Multiple Choice Question: We are the buyer’s agent for a “pocket listing” that is not in the MLS. The agent representing the seller works for another brokerage. What form do we use to make sure we get paid a commission? Pick the best answer:

A. Buyer Representation Agreement – Exclusive.
B. Cooperating Broker Compensation Agreement.
C. Single Party Compensation Agreement.
D. All of the above. 

Answer: Answer A, a Buyer Representation Agreement – Exclusive (BRE), is a correct answer, but it may not be the best answer. When a property is not listed in the MLS, the buyer’s agent has no entitlement to compensation. Of course you can negotiate with the listing agent and seller to pay you, but they may not agree. Take the guesswork out of the equation by having your buyer sign a BRE upfront to make sure you’ll get paid. The BRE specifically provides that whatever compensation you receive from another source will be credited towards what the buyer owes you. For example, if the buyer agrees to pay you 3% in the BRE, but you later get the listing agent to also pay you 3%, then the buyer owes you nothing.

Answer B, a Cooperating Broker Compensation Agreement (CBC) is also correct, but it’s not necessarily the best answer. When a property is not listed in the MLS, the CBC documents the compensation owed by a listing broker to the buyer’s broker. Make sure you get the listing agent to sign the CBC before you present your buyer’s offer.

Answer C, a Single Party Compensation Agreement (SP), is also correct in some situations. Agents generally use the term “pocket listing” to describe an actual listing agreement that is currently excluded from the MLS. However, some agents purporting to have a “pocket listing” may have no listing agreement at all. The agent may just have an informal arrangement with a homeowner who has verbally agreed to pay a commission if the agent brings an acceptable offer. In that situation, the CBC does you no good if the seller isn’t obligated to pay the seller’s agent. Ask for the seller to pay the broker’s compensation by signing an SP with the seller’s broker, buyer’s broker, or both. Again, to be safe, ask that the seller signs the SP before you present your buyer’s offer.

Answer D, all of the above, is the best answer. When it comes to commission agreements, the more the merrier! The BRE obligates the buyer to pay you unless you get paid by someone else. The CBC obligates the listing agent to pay you. In some situations where the seller’s representative doesn’t have a listing agreement, the SP obligates the seller to pay a commission.

-Thank you to Lyle Elliott (Ventura Branch Manager) for suggesting this week’s legal tip.

Copyright© 2018 Berkshire Hathaway HomeServices California Properties (BHHSCP). All rights reserved. Any unauthorized reproduction or use of this material is strictly prohibited. This information is believed to be accurate as of January 22, 2018. It is not intended as a substitute for legal advice in individual situations, and is not intended to nor does it create a standard of care for real estate professionals.