Why this matters: California legislation has now attempted to stop seller broker interference with the societal need for the buyer broker and their buyer-client to set the fee due the buyer broker — what hasn’t changed is the buyer’s purchase price still includes all broker fees.
Whoever holds the gold makes the rules
Have you heard? Price-fixing fees is out, a client and their broker negotiating fees is in. Big broker operators fume.
Decades of contractual nonsense barring buyers from getting a shot at reasonable representation is fast coming to an end. Seller representation, in contrast, has been devoid of chaos and straightforward — authorize a broker to sell and they find a buyer.
And now, so be it also for buyers — authorize a broker to buy and they find a property. To achieve this quaint goal, brokers need a simple written employment agreement with an agreed broker fee and authority to represent. The buyer as a consumer is on equal footing this time around the antitrust circuit. Big brokers will resist as it’s in their profits to do so.
Effective January 2025, buyer brokers set the fee they earn when employed by their buyer-client, set independent of the seller broker. No longer will fee amounts for real estate brokers be displayed on the multiple listing service (MLS), ending that role in the inveterate fee-fixing game. [People v. National Association of Realtors (1981) 120 CA3d 465]
Now compulsory as broker conduct, the buyer broker negotiates — upfront — with their buyer-client to set their fee amount, a legislative mandate policed by the Department of Real Estate (DRE).
Each broker and their buyer-client set the fee. Then they state the amount in a buyer representation agreement form, otherwise known as a BRA, published for this purpose. [See RPI Form 103.1 §4]
The buyer broker fee, set with the buyer-client, is negotiated independent of all others. Others do wish to influence or force compliance with the old fee-fixing gold standard — 6% of the price, their holy grail.
Further, a purchase offer is written up to include the buyer broker fee as a dollar figure, disbursed from the purchase price to be paid for the property.
Of course, as in the past, it is the seller who pays the buyer broker’s fee out of the buyer’s purchase price funds. And as always, the buyer’s obligation to pay the agreed-to fee their broker earns is extinguished when the seller pays the fee to the buyer broker.
The buyer broker’s fee in the past was the seller’s transactional cost and it remains as the seller’s going forward. The fees are in the purchase price paid for a property, not in addition to the price the buyer pays. Mortgage loan originators (MLOs) get it, escrow officers know it. Now it is the broker’s turn to document it.
Again, a buyer broker’s fee is no longer set by seller brokers (or by trade union membership). Fee setting is state mandated between each broker and their client.
The seller broker — who interferes with the fee the buyer broker and buyer-client agreed to — faces litigation for tortious interference with the buyer broker fee agreement. [Buckaloo v. Johnson (1975) 14 CA3d 815]
In practice, the buyer broker submits a purchase agreement the buyer-client signed to a seller broker for delivery to the seller. The purchase agreement contains the amount of the buyer broker fee to be disbursed from the purchase price. Again, the fee earned is the amount agreed to with the buyer-client, payable when the buyer acquires the property sought. [See RPI Form 150 §10.1]
Counteroffer to a purchase agreement with a fee provision
Consider the seller broker who receives a purchase agreement offer a buyer broker submitted. A provision in the offer calls for the buyer broker to be paid a fee out of purchase price funds.
The seller broker reviews the purchase agreement and decides the purchase price offered is too low to accept — something the seller decides, not the seller broker, though they may make recommendations.
The seller agrees to counter the buyer’s purchase offer with a higher price. The seller broker prepares a counteroffer form for the seller’s signature.
May the counteroffer the seller broker prepared counter the buyer’s total purchase price?
Yes, of course. The buyer’s total purchase price is a proper subject for negotiations between buyers and sellers for brokers to manage. [See RPI Form 150 §10]
May the seller broker counter the buyer broker’s fee?
No, not anymore. The seller broker, as in the past, may not interfere with the amount the buyer broker has agreed with their buyer they are to be paid.
Others are not to interfere with the fee the buyer and their broker set, including the seller broker — unless the seller broker intends to tortiously interfere with the fee arrangements between the buyer and the buyer broker. [See RPI Form 150 §10.1]
Thus, the seller broker does not counter the fee amount, all else being up for grabs. By legislation, the fee due the buyer broker is the domain of the buyer and their broker. The fee is negotiated and entered in a signed buyer representation agreement, mandated in all buyer-client arrangements with a broker. [See RPI Form 103.1 and 103.2]
The penalties for failing to have a buyer representation agreement subjects the broker’s license to review for violating real estate law. [Calif. Civil Code §1670.50(e)]
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The counteroffer form
The seller broker counters the buyer broker’s offer on a Counteroffer form. [See RPI Form 180]
The Counteroffer provides a space for the seller broker to list the alternative terms and conditions the seller wants as a counter to the buyer’s offer. [See RPI Form 180 §2]
The seller broker also enters an expiration date for the buyer’s acceptance of the counteroffer. When no specific date is given, a reasonable time to accept is permitted. [See RPI Form 180 §3]
The seller signs and dates the counteroffer. The broker signs the counteroffer to acknowledge their representation as the seller broker. [See RPI Form 180]
Alternatively, instead of using a Counteroffer, a seller broker may choose to make a new offer by preparing a fresh purchase agreement form to submit as the counteroffer.
When the replacement purchase agreement is prepared, reviewed and acceptable to the seller, the seller and their broker sign the purchase agreement. The offer is submitted to the buyer broker as the seller’s counteroffer. Thus, the counteroffer is documented as an original purchase agreement offer with no reference to the rejected offer. [See RPI Form 150]
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