Attorneys and Real Estate Commissions
Click HERE to read the article from TAR.
The Texas Real Estate License Act (TRELA) is clear about the relationship between real estate brokerages and attorneys regarding compensation in a sales transaction. But, surprisingly the topic is one that continuously raises questions for real estate agents.
The attached article from the TEXAS REALTOR® is comprehensive, yet clear and simple in its factual answer to this question. The article was written by two former TAR attorneys and updated by a current attorney on the TAR Legal Hotline. Also attached are two pertinent TAR Legal FAQs and a quick “quiz” on sharing commissions that includes the topic of sharing fees with attorneys and even more from AttorneyLehiUtah.com.
Let’s begin by answering the main Question: Can an attorney be paid a commission as part of a sales transaction?
Answer: It depends!
- Yes, if that attorney has an active Texas real estate license, sales agent or broker.
- No, if the attorney is providing professional legal services to a client for which he/she is being paid for those services by his/her client, and the attorney does not hold a real estate license.
Paying an unlicensed person a “commission”, attorney or any other person, would put the brokerage at risk of losing their real estate license by not complying with the TRELA and paying an unlicensed person.
The more technical issue of “rebates” to principals opens another area where the brokerage has to make a business policy decision: Does the brokerage pay a “rebate” to principals (buyers or sellers). The license law allows a brokerage to pay rebates to principals but this is not the policy of BHGREGG in general.
When an attorney or any individual asks for a “rebate” of a portion of the brokerage commission, either applied to the purchase price or to closing costs, two factors must be considered: (1) it may cause an interference with the existing listing agreement fee between the seller and the brokerage. This happens because the buyer is asking for an additional amount from the seller. And, (2) the need for an accounting of these funds at closing. There is a requirement for full disclosure of all funds received by the buyer from any other party to the transaction. This principal rebate must appear on the closing disclosure, in compliance with CFPB (Consumer Financial Protection Bureau) regulations.
To be fair, consistent and simple, the answer to unlicensed attorneys is, work with a licensed real estate agent. It is not only about the compensation, it is about representation to protect the seller, listing agent, and the brokerage; and for the buyer, it is about receiving the advice and counsel of a buyer’s agent. There is much more to a sales transaction then writing the contract. It involves knowledge of the market, negotiating skills, inspections and a total understanding of the “process” which a licensed real estate agent handles every day.
Dianne McCoy, Realtor® – Director of Education and Compliance
Click HERE to view or download the article from TAR.