Q1.  Is a buyer broker required to have a Compensation Agreement Between Brokers (CABB) signed before they show a property to their buyer?

A1.  No. There is no requirement for a buyer broker to have a CABB signed ever, let alone prior to showing a property.  In fact, the workgroup felt that practice would be cumbersome and envisioned that buyer brokers would probably request a CABB only for those properties that their buyer intended to make an offer to purchase.

Q2.  Is a listing broker required to provide a Compensation Agreement Between Brokers (CABB) if their seller authorized compensation to a potential buyer broker in their ER-Residential Listing Contract (Listing Contract)?

A2.  No.  The Listing Contract allows the seller to authorize their listing broker to communicate an offer of compensation to a potential buyer broker and provides consent for the listing broker to enter into a CABB.  There is no requirement for the listing broker to sign a CABB and some brokerages have chosen not to.  Instead, those listing brokerages, at their seller’s instruction, may request that the buyer submit a Seller Compensation Addendum (SCA) with their purchase offer in which the buyer requests that the seller compensate the buyer broker in the stated amount.  Best practice would be for the seller and their listing broker to note in the Additional Terms and Conditions section of the Listing Contract the seller’s preference for using the SCA.  Keep in mind that it must be the seller’s decision whether to offer cooperative compensation and, if so, how much.

Q3.  A listing broker and a buyer broker enter into a Compensation Agreement Between Brokers (CABB) that fully compensates the buyer broker.  What line on the Seller Compensation Addendum (SCA) does the buyer broker disclose the existence of the CABB?

A3.  There is no reason to use the SCA in this situation.  When a CABB is already in place, the SCA should only be used if the buyer is requesting buyer broker compensation in addition to any compensation provided in a CABB.  Here, the buyer broker is fully compensated via the CABB, so the SCA is unnecessary, and its use would be confusing and possibly in error of the intention of the parties.

Q4. The buyer agrees via a written representation agreement to compensate their broker 100 apples. The buyer subsequently submits a purchase offer, attached to which is a Seller Compensation Addendum (SCA). In the SCA, the buyer asks the seller to compensate the buyer broker 100 apples. The seller agrees and signs the SCA, at which point the buyer broker is assured that they will be fully compensated. Should the listing broker now send a Compensation Agreement Between Brokers (CABB) to the buyer broker for 100 apples? 

A4.  No.  There is no reason to use the CABB in this situation because the buyer asked the seller, via the SCA, to fully compensate the buyer broker in amount of 100 apples and the seller agreed.  Therefore, a CABB is unnecessary and would only serve to complicate matters.  Please keep in mind that sending a CABB during purchase contract negotiations does not somehow trump or void a previously executed SCA, meaning that the use of a CABB in this situation may result in an unintended additional payment to the buyer broker.

Q5.  When should brokers sign a Compensation Agreement Between Brokers (CABB)?

A5.  Best practice would be for the CABB to be fully signed prior to the buyer making a purchase offer.  If a CABB that is not fully signed is sent with the buyer’s purchase offer, the seller can accept the offer and reject the CABB.  In such circumstances, there may be no legal obligation for either the seller or the listing broker to compensate the buyer’s broker. 

Q6.  The seller is verbally advertising an offer of compensation to a potential buyer’s broker, but requests the compensation be requested by the buyer in a Seller Compensation Addendum (SCA).  The amount offered is more than the compensation owed in the buyer’s broker employment agreement.   Can the buyer request the advertised amount of compensation offered in the SCA even though it exceeds the amount owed to the buyer’s broker?

A.6.   Yes, provided that the excess is credited to the buyer and not retained by the buyer’s broker.  Although the SCA indicates that the amount requested is for the purpose of compensating the buyer broker, there is nothing misleading about accepting the seller’s offered amount of compensation that was advertised.  Furthermore, the seller is aware and “acknowledge[d] that the buyer broker may credit part, or all, of their compensation to the buyer” in their ER-Residential Listing Contract. 

Q7.  An agent intends to represent themself in the purchase of a home.  That purchase will run through the agent’s brokerage.  Must the agent enter into a buyer broker employment agreement with themself?

A7.  Yes.  A buyer broker employment agreement is between the brokerage and the buyer. It is not simply between the agent and the buyer. For that reason, one of two things should probably occur under this scenario: (i) the agent signs the buyer broker employment agreement in their capacity as the buyer, which is then countersigned by the broker; or (ii) the agent signs the buyer broker employment agreement in two different locations and in two different capacities – one on behalf of the broker and one on their own behalf as the buyer. Either way, the agent should talk to their broker for guidance.

Q8.  The Buyer Broker Exclusive Employment Agreement provides three possibilities for a rate or amount of compensation (lines 33-36).  Can a broker choose “other” and include a range of compensation?

A8.  No.  The amount of compensation must be objectively ascertainable and may not be open-ended.  This is required by the NAR Settlement.  A range of compensation or writing in “whatever amount a seller offers” is not objectively ascertainable.  Rather, it’s open-ended, and therefore prohibited by MLS rules.  “Other” compensation could include hourly rates, per showing amounts or any other compensation that is reflects a sum certain.

Q9.  The seller is willing to pay compensation to a potential buyer broker but wants to pay as little as possible.  Can the seller demand to see the buyer broker employment agreement before agreeing to pay buyer broker compensation?

A9.  It is not appropriate for the seller to demand the buyer broker employment agreement to gain a negotiating advantage.  Conversely, it would not be appropriate for a buyer to demand the listing agreement for the same reason.  Offers to compensate a potential buyer broker reflect a strategy to attract buyers.  If the seller demands to see the confidential representation agreement between the buyer and their broker, it may turn off the buyer, thus having the opposite effect.  Furthermore, a purchase offer that includes a request for buyer broker compensation should be evaluated on the net amount to be received by the seller.  Please note a buyer broker cannot disclose the confidential terms of their employment agreement without the buyer’s informed, express consent which should be obtained in writing.