5.1 Broker Responsibilities, Brokerage Agreements, and Compensation
Key Takeaways
- The brokerage, not the individual agent, holds the listing; commission flows through the broker to the salesperson.
- Exclusive right to sell pays the broker regardless of who finds the buyer; open listings pay only the procuring cause.
- Earnest money must go into a trust account; commingling and conversion are disciplinable violations.
- Commission rates are fully negotiable and never set by law or custom.
A real estate brokerage is built on a chain of relationships. A licensed broker holds the firm's license, supervises affiliated salespersons, and is ultimately responsible for the conduct of everyone in the office. A salesperson (or associate broker) works under that broker's license and cannot operate independently. On the exam, remember the core rule: the public hires the broker, not the agent. When a salesperson takes a listing, the listing belongs to the brokerage.
Brokers carry duties that the exam tests heavily. These include supervising licensees, maintaining trust (escrow) accounts, retaining transaction records, and ensuring advertising complies with law. A broker who fails to supervise can be disciplined even if the broker never met the client. This is vicarious liability in practice: the principal broker answers for the acts of agents performed within the scope of the agency.
Brokers must keep client funds separate from operating funds. Commingling (mixing client money with the broker's own money) and conversion (using client money for the broker's own purposes) are serious violations. Earnest money must be deposited into a trust account, typically within a short statutory window (commonly 1 to 3 banking days, depending on the state). If a broker deposits earnest money into the firm's general checking account to cover payroll, that is conversion — a frequent trap answer.
A listing agreement is an employment contract between a seller and a broker. The three classic forms differ in who earns the commission and under what circumstances. Memorize the distinctions — questions often describe a scenario and ask which agreement applies.
| Agreement | Who can earn commission | Key trait |
|---|---|---|
| Exclusive Right to Sell | Listing broker, no matter who finds the buyer | Most protective for broker |
| Exclusive Agency | Listing broker, unless the seller finds the buyer | Seller can sell themselves commission-free |
| Open Listing | Only the broker who actually procures the buyer | Seller may list with many brokers |
Connecticut Regulation §20-328-6a expressly prohibits net listings.
Commission is earned by the broker who is the procuring cause — the one whose efforts set in motion an uninterrupted chain of events leading to the sale. In an exclusive-right-to-sell listing, procuring cause does not matter; the listing broker earns regardless. In open listings, procuring cause is decisive. A 'ready, willing, and able' buyer who matches the listing terms generally triggers the commission obligation even if the seller later refuses to close.
Commission is fully negotiable between the seller and broker — there is no standard rate set by law. Stating that '6% is the going rate' to a client can edge toward price-fixing, covered in 5.3. Compensation may be a percentage, a flat fee, or a combination. The listing broker typically shares the commission with the cooperating (buyer's) broker through an offer of cooperation, though such offers are no longer required to be posted in the MLS under recent industry settlements.
A home sells for $420,000 with a 6% total commission. The listing brokerage and the cooperating brokerage split it 50/50. The listing salesperson keeps 60% of her brokerage's share.
- Total commission: $420,000 x 0.06 = $25,200
- Listing brokerage share: $25,200 x 0.50 = $12,600
- Listing salesperson's cut: $12,600 x 0.60 = $7,560
Note how the agent never receives commission directly from the client — it flows through the brokerage. This sequencing reflects the broker-centered structure and appears repeatedly on the national exam.
A salesperson deposits a buyer's $5,000 earnest money check into the brokerage's general operating account to cover the office rent, intending to replace it later. This is best described as:
Under an exclusive agency listing, the seller personally finds a buyer without any help from the listing broker. The seller owes the broker:
Procuring Cause and Independent-Contractor Status
Procuring cause disputes arise when two brokers each claim they produced the buyer. The broker who started the uninterrupted chain of events leading to the ready, willing, and able buyer earns the commission. A buyer who simply revisits an open house after working extensively with another agent rarely breaks that chain.
Salesperson Compensation Structure
Most salespersons are independent contractors under a written agreement, paid by commission rather than salary, with control over their own hours, yet still legally supervised by the broker for license-law compliance.
| Concept | Rule |
|---|---|
| Who pays the salesperson | The broker, never the client directly |
| Commission rate | Fully negotiable; no legal standard rate |
| Referral fee | May be paid only to a licensed broker |
Exam trap: A salesperson may never accept compensation directly from a client or another licensee, only from their own sponsoring broker.
Ready, Willing, and Able
A broker generally earns the commission once a ready, willing, and able buyer agrees to the seller's stated terms, even if the seller then refuses to close. "Able" means financially capable (qualified for financing or holding the cash).
Exam trap: If a seller backs out after a ready, willing, and able buyer meets the listing terms, the commission is typically still earned.
Antitrust in Commission Talk
Because commissions are fully negotiable, a broker must present rates as the firm's own independent decision. Telling a client that "all brokers charge the same rate" or coordinating fees with competing firms risks a price-fixing violation under federal antitrust law (detailed in 5.3). Each brokerage sets its own compensation.
Exam trap: There is no legal "standard" commission, implying one exists, or agreeing on rates with rivals, edges into illegal price fixing.