The Legal and Ethics Hotline receives several inquiries regarding how to handle agent compensation within Tennessee REALTORS® forms.  The forms within the library offered by Tennessee REALTORS® provides several options for consumers.  This article seeks to share all options.  Should you have any questions, feel free to contact the Legal and Ethics Hotline by visiting this link.

 

Option 1:  Each Consumer Compensates Their Independent Licensee.

Each listing agreement provided by Tennessee REALTORS® offers the consumer the ability to agree to compensate the listing agent at closing.  Using the RF101, that amount will be entered into the blank on line 62.

Each agreement between a licensee and a buyer contains a similar provision.  Using the RF141, this amount is to be entered into the blank on line 45.

 

Option 2:  Cooperating Compensation.

On the RF101, if a seller would like to offer cooperating compensation, that amount may be entered into the blank on line 68.  Conversely, if the seller does not wish to offer cooperating compensation, “0” may be entered into this line.

On the RF141, lines 47-48 authorize the buyer’s agent to receive cooperating compensation and states the buyer will be responsible for compensating the licensee for the difference of the amount listed on line 45 and any cooperating compensation or compensation directly from seller offered.

If cooperating compensation is being offered by a listing agent based on their agreement with the seller, RF702 should be completed by the listing agent and selling agent reflecting the amount agreed upon.  If this amount is sufficient for the parties, there is no need to also address compensation within the purchase and sale agreement.

If the amount of cooperating compensation being offered is not satisfactory to the buyer and the buyer would like the selling agent to be compensated at a higher amount for the buyer to be able to afford the property, the buyer can ask the seller to compensate buyer’s agent an additional amount within the purchase and sale agreement.

The compensation agreement and purchase and sale agreement will be added together at closing to get the total amount paid to buyer’s agent.

 

Option 3. Seller to Compensate Buyer’s Agent Directly at Closing. 
If a seller does not wish to offer cooperating compensation, they can enter “0” in the blank on line 68 of the RF101.  If the buyer would like the seller to compensate the buyer’s agent at closing, they may enter the special stipulation language provided on lines 286-287 of the RF707. This is a negotiable item between the seller and buyer.

 

Conclusion
Consumers have always had a choice when it comes to broker compensation. It is important to let consumers know compensation has always been and will continue to be fully negotiable.

The following excerpts are taken from facts.realtor published by NAR regarding options available to a consumer:

  • Consumers have choices. Consumers can work with their agent to understand the full range of these choices when selling their home, which will help the consumer make the best possible decision for their needs.
  • Post Settlement, sellers still have the choice of offering compensation to buyer brokers. Sellers may consider doing this as a way of marketing their home or making their listing more attractive to buyers.
  • Agents must conspicuously disclose this to sellers and obtain approval for any payment or offer of payment that a listing broker will make to another broker acting for buyers.
  • Sellers can still make an offer compensation, but agents cannot include it on a Multiple Listing Service (MLS).

NAR offers this consumer guide on offers of compensation.  Feel free to share it and all other consumer guides available with your buyers and sellers.