How broker compensation is agreed.

Compensation is now agreed in writing before showing, on both sides. Here is how each agreement works and what the file must hold.

Two documents, two negotiations

The listing agreement handles the seller side. The buyer representation agreement handles the buyer side. Each is signed by one client and one brokerage, each states a compensation figure, and neither one binds the other side. A transaction with representation on both sides has two of these documents, held by two different brokerages.

Nothing is implied anymore

Before August 17, 2024, a buyer broker could open a listing and read what the listing brokerage was offering. That field is gone from every multiple listing service, and offers cannot be reintroduced in remarks or attachments. The practical result is that compensation now has to be asked for, agreed and written down rather than looked up.

Why this lands on the back office

Two agreements means two documents to collect, two amendment chains to keep straight, and a closing check that compares what was agreed against what was paid on each side. The guide on what the NAR settlement changed covers the rule changes themselves; this one covers the agreements they produced.

State law still applies

Several states set their own requirements for written representation agreements, including content and timing rules that predate the settlement. Where state law is stricter it governs. Where it is silent, the settlement terms govern for MLS participants, which covers most brokerages.

The listing agreement answers two questions: what the seller pays the listing brokerage, and whether the seller will contribute toward a buyer broker.

What the seller agrees to pay

A total compensation figure to the listing brokerage, stated as a percentage of the sale price, a flat fee, or a tiered structure. The figure is negotiated between the seller and the brokerage and has never been set by any rule or association. Nothing about the number requires it to be split with anyone.

Whether the seller will pay a buyer broker

Most post-settlement listing agreements now include a separate section where the seller states whether they are willing to contribute to buyer broker compensation and up to what amount. This is authorization, not obligation. The seller is telling the listing brokerage what it may offer, and the actual offer is made off the MLS and accepted through the contract or a separate agreement.

Two figures instead of one

Older listing agreements stated a single total that the listing brokerage then split. Current forms tend to separate the listing brokerage's compensation from any buyer broker contribution, because the two are agreed differently and can move independently. Record both figures separately rather than storing a combined total.

Term and protection period

The compensation term lives inside the listing term, and the protection period extends the compensation obligation past expiration for buyers introduced during the term. Both dates belong on the listing record, since a compensation claim after expiration depends entirely on being able to prove when the buyer was introduced.

The buyer agreement states a specific amount, and that amount is a ceiling on what the brokerage may receive from any source.

Specific and objective

A dollar figure, a percentage, or a formula that resolves to a single number. A range does not qualify. Language that defers to whatever the seller offers does not qualify, because the entire point of the requirement is that the buyer knows the number before they see a house.

The ceiling rule

If the agreement says two and a half percent and the seller is willing to pay three, the brokerage collects two and a half. The extra half point is not available without an amendment signed by the buyer before closing. This is the most common post-settlement disbursement error and it is also the easiest to catch, because it is one comparison between two numbers already in the file.

Signed before touring

The agreement has to exist before the buyer tours a home, including a first showing and an agent-led virtual walkthrough. It does not attach to sending listings, answering questions or a buyer attending an open house alone. The guide on what belongs in a buyer broker agreement covers the document and its timing in detail.

Scope and term matter more than they used to

A buyer agreement limited to one property or one price band expires as a practical matter the moment the buyer looks elsewhere, and an expired agreement at the moment of a showing is the same as no agreement. Write the scope wide enough to cover the search, or expect to write a second agreement mid-search.

Six levers, and each one leaves a different record behind.

Rate and structure are different decisions

Rate is the number. Structure is how the number behaves. A flat fee produces the same compensation on a 300 thousand dollar sale and a 900 thousand dollar sale, which suits some clients and disadvantages some brokerages. Tiered structures split the difference and require a worked example in the agreement so nobody computes it differently at closing.

Duration and scope are the quiet ones

Clients negotiate rate and rarely think about term or scope, which is why those two produce most of the disputes. A ninety day buyer agreement on a buyer who takes seven months to purchase either gets renewed or lapses unnoticed. Track expirations the same way listing expirations are tracked.

Funding source is negotiable, the ceiling is not

Who pays can shift right up to closing: seller funded, buyer funded, or split between them. What cannot shift without a signature is the total the buyer's brokerage receives. Keeping compensation agreement records in the transaction file, with the agreed amount stored as a field, makes that comparison automatic instead of manual.

Every change needs its own paper

A verbal agreement to reduce a rate at closing is not an amendment, and a rate reduction agreed on the phone and honored at the closing table leaves a file where the disbursement disagrees with the agreement. One paragraph, one signature, one date, stored with the original.

Four groups of documents, and the file is not complete until all four are present.

The agreement chain

The original agreement plus every amendment, dated and in order, with the operative version obvious. A file holding three unlabeled versions of a buyer agreement cannot answer what the agreed amount was at closing, which is the only question an auditor asks about it.

The cross-side documents

When the seller pays the buyer broker, the arrangement lives either in the purchase contract or in a separate compensation agreement between the two brokerages. Whichever it is, the buyer-side file needs a copy, because the buyer brokerage's right to be paid rests on it.

The closing reconciliation

Compare the settlement statement lines against the agreed amount on each side. On the buyer side the total received must be at or below the ceiling. On the listing side the disbursement must match the listing agreement and any amendment. Two comparisons per transaction, both arithmetic.

Retention

State license law sets how long these records must be kept, commonly three to five years from closing, and some states run longer. Store them with the transaction rather than in an agent's personal files, since the retention obligation belongs to the brokerage and an agent who leaves takes their filing habits with them.

Questions brokers ask