Intermediary & Unrepresented Buyers

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 that 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).

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 that 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 an intermediary transaction, there will not be another broker. One broker represents both the seller and the buyer. 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. Since the intermediary listing broker is representing the buyer, the listing broker is entitled to retain the fees intended for the buyer-side of the transaction.

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.

In an intermediary transaction, both the seller and the buyer have agreed to pay the broker’s fees in their representation agreements. Since the seller has only agreed to pay the listing broker the seller-side of the transaction by using 5B, the buyer would be responsible for paying the buyer-side of the transaction under the buyer representation agreement.

If the buyer wants to request the seller to also pay the listing broker for the buyer-side, the buyer can attach the Addendum Regarding Broker’s Fees (TXR 2406) to the offer. Use Paragraph E, Intermediary Broker’s Fees, to include the amount of compensation the buyer is requesting the seller pay. Any amount inserted in Paragraph E will be in addition to the amount the seller is already paying the broker under the listing agreement.

Note: Do not use Paragraph D for intermediary transactions. The seller and buyer have the same broker. So the buyer is not asking the seller to pay the “other” broker. The buyer is asking the seller to pay the broker additional compensation that will be applied to broker fees the buyer owes under the buyer representation agreement.