR policy, a written buyer agreement must be signed prior to showing a home. A “home” means a one-to-four family residential dwelling. The policy does not include exceptions for the property's size or intended use. If the property contains a home, regardless of acreage, a signed agreement with a buyer would be required to show the property. Note: This requirement does not affect MLS property type or the sales contract. Continue to select the applicable property type in the MLS and use the Farm and Ranch Contract when appropriate.

No. TXR 1412 includes information about the seller concessions possibly being used for the buyer’s broker fees, so this form cannot be included on the MLS. MLSs have the discretion to allow brokers to include information about sellers paying buyers’ expenses. However, any amounts listed on an MLS cannot be earmarked for broker compensation

NAR’s MLS rules require that the amount of broker compensation stated in a buyer representation agreement must be objectively ascertainable. This requires that compensation be a definite or specific amount or rate. NAR has provided a few examples of what type of compensation is not considered objectively ascertainable. The amount or rate of compensation cannot be stated as a range, for example from X% to X%. The amount or rate cannot vary depending on the source of payment, for example a different amount if the listing broker pays the fee versus if the buyer pays the fee.

No. TXR 2402 contains information regarding compensation between a listing broker and buyer’s broker. MLS policy prohibits compensation information from being included anywhere in the MLS.

Yes, they can earn those bonuses if the broker discloses the specific amount of compensation offered to the broker and receives authorization from the buyer. The broker can use the Amendment to Buyer/Tenant Representation Agreement (TXR 1505) to specify the amount of the bonus the broker will receive and obtain the buyer’s authorization. TXR 1505 requires the bonus to be specific to a particular property. Since the bonus is being paid by the seller or the seller’s agent, the buyer is not obligated to pay the bonus.

Yes, brokers and clients can negotiate compensation on a case-by-case basis. Keep in mind that fair housing laws apply to both sellers and their agents. Payment of different commissions cannot be based on a party’s or their agent’s status in a protected class. NAR has resources available for brokers and agents to use.

Yes. The representation agreement can be amended between the parties to the agreement at any time. For example, a builder may offer broker bonuses that may not have been included in the original representation agreement. If the buyer agrees, the parties may amend the representation agreement to include the bonus amount. Keep in mind that NAR has stated that there needs to be a legal basis for amending the buyer/tenant representation to increase the amount you are paid such as additional work completed for the buyer. It cannot simply be to match the compensation being offered by the seller or listing broker.

Yes, but only if the buyer representation agreement is amended. Per MLS Policy Statement 8.13, buyer’s brokers cannot accept compensation above the amount listed in the buyer representation agreement. If the buyer agrees, you can use Amendment to Buyer/Tenant Representation Agreement (TXR 1505) to amend the amount allowed under the buyer/tenant representation agreement. In addition, NAR has stated that a buyer representation agreement cannot be amended simply to match the compensation being offered, but there must be a legal basis for the amendment such as increased services being offered or additional work being done for the buyer.

No. The buyer/tenant representation agreement is a confidential document between buyer and that buyer's broker. Under NAR policies, a buyer’s broker is not required to disclose to the seller or listing broker the amount of compensation the buyer is paying. Just as the listing broker is not required to disclose the terms in that broker's listing agreement.

It is inappropriate for brokers to demand to see another brokers' confidential agreements. They are essentially demanding that brokers violate their fiduciary duty to their clients. If the listing broker and seller have agreed to compensate a buyer’s broker in a listing agreement, the listing broker should execute a broker-to-broker compensation agreement with a buyer’s broker for the amount agreed to in the listing agreement. The brokers can use the Compensation Agreement Between Brokers (TXR 2402). If the compensation the seller or listing broker is paying the buyer’s broker is more than what is stated in the buyer representation agreement, the buyer and buyer’s broker can amend their agreement, provided there is a legal basis for such amendment or make other arrangements on how to account for any differential.

If the listing broker or seller refuses to sign either the compensation agreement or sales contract without being provided the buyer’s representation agreement due to the seller's requirement that it be provided, buyer’s agents should discuss the situation with their buyers. The buyers have several options. The buyers may not want to submit an offer on that property; they may want to submit an offer without providing a copy of the buyer representation agreement to begin negotiations; or the buyers can give permission to disclose the terms of the buyer’s representation agreement to submit an offer.

TXR 1507 is a representation agreement. It allows brokers to limit the scope of their representation, as permitted by Texas law. While brokers who have agreed to provide showing services are not providing comprehensive brokerage services, they have agreed to provide some brokerage services, making

the potential buyer a client and not a customer. Brokers must still meet their legal and ethical duties while performing the limited services they’ve agreed to in their representation agreements. Section 1101.557 of the Texas Occupations Code requires license holders to, at minimum, answer the party’s questions and present any offer to or from the party.

Section 1101.557 of the Texas Occupations Code requires license holders to, at minimum, answer the party’s questions and present any offer to or from the party. This simply means the agent is required to give the offer to the intended party. This requirement is intended to prevent agents from withholding information from their clients. If the seller sends an offer to an agent, the agent cannot hold on to the offer but must forward the offer to the buyer. Likewise, if a buyer has an offer to send to the seller, the agent will have to forward the offer to the seller. This does not require the agent to write the offer or negotiate the terms for the buyer or seller if the agent hasn’t agreed to provide those services.

If a buyer gives the buyer’s agent an offer under a showing services agreement, the agent will have to forward the offer to the seller. It is not anticipated that this would happen very often. Also keep in mind that the agency relationship exists only for the term of the agreement. If the showing services agreement is for one day or a weekend, it is unlikely that a buyer will provide an agent with an offer during that short period of time.

Brokers are permitted under the law to agree on which services the broker will provide to their clients. For example, there are limited services listing brokers and there are referral agents that have agreed to provide only certain services to their clients. These brokers can perform the limited services they’ve agreed to and still meet their legal and ethical duties.

No. Texas REALTORS® offers two buyer representation agreements that can be used to comply with the requirement to have a written agreement signed before showing a home. Members can choose between the traditional Residential Buyer/Tenant Representation Agreement – Long Form (TXR 1501) or the new Residential Buyer/Tenant Representation Agreement - Short Form (TXR 1507).

No. Brokers are not required to accept a certain type of payment. Brokers can set their own policies and procedures to determine what types of payment they will accept.

Yes. The broker and buyer can agree on any amount. Keep in mind that per MLS Policy Statement 8.4, brokers and agents must not represent that their brokerage services to a client or customer are free or available at no cost to clients, unless the broker or agent will receive no financial compensation from any source for those services.

No. TXR 1507 can be used for multiple showings at different properties. Paragraph 3 allows the broker and the client to specify the market area, which could be one property, a subdivision, a city, county, or zip code, etc.

Under the showing services option, brokers have only agreed to provide clients with access to properties in the defined market area. Any additional services desired by clients, including activities like drafting offers, advising on terms of offers, or negotiating with sellers on the client’s behalf, must be agreed to by the client. There are a couple of options the broker and client can consider to add full services. The broker and client can amend the Residential Buyer/ Tenant Representation Agreement – Short Form (TXR 1507) to full services using Amendment to Buyer/Tenant Representation Agreement (TXR 1505) if the original agreement for showing services is still in place. Alternatively, the parties can choose to execute a new Residential Buyer/Tenant Representation Agreement –Short Form (TXR 1507) or Residential Buyer/Tenant Representation Agreement – Long Form (TXR 1501) to provide a full range of services. The parties should also determine if intermediary authorization is needed and what the broker’s fee should be.