Why a Seller Compensation Form is Needed

Anthony Lamacchia: No need to worry about getting paid. No, no worry at all. As long as you have the language in the purchase agreement when you’re representing a buyer and you submit it to a seller and seller signs, you’re all set. You’ll definitely get paid, especially if you have a buyer agency agreement, right? Well, not so fast. I actually don’t agree. That’s why in our getting paid course that we have from Crush It In Real Estate and here at Lamacchia Realty, we are recommending and strongly encouraging our agents to use what we refer to as a seller-provided compensation form. This way, there’s a contractual tie from buyer brokerage to seller, specifically for the commission.

Now, let me back up and explain why. Remember a few things. When there is an agreement, a purchase and sales agreement, who is party to that actual agreement? Seller, buyer. Brokers are not party to that agreement. If there is something agreed to in here with respect to compensation, and one of the parties, the seller or the buyer, decides they don’t want to abide by the part that says they’re paying the brokerage, in this specific example, if seller was to sign and then decide in the 11th hour before closing because they put the news on and they see some hotshot point of attorney explaining that sellers should never have to pay buyer’s brokers.

They see that and they say, “You know what, I don’t want to pay.” Imagine the predicament you are in as the buyer broker. Now you’re informed that the seller doesn’t want to pay you at closing. Now, some of you right now are saying, well, they can’t do that. Okay, well, people can’t rob banks and people can’t hurt one another, but those things happen every single day. Follow me here. Seller decides before closing they don’t want to pay. Really the only person with the power to enforce that is buyer at that time. “Hey, you have to pay my agent.”

Will the buyer be willing to say, “I will not close unless you pay the agent?” That’s an awkward conversation to have with your buyer. What are you going to say? “Don’t buy this house, even though you’ve lined up the moving truck, you have nowhere to live next month, but don’t buy the house because I need to get paid.” That’s a tough conversation. That is why I have been saying all along, there should be a seller-provided compensation form. If you look at this form that we have, it has two specific sentences that I think are important.

Said fee shall be due only when closing occurs where the buyer named above is the purchaser for the above-referenced property. Then there’s another sentence. This agreement does not and is not intended to create any agency relationships between buyer brokerage and seller. Makes perfect sense. Also notice I call this the seller, we call this the seller-provided compensation form. Why? Because it looks like here we are 60, 90 days after the settlement, it’s looking like over 90% of transactions are being written in such a way that seller is agreeing to pay buyer brokerage.

Why is that? That’s because of what I’ve been talking about since October of 2023, when I said no buyer says, I want to pay my broker out of pocket. These hotshot attorneys and these other people from these consumer groups, they claim to be good for consumers. They claim to be for buyers. When they say things like, oh, it’s going to be a better system because then the buyer’s going to pay their agent directly. In the real practical world where the mortgage finance system doesn’t allow the financing of compensation and many buyers barely have enough money for closing costs and down payment, in the real practical world, that money needs to come from seller.

That’s why many buyers are requesting that from seller and buyer brokers are writing that into their agreement. The reason I’m bringing this up is we are seeing this form get signed about 70% of the time, which is good, but I think it should be 100% of the time. I wanted to put this message out to the market because I want all realtor friends near and far to hear the reasoning that I think it is necessary to have a separate form so that there is some type of contractual tie between buyer brokerage and seller. That way there, there’s an actual connection.

Now I’ve heard some lawyers and I’m sure there’ll be some that watch this, might even be some of the plaintiff’s lawyers who like to keep an eye on me. They’ll say, well, that isn’t true. The buyer brokerage could certainly sue and argue that they are a third party beneficiary to the contract. Okay, sure. After the transaction closes, then the buyer brokerage has to sue. Yes, that’s cheap, that’s easy, and those things work out really quickly, right? No, that’s hard. When you don’t have a direct contractual tie at all, it’s harder to get paid.

Then I’ve heard some attorneys say, well, if you’ve got a buyer agency agreement or a buyer contract, you’re all set. Arguably, yes. We know that when there’s a contract between buyer and buyer brokerage and the buyer agrees that they’re paying the buyer brokerage or making sure that they get paid at closing, well, arguably they should get paid, but not so easy to sue a buyer after they buy a home and they have no money left in the bank.

Not only it’s not easy, but if they have no money, they have no money. This is why these things are normally paid for 100 years through the transaction until these attorneys got involved in the Department of Justice and they started thinking they were smarter than everyone else, and now it has to be done this way in many cases.

Now, let me turn the page and talk broker to broker because I know there’s brokerages out there that are still participating in broker to broker. We decided not to. We decided that’s something we didn’t want to be a part of because we see the writing on the wall that broker to broker sharing of compensations will at some point probably be forced to go away. We made the decision that we wanted our agents to learn the new system once. The course that we sell through Crush It In Real Estate, our getting paid course, we wanted to teach it one way. That’s why we did what we did.

There’s plenty of brokerages that are still participating in broker to broker. This is no shame on them. It’s not bad of them to do that, but they’re still doing it. What some listing brokers are doing is they’re taking the attitude of, “Hey, buyer agent, you’ve got nothing to worry about. I have a listing agreement with the seller. The seller’s agreeing to pay me X, and I’m agreeing to pay out Y.” Okay, great. If you’re representing the buyer, you need a contract from your brokerage to their brokerage.

Remember, MLS used to act as the contract. It’s been held up in courts all over the country for decades. Now that the posting of compensation and the offering of compensation is not allowed to be offered in the MLSs, there is effectively no contract. When you’re representing a buyer and the listing agent tells you, you’ve got nothing to worry about, well, they’re wrong. If they’re promising to pay you and your office and your company is okay with you accepting that, that’s fine for now. You need to have some agreement that binds the two of you.

Maybe it’s a simple email. Maybe you email them and said, you’ve informed me that your company, XYZ Brokerage, will pay my company, ABC Brokerage, X percent at closing or X dollars at closing. I don’t know what it is. My recommendation, I would have a form, I would have a contract, and I’d make sure everybody signs. See, that’s what I love about having these separate forms. It’s radically transparent. No one can say they weren’t clear on who was getting paid what. They can’t say that. When it’s just in the purchase agreement, it’s only contractual between buyer and seller.

Let’s face it, some of these purchase agreements are 10, 15, 20 pages. It’s possible, it shouldn’t happen because agents should do a good job making sure buyers and sellers are very clear. It’s possible someone could say, I wasn’t totally clear on who was getting paid what. When you have a separate form, in addition to the purchase agreement, now, legally, contractually, you are in good shape, and everyone is very clear on who is getting paid what. I hope that makes sense. I hope you’re all looking at this a little bit differently. For those of you that do business with my company or do business with some of the companies that have purchased our getting paid course, I hope that makes it a little more understanding.

I know that we’re not the only company out there requesting and strongly requiring a seller compensation form, but I also know there’s plenty of companies that aren’t, and I wanted to explain the why behind that. I hope that makes sense. If you’re an agent out there representing buyers every day, and you’re only writing it in the purchase agreement, and the buyer and seller are signing, yes, you’ll probably get paid most of the time. At some point, there may be a case where there’s an issue with you getting paid, and you’ll think of this video, you’ll think of our form, and you’ll say, “Gee, Anthony was right.”

I don’t want that to happen to anyone because we want to be operating in a business that’s open, transparent, clear, and people are getting paid, practitioners are getting paid, companies are getting paid like every other business in the world. I hope that makes sense. Good luck. Happy home selling.

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