A prospective buyer is interested in one of my listings. He told me he is a licensed attorney and will prepare his own offer without using a real estate agent. He also asked to receive a share of my fee in the transaction. He doesn’t have a broker’s license. Can I pay him?

Yes. A broker can share a fee with a principal, regardless of the principal's profession or license status. However, the broker is not required to do so. A concession of part of the broker’s fee to a principal is a business decision made by the broker.

Remember, a broker is prohibited from sharing a commission with an attorney who represents a party in a transaction. In that situation, the attorney would need to seek payment from his client.

Keep in mind that if you decide to share your fee with a principal who you don’t represent, you must obtain consent from your client to do so.

An attorney told me her client attended an open house for my listing and wants to make an offer on the property. The attorney is preparing the offer for her client and insisted I pay her the same fees I had offered cooperating brokers in the MLS. The attorney doesn’t have a broker’s license. Can I pay her the cooperation fee if her client purchases the property?

No. The Real Estate License Act (TRELA) prohibits brokers from sharing fees received for services as a real estate agent with anyone not licensed as a real estate broker or salesperson in Texas or any other state. (See Section 1101.651, Occupations Code.) You would face disciplinary action for paying a cooperating commission to an attorney.

Although attorneys are exempt from the provisions of TRELA (see Section 1101.005, Occupations Code) and are permitted to represent clients in real estate transactions, attorneys must seek compensation for those services directly from one of the principals in a transaction.

A buyer broker whom I know told me that he regularly shares part of his fees with the buyer he represents. Also, he pays the buyer outside of closing with no indication of the payment shown on the HUD-1 Settlement Statement. Isn't that illegal?

A broker is not prohibited by The Real Estate License Act from sharing a fee with a principal. Any fee-sharing arrangement, however, should be disclosed on the HUD-1 Settlement Statement.<br/><br/> Sellers and buyers signing the HUD-1 Settlement Statement represent that the settlement statement is a true and accurate statement of all receipts and disbursements made in connection with closing of the transaction. The HUD-1 Settlement Statement usually contains a warning that making a false statement on it is a federal crime punishable by a fine or imprisonment. A broker participating in any scheme to pay money to a buyer outside of the closing might risk similar penalties. <br/><br/> Note: REALTORS® advertising or otherwise representing that they will share fees with a party in a transaction must disclose in the ad that the rebate is subject to the consent of the party that the broker represents. Also, if the rebate is contingent upon certain restrictions, such as approval by the lender, the ad must contain a disclosure that payment of the rebate is subject to restrictions.

I’m a broker and I recently terminated the services of one of my agents who signed the TAR independent-contractor agreement. Which fees should he receive upon termination?

You owe him any fees earned before the termination was effective.

The Independent Contractor Agreement for Sales Associate (TAR 2301) outlines the rights of the broker and agent concerning earned fees upon termination of agent sponsorship. According to Paragraph 16C of the contract, an agent’s fees are earned at the time a broker's fees are earned under the applicable agreement for brokerage services—unless the fees are subject to arbitration or litigation. Each brokerage agreement defines when a broker's fees are earned. Generally, a broker's fees are earned when contracts or leases are fully executed.

Paragraphs 16G and 16H address the issue of fees payable to the departing agent if prospects are reassigned to another agent to complete a transaction. The parties could agree to other rules regarding this fee sharing, but a different agreement should be in writing to prevent disputes.