The Right Way For Real Estate Brokers To Handle Commission Sharing

business handshake, the deal is finalized between two enterprises. man in black suit and woman in white one have signed the agreement.

A transaction falls apart and the real estate brokers (listing and selling) agree to pay some part of the money it takes to keep the sale alive. The listing broker asks me to draft a release.

A release is a contract.  Party one agrees to pay party two if party two agrees to waive its claims against party one.  To be valid, contracts need consideration.  Money on one side and release of claims on the other side.  I draft the release so that each brokerage/broker will pay consideration to the buyer/seller getting the money.

The selling broker’s manager refuses to write a check to the buyer/seller on the basis that it is commission sharing, prohibited by law.  The risk of not writing a check is that the release could be deemed to be invalid.

The ban on commission sharing is intended to prevent kickbacks from brokers to buyers/sellers.  However, there is nothing in the statute that prevents a broker/brokerage from paying consideration to solve a legal claim (or possible legal claim) in exchange for a release.  The only thing is you want to write the check for the consideration out of your operating account, not pay it from your commission at closing.

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