Buyer Agency Agreement and Other Forms of Compensation

QUESTION: I am currently the BIC of a real estate firm. I have an agent who would like to start charging buyers a retainer fee that would be paid at the time the buyer agency agreement is signed. This agent is also considering charging by the hour for the time she spends working for her clients. Would these practices be legal? What type of form could she use to do this properly?

ANSWER: Standard Form 201 provides an option for buyer agents to charge a non-refundable retainer fee. Before sending out an offer for their clients, it is imperative that agents obtain a written agency agreement. Additionally, we want to emphasize that agents must review the WWREA disclosure at first substantial contact with prospective clients. We have previously explained how to complete the form here.

To properly pay a retainer fee, the client should write a check payable to the firm. The check should be deposited into the firm’s operating account, and the firm may then write a check to the agent. We have discussed the reason for this process in a prior Q&A found here. Your firm and your agent can discuss whether the retainer fee will be credited on the closing disclosure at time of closing or if it will be a separate, additional fee, based on which option is checked in Paragraph 4(a) of Form 201.

Brokers may enter into different compensation agreements with their buyer-clients. Although there is no standard form to establish an hourly fee with clients, your firm could use a custom agreement in which the buyer agrees to pay a deposit that would be used to pay the agent’s hourly billing, much like other professionals. If your agent does enter into an agreement with a buyer to pay for services based on the time expended working for the client, the buyer’s deposit should be made payable to the firm and deposited into the firm’s trust account. Ideally, the compensation agreement would identify when the fees are to be earned or billed against the deposit and what will happen to any balance remaining at the end of the agency relationship. When invoices are sent to the client, that would be the time to move what has been billed from the firm’s trust account to the firm’s operating account. Until the fees are earned, however, the funds are considered the property of the client. Regardless of how the firm and your agent will be paid, it is important to ensure that the client is aware of how commissions will be earned and paid.