BROKER RISK MANAGEMENT
WEEKLY PRACTICE TIP
Q: I am representing a buyer and have read paragraph 3G(3) of the RPA and am confused about whether I should recommend the buyer check that box. It seems to require that I have a Buyer Representation Agreement with the buyer before I check the box, and I do not. However, I want to ensure that I get paid at closing. What do I have to do?
A: This is confusing until you understand what that paragraph does, and does not, do. The paragraph states:
□ Seller agrees to pay the obligation of the buyer to compensate the buyer’s broker under a separate agreement (C.A.R. Form SPBB attached). The seller’s broker’s offer, if any, to compensate the buyer’s broker is unaffected unless otherwise agreed.
- What does 3G(3) Mean?
The first sentence states that the buyer is asking the seller to pay the buyer’s broker under a “separate agreement.” That separate agreement is the CAR Buyer Representation and Broker Compensation Agreement (form BRBC on zipForms), a buyer representation agreement.
The second sentence makes clear that the seller’s broker’s offer of compensation to the buyer’s broker, whether through the MLS, a Cooperating Broker Compensation form (“CBC”), or other written agreement (the “seller’s broker’s offer”), is not changed unless otherwise agreed in writing.
- Steps in dealing with 3G(3).
STEP 1: If there is no buyer representation agreement, do not check this box.
Remember, if there is a seller’s broker’s offer of compensation to the buyer’s broker, either through an MLS offer of compensation, a CBC or other written agreement between the seller’s and buyer’s brokers, then the buyer’s broker will receive that compensation whether or not this box is checked. Checking or not checking this box has no effect on that.
STEP 2: That box could be checked if there is a signed BRBC between the buyer and their agent, and the buyer wants to ask the seller to pay the buyer’s agent.
If the seller’s broker’s offer is equal to, or greater than the amount buyer would owe their agent pursuant to a BRBC, then there is no need to check this box as the buyer’s obligation to pay their agent pursuant to the BRBC is fully met through the seller’s broker’s offer, and buyer owes nothing to their agent.
However, if the offer of compensation through the MLS is less than the amount in the BRBC, THEN the buyer’s agent can ask the buyer to check that box, thus requesting that the seller pay the difference.
STEP 3: Attach a completed Seller’s Payment to Buyer’s Broker form (form SPBB) with the buyer’s offer.
Make certain that the SPBB is fully completed with the blanks in the first three paragraphs completed, and signed by the buyer. Paragraph 3 will be the amount that the buyer is requesting the seller to pay, which is the amount in Paragraph 1 (the amount owed by the buyer to the buyer’s agent) less the amount Paragraph 2 (the amount of the seller’ Broker’s Offer).
- If the seller agrees to pay the entire amount requested in Paragraph 3 of the SPBB, the seller would just sign and return that form together with the signed offer.
- If the seller wishes to reject the amount that the buyer inserted in Paragraph 3, the seller should issue a counteroffer rejecting the buyer’s request.
- Note: If the buyer’s agent left Paragraph 3 blank, or has a wrong number inserted, the seller, cannot insert the amount or percentage in Paragraph 3 that the seller is willing to pay and then sign and return to the buyer since the seller is making a change above the buyer’s signature. No changes should be made above a client’s signature. A counteroffer is required.
STEP 4: The seller can refuse to pay all, or a portion, of the amount requested by the buyer.
If the 3G(3) box is checked, the seller can refuse to agree to pay the requested amount, or any portion thereof, to the buyer as a contractual obligation. That does not affect the offer of compensation due to the buyer’s agent through the seller’s broker’s offer of compensation.
If the seller is refusing to agree to the buyer’s request to pay the amount that the buyer must pay their agent, there is no reason for the seller or their agent to ask to see a completed SPBB if not attached to the buyer’s offer.
STEP 5: If the seller agrees to, and signs, the SPBB documenting the agreement, then the seller has a CONTRACTUAL obligation to pay the buyer’s agent ONLY any amount in excess of the amount being paid to the buyer’s agent in the seller’s broker’s offer of compensation, as is clearly stated in the SPBB form.
However, if the seller does NOT receive the SPBB with the offer, and the seller is willing to pay all or some of the amount the buyer will owe in the BRBC, the seller can request from the buyer’s agent a copy of the portion of the BRBC showing the amount owed by the buyer to their agent, then complete the BRBC showing the amount in Paragraph 3 they are willing to pay (over and above seller’s broker’s offer), and return with a counter offer for buyer’s signature.
PRACTICE TIPS:
- Before preparing an offer for a buyer, buyer agents must fully understand:
- The purpose of paragraph 3G(3) and when that box should be checked.
- That box should never be checked unless there is a Buyer Representation Agreement (“BRBC”) in place.
- There cannot be a duplicate payment to the buyer’s broker by checking that box.
- If you have any questions regarding these issues as you are preparing an offer for a buyer, or working with a seller when paragraph 3G(3) has been checked, immediately contact your broker or manager for advice.
This Weekly Practice Tip is an attorney-client privileged document for the exclusive use of clients of Broker Risk Management and their agents. It may not be reproduced or distributed without the express written consent of Broker Risk Management. The advice and recommendations contained herein are not necessarily indicative of standards of care in the industry, but rather to suggest good risk management practices.