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With so many new forms and forms revisions, you may have run across a scenario or two where you’d like additional explanation. Don’t worry—we have answers! Find even more FAQs at 6717y.com/lawsuit.

A broker includes offers of compensation on his brokerage website for his listings. If my buyer submits an offer on a property with compensation from the broker listed on the website, do we still need to sign a compensation agreement?

Yes. You can use the Compensation Agreement Between Brokers (TXR 2402). Compensation listed on a broker’s website does not create a binding obligation to pay the buyer’s broker. The brokers must still sign an agreement to create a binding contract for compensation. If the listing broker has agreed to compensate a buyer’s broker that procures a buyer in his listing agreement with a seller, the listing broker should execute a compensation agreement for the amount that was agreed to in the listing agreement.

What should we include as the term in the Compensation Agreement Between Broker and Owner (TXR 2401) and Compensation Agreement Between Brokers (TXR 2402)?

The date of the term should provide enough time for the parties to negotiate and sign the sale or lease agreement. For compensation to be earned under the compensation agreements (TXR 2401 and TXR 2402), the owner of the property must enter into a binding agreement to sell or lease the property during the term. The parties to the compensation agreement can agree to extend the term if additional time is needed for negotiations. Note: If the sales contract was executed during the term, the compensation is still payable even if the sale closes after the term has expired.

Can a VA buyer pay for buyer’s broker compensation?

Yes. The Department of Veterans Affairs issued a temporary rule that went into effect on August 10, 2024, that allows VA buyers to pay reasonable and customary amounts for buyer’s broker fees if the property is located in an area where either the listing broker is prohibited from setting buyer’s broker compensation through an MLS or the buyer’s broker compensation cannot be established or flow through the listing broker. If a VA buyer purchases a home that was listed in an MLS that prohibits advertising broker compensation, the buyer can pay reasonable and customary amounts for buyer’s broker compensation. However, buyer’s broker compensation cannot be included in the loan amount.

My buyers say they don’t want to see any property that doesn’t offer compensation or seller concessions. How should I handle this situation?

MLS policy prohibits participants and subscribers from filtering out MLS listings provided to clients and consumers based on compensation offered to buyer’s brokers. REALTORS® must provide the buyer with all property that otherwise meets the buyer’s criteria. Allow buyers to choose which properties to visit. REALTORS® should also explain to their clients that even though a property may not have an advertised offer of compensation or concession up front, it’s still possible to negotiate seller concessions when the buyer submits an offer.

I was taught that we can choose to treat a buyer as a client or a customer. Can we use a non-agency agreement to comply with the new NAR rules and treat a buyer as a customer to show a home without representation?

No. Texas law does not allow agents to provide services in a non-agency capacity. When providing brokerage services, such as showing property, a license holder must represent someone in a transaction. An agent can only choose to treat a party to a transaction as a customer if the agent already represents the other party.

For example, when a listing agent interacts with an unrepresented buyer who wants to purchase the listed property, the agent can take that buyer on as a client, or the buyer can remain unrepresented, and the buyer would be considered a customer. This arrangement is only possible because the listing agent is already representing the seller. However, if the agent who wants to show a property is not the listing agent, the agent cannot treat the buyer as a customer. The agent would have to represent someone, either the buyer as a buyer’s agent or the seller as a subagent. If the agent represents the buyer, the agent must get a written representation agreement to show the home. Listing agents and subagents do not have to get written agreements with buyers to show a home if they only represent the seller.

Are we required to get a written representation agreement signed with a tenant before showing a rental property under the new NAR rules?

No. NAR’s MLS policy only requires written agreements with buyers prior to showing one to four family residential properties for sale. However, MLSs have discretion to adopt additional policies. Check your local MLS rules for specific requirements that may apply to other types of properties.

Do I have to get a written agreement signed with a buyer when hosting an open house on behalf of the seller only?

No. When hosting an open house on behalf of the seller only, agents are not required to enter into written agreements with buyers that attend the open house. This applies to the listing broker, any associated broker or sponsored sales agent, and an agent outside of the listing brokerage firm that gets permission from the listing broker to host an open house. If the open house is being held on behalf of the seller only, then agents are not working with the buyer.

While hosting the open house, it’s important to remember that your fiduciary duty is owed to the seller! If an agent subsequently agrees to represent a buyer, that agent will need a written agreement before showing homes going forward.

Texas REALTORS® offers two agreements that can be used to satisfy the written agreement with a buyer requirement: Residential Buyer/Tenant Representation Agreement – Long Form (TXR 1501) and Residential Buyer/Tenant Representation Agreement – Short Form (TXR 1507).

How do I complete the Broker’s Fee paragraphs 5A or 5B on the updated Residential Real Estate Listing Agreement, Exclusive Right to Sell (TXR 1101)?

The listing broker and seller must first determine if the listing broker will share compensation with a buyer’s broker that procures a buyer. Paragraph 5A should be used to indicate the broker’s fee that will include a total amount for the listing broker and the buyer’s broker. Paragraph 5B should be used if the seller will only pay a broker’s fee that will be retained by the listing broker and no portion will be shared. Both 5A and 5B include blank lines to allow the broker’s fee to be expressed as a percent of the sales price or a flat fee. Only one line should be filled in. The other space will be left blank. Both 5A and 5B also include a blank line for alternative broker fee structures like an hourly rate.

How is listing broker compensation covered with unrepresented buyer transactions when using Paragraph 5A versus 5B in the listing agreement?

Under Paragraph 5A in the listing agreement, the seller agrees to pay the listing broker a total negotiated broker’s fee that includes compensation for the listing broker and the buyer’s broker. The listing broker agrees to pay a portion of that total fee to the broker who procures the buyer. The total amount for broker’s fees is inserted in 5A(1). The portion of the total that will be paid to the buyer’s broker is inserted in 5A(2).

In a transaction with an unrepresented buyer, there will not be another broker. Under 5A(4), if there is no other broker, the listing broker retains the total broker’s fee in 5A(1). By using 5A, the seller has agreed to pay broker’s fees for the buyer-side of the transaction. Even though the listing broker is not representing the buyer, the listing broker will have to perform certain buyer-side tasks that would normally be performed by the buyer’s agent to get to a successful closing. The listing broker is entitled to retain the fees intended for the buyer-side of the transaction for this additional work.

Under 5B, the seller only agrees to pay the listing broker for the broker’s services. No compensation is being offered to a buyer’s broker.

Since the seller has only agreed to pay the listing broker’s fees for the seller-side of the transaction under 5B, the listing broker may want additional compensation for the additional work required to get a successful closing. Once an unrepresented buyer transaction is contemplated, the listing broker and seller can agree to additional compensation using the Amendment to Listing (TXR 1404). The listing broker and seller can also add compensation for unrepresented buyers in the listing agreement using the blank line on 5B(1)(b).

When using the Addendum Regarding Brokers’ Fees (TXR 2406), what box do we check if the seller agrees to pay the buyer’s broker fee?

First, check the box next to Paragraph D(2) which states, “Seller shall pay.” Then check either D(2)(a) or D(2)(b) depending on which contract is used to establish buyer’s broker’s compensation.

  • Check box D(2)(a) if the seller has signed a separate compensation agreement with the buyer’s broker, such as the Compensation Agreement Between Broker and Owner (TXR 2401).
  • Check box D(2)(b) if the seller agrees to pay any of the buyer’s broker’s fees as an additional term under the sales contract. This option creates a new obligation for the seller to pay the buyer’s broker’s fee as stated in this addendum.

When should the listing broker and buyer’s broker sign the Compensation Agreement Between Brokers (TXR 2402)?

TXR 2402 should be negotiated and executed by the listing broker and buyer’s broker before the offer from the buyer is presented. Whether the listing broker will compensate the buyer’s broker will have a significant impact on the terms of the offer the buyer may want to present to the seller. For example, if the listing broker will not pay the buyer’s broker at all or not enough to cover the broker’s fee in the buyer’s representation agreement, the buyer may want to submit an offer requesting the seller compensate the buyer’s broker. Therefore, the brokers should determine what, if any, compensation the listing broker will pay to the buyer’s broker before the buyer presents the offer to the seller.

Important note regarding ethical duties. REALTORS® cannot refuse to present an offer from their buyer client to force the listing broker to offer compensation or pay any specific amount of compensation (Article 16, Standard of Practice 16-16 of the NAR Code of Ethics). After a buyer’s agent negotiates possible compensation with the listing broker, the buyer’s agent must inform the agent’s client about the results of such negotiation, whether the listing broker agreed to compensation or not. REALTORS® must then discuss with their buyer whether their client wishes to submit an offer and, if so, what terms regarding compensation should be included with that offer.

Under the new MLS rules, can you show your own listings without signing a written agreement with a buyer before showing a home?

Yes. A listing broker and REALTORS® associated with the listing broker represent the seller, so they would not need a buyer’s representation agreement to show the house to a potential buyer. The listing agent may want to use the Representation Disclosure (TXR 1417) to establish that the listing agent does not represent the potential buyer.

As a listing agent, am I responsible for making sure a buyer’s agent has a signed buyer’s representation agreement?

No. Local MLSs are responsible for enforcement of MLS rules and regulations. If you suspect an MLS participant is not complying with the written buyer agreement requirement, you should contact your local MLS.

Can REALTORS® advertise offers of compensation for their own listings on their brokerage website?

Yes. Under NAR policies, brokerages are allowed to post offers of compensation on their own websites but only for their own listings, even if their websites receive MLS data through an IDX feed. NAR rules also permit brokers to post a link to their brokerage website in MLS platforms, such as in an agent remarks field. However, the link cannot lead to the webpage with the broker’s offer of compensation. The link can lead to the broker’s website homepage. There could then be a link from the homepage that goes to the page with the compensation information. In other words, the homepage cannot have offers of compensation, but the next click could.

Note: Local MLSs have discretion to adopt additional rules. Check your local MLS rules for any restrictions regarding agent remarks.

Can listing brokers advertise buyer’s broker offers of compensation on signage outside of a home?

Yes. Offers of compensation are only prohibited from being included on an MLS.