Describe brokers’ fees in employment contracts

Correct use of the fee clauses in the PAR employment contracts can help you stay competitive while earning a fair fee for your work. Take some time to understand all the ways you can fill in the forms, and you’ll see that PAR Standard Forms provide a lot of flexibility in the fee relationships you can establish with your clients.

For starters, get it in writing! You might think you’re being nice by starting work without a contract, but remember that you cannot be paid for your efforts without a written agreement! Section 281 of the Real Estate Commission Rules and Regulations states that contracts between a broker and a client which require the client to pay a fee must be in writing, and that a “licensee is not entitled to recover a fee, commission or other valuable consideration in the absence of a signed agreement.” Recent case law backs that up, so if you expect to be paid for your services, make that clear by getting a written and signed fee agreement from your client at the start of the relationship.

Both the PAR Listing and Buyer Agency Contracts ask whether the client has an exclusive contract with another broker. Not only does this help protect you from interfering with the exclusive representation agreement of another Realtor® (See Article 16 of the NAR Code of Ethics) but it helps protect you and your fee by alerting you to situations where another broker may make a claim for part of the fee.

When working with sellers and the PAR Listing Contract (Form XLS), Paragraph 5 allows you to describe your fee as a percentage of the sale price or a flat fee, whichever is greater. For example, if your brokerage policy is to have a minimum fee of $6,000 per transaction you might describe your fee as “10 percent of the sale price or $6,000, whichever is greater.” This will protect your right to earn the minimum fee whether the sale price is $250,000 or $50,000.

Paragraph 5 also provides space to establish a “blended fee,” such as “10 percent of the sale price plus $300” if that’s how your brokerage model operates. Using this provision can help avoid potential RESPA problems for brokers that might try to charge a separate “administrative fee” to clients. And it even lets you charge the client a non-refundable portion of that fee upon the signing of the Listing Contract, giving you some protection in the event no offers are received – a provision that was added at the request of brokerages.

The same principles apply to the PAR Buyer Agency Contract (Form BAC). However, buyers’ agents who may be relying on receiving cooperating compensation from the listing broker need to be cautious of placing a “zero” in these spaces. If you put in “zero” as your fee you run the risk of receiving ZERO – or at least less than you might have been anticipating – if the buyer purchases a home with a lower offer of cooperating compensation! Remember that a signed representation agreement is a contract between you and the buyers, not you and the listing broker, so protect your interests and get paid for your work by filling in the blanks appropriately.