From the Legal Hotline: The Wrong Place for Commission Negotiations

We sometimes get callers who ask whether they can put a commission amount on Page 9, Broker Information, of the One to Four Family Residential Contract (Resale) (TAR 1601, TREC 20-14) to bind the other broker to that amount. However, the blank space on Page 9 of the contract regarding the commission is there to serve as authorization to the title company to pay the buyer’s broker directly from the listing broker’s commission.

Commission discussions or negotiations between brokers should have already been completed. Furthermore, the contract is between the buyer and the seller, and thus is not binding on the agents or brokers.

The commission offered by the listing agent in the MLS becomes binding when the buyer’s agent submits an offer. When a property is not listed in the MLS, the listing broker and buyer’s broker should enter into a separate written agreement, like the Agreement Between Brokers for Residential Lease (TAR 2002) or the Registration Agreement Between Brokers (TAR 2402) offered by TAR, about how much commission will be paid to the buyer’s broker upon successful closing.”

—Iman Ali is associate counsel for the association.