Navigating Cooperative Compensation in Compliance with the License Law and the Code of Ethics (Part 2)
QUESTION: You previously published a Legal Q&A on how to navigate cooperative compensation in compliance with the Code of Ethics and the License Law. I have two follow-up scenarios that I have encountered that I would like for you to address.
In the first scenario, a buyer’s agent called to ask whether cooperative compensation was available on my listing. I explained that my firm has a policy requiring that the basic terms of the buyer’s potential offer be considered before determining whether cooperative compensation will be negotiated. An email or text message of the offer terms is acceptable. The buyer’s agent then stated that they would not share any details of their buyer’s offer until cooperative compensation was agreed to. Can a buyer’s agent withhold the buyer’s potential offer terms like this?
In the second scenario, I offered a specific amount of cooperative compensation to a buyer’s agent after they provided me with the basic terms of the buyer’s offer in an email. The buyer’s agent agreed to the amount and said they would fill out an Offer to Purchase and Contract (Form 2-T). The buyer’s agent informed me the next day that the buyer had signed Form 2-T, but they would not send it unless I agreed to increase cooperative compensation. Is this permissible?
ANSWER: Based on these facts, it is difficult to give “yes” or “no” answers, however, there are several important issues to discuss.
A buyer’s agent who is instructed by their client to take the actions you describe would need to follow those instructions. Buyer’s agents should make sure that they confirm or receive their client’s instructions in writing and retain them. That said, a buyer’s agent who withholds an offer or a signed purchase contract without the buyer’s express direction may be in violation of both Article 16 of the Code of Ethics and the License Law.
Article 16 states that “REALTORS® shall not engage in any practice or take any action inconsistent with exclusive representation or exclusive brokerage relationship agreements that other REALTORS® have with clients.” This means that buyer’s agents cannot use the terms of an offer as leverage to modify the listing broker’s offer of compensation, nor can a buyer’s agent make the submission of an executed offer contingent on a modification of offered cooperative compensation. See Standard of Practice 16-16.
Also, the reason License Law Rule .0112 prohibits broker compensation in a pre-printed offer to purchase is because the Commission does not want buyer’s agents attempting to improperly force a listing firm to offer more cooperative compensation. See North Carolina Real Estate Manual, Chapter 11, Sales Contracts and Practices.
In the first scenario, you have informed the buyer’s agent of your firm’s policy. The policy is a valid one. Listing agents may negotiate cooperative compensation if their seller has given them authority to do so in the listing agreement, and part of that negotiation can certainly be consideration of the basic terms of the buyer’s potential offer.
The buyer’s agent’s response in the first scenario is concerning, because the buyer’s agent was not willing to consider a reasonable request that might result in a material benefit to their client. Withholding the buyer’s basic offer terms in this scenario may have harmed the buyer, which could be an issue under the Code and the License Law. Therefore, buyer’s agents should not adopt such a negotiation tactic unless their client has given them clear, written direction after being fully advised of this and other potential risks.
In the second scenario, there is a significant risk that the buyer’s potential offer will be rejected due to the request to change cooperative compensation after an agreement in principle was reached. Again, if this risk is one that the buyer has chosen to take after being fully briefed by their broker, then the Code and License Law may be satisfied. However, if the buyer’s agent is making the request unilaterally without input from the buyer, then the Code and the License Law would prohibit such a request.
In both scenarios, the fundamental question is whether the buyer’s wants and needs are being put first as both the Code and the License Law require. Agent compensation is an important part of negotiating a purchase, but buyer’s agents should make sure that all negotiations keep this fundamental question front of mind.
Release Date: 03/20/2025
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