Critical steps:
1. Have a SIGNED Exclusive Buyer Representation Agreement.
2. Use the suggested language below based on the specific scenario.
Scenario 1:
The buyer has signed an Exclusive Buyer Representation Agreement (EBRA) and will compensate the Buyer’s Broker.
Therefore, one way to handle this compensation is to simply share the EBRA with the title company and lender making sure the Buyer can afford this cost and the title company is aware of the expense of paying the agent directly.
However, the recommended practice is to put language in the contract stating that the Buyer will pay BAC. This makes the BAC part of the contract and thus necessary to close the deal.
Suggested language:
In the offer, the Buyer could also include a statement waiving any compensation offered by the Seller.
Scenario 2:
The buyer has signed an Exclusive Buyer Representation Agreement (EBRA) and needs the Seller to compensate the Buyer’s broker on their behalf. The buyer does NOT need concessions or contributions from the Seller to close the deal other than to pay the Buyer Agent Compensation (BAC).
Suggested language:
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"Buyer(s) has entered into an Exclusive Buyer Representation Agreement with buyer's Broker. Pursuant to that contract, the buyer is obligated to pay Broker XX% of the purchase price or $XX US dollars. Seller shall pay the Buyer's monetary obligation of the Exclusive Buyer Representation Agreement and pay the full XX% due as part of this specific transaction."
Scenario 3:
The buyer has signed an Exclusive Buyer Representation Agreement (EBRA) and needs the Seller to compensate the Buyer’s broker on their behalf and also needs concessions to close the transaction.
Suggested language:
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"Buyer(s) has entered into an Exclusive Buyer Representation Agreement with buyer's Broker. Pursuant to that contract, the buyer is obligated to pay the Broker XX% of the purchase price or $XX US dollars. Seller shall pay the Buyer's monetary obligation of the Exclusive Buyer Representation Agreement and pay the full XX% due as part of this specific transaction."
-AND-
"Seller to pay buyer's closing costs, pre-paid and miscellaneous fees, not to exceed __% of the purchase price."
By using both clauses the Buyer can maximize allowable concessions and the Seller is still able to compensate the Buyer's agent.
Example: The Buyer is a conventional buyer that needs a 3% concession to close the transaction. They also sign an EBRA for 2.5%, but they don’t have the funds to bring to the table. Therefore they need the Seller to pay the EBRA amount and they need a 3% concession for other closing costs. Both clauses above would be needed.
Scenario 4:
The buyer has signed an Exclusive Buyer Representation Agreement (ERBA) and agreed to pay 3% compensation to Key Realty. However, the seller is only willing to pay 2% toward the buyer agent compensation. The buyer understands and agrees that they are responsible for the remaining 1% and are responsible for paying that at closing.
Suggested language:
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"Buyer(s) has entered into an Exclusive Buyer Representation Agreement with buyer's Broker. Pursuant to that contract, the buyer is obligated to pay the Broker XX% of the purchase price or $XX US dollars. Seller shall pay the Buyer's monetary obligation of the Exclusive Buyer Representation Agreement and pay the full XX% due as part of this specific transaction."
AND
It may also be sufficient to only include the first clause for the contribution from the Seller and provide the EBRA to the lender and title company. However, making both the contributions from the Seller and Buyer on the PA are more clear and distinguishable.
It is important to note the following:
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If a contract was sent prior to August 17th, 2024, but executed after said date, you need to amend it.
Additional Information
Broker to Broker Agreements:
These forms goes to the heart of the lawsuit and are designed for Brokerages that are trying to resist change. Key Realty will NEVER use these forms because our Listing Agreement does not allow it. Our agreement sets up for Buyer Concession or Buyer Compensation paid directly from the Seller to the Buyer's Broker on behalf of the Buyer.
If you as a Key agent are presented with this on the Buyer side, it is still best to write the appropriate terms in the contract. If the Listing Agent or Seller insists on using a “Broker to Broker” Agreement type form, strike through the language in the contract, don't delete it, and move forward with the signature of this form. This offers you the agent and Key Realty some protection.
Buyer Broker Compensation Addendum Forms:
As discussed earlier, these exact terms or similar terms can be written into the agreement, however, an addendum can be made part of the contract and will suffice. Language should be added to the contract stating that an addendum has been made part of the contract.
Seller Concession Addendum Forms:
These documents can be used, however, there are some potential pitfalls. Key Realty feels it is better to separate Buyer Compensation from Buyer Concessions. It is clearer and will not interfere with the concessions that the Buyer may need otherwise. We recommend writing two different clauses. See Scenario 3 above.
Ohio Buyer Broker Compensation Agreement (Click HERE to view):
Key Realty would prefer that agents representing a Buyer do not use this form. Instead, simply write the language into the purchase contract. We believe that it is a more straightforward approach. If a Key agent receives this on the listing side, they can accept this. Section 3b should never be checked on the listing side. Our listing agreement does not allow for broker-to-broker compensation.
Keywords: Pay, Co-broke, Compensation, Incentive, Commission, Concession, Buyer Agency, Contract, Clauses
