5.1 Broker Responsibilities, Brokerage Agreements, and Compensation

The Broker as Supervising Principal

In nearly every state, the broker is the only license level that may operate an independent real estate business, hold client funds, and employ salespersons. A salesperson always works under a sponsoring broker and cannot accept compensation directly from a buyer or seller — all commission flows through the broker. Exam questions love this rule: if an agent is paid directly by a client, that is a license-law violation.

The broker carries supervisory duties that the exam tests repeatedly. The broker must train and oversee agents, review and approve all advertising, maintain the firm's trust (escrow) account, retain transaction records for the state-required period (commonly 3 to 5 years), and prevent agents from engaging in the unauthorized practice of law — such as drafting custom contract clauses rather than filling in standard forms.

Listing Agreements: The Three Core Types

A listing agreement is a contract that creates agency between a seller and a broker. The compensation owed depends entirely on which type was signed. Memorize the differences below — several exam items hinge on "who owns the property and who sells it."

The exclusive right-to-sell is the most common and most protective of the broker. Maine prohibits net listings under 02-039 C.M.R. ch. 410, §4.

Buyer Representation and Termination

Buyers can sign buyer-agency agreements that mirror listing types (exclusive or non-exclusive). A listing or buyer agreement ends by performance (sale closes), expiration of the stated term, mutual agreement, or destruction of the property. A protection (safety) clause entitles the broker to commission if a previously shown buyer purchases within a set window (e.g., 90 days) after the listing expires — preventing sellers from cutting the broker out by waiting.

Procuring Cause and Commission Splits

When two brokers each claim a commission, the dispute turns on procuring cause — the broker whose unbroken efforts actually produced the ready, willing, and able buyer. Mere introduction is not enough if a new broker later does the real work that closes the deal.

Worked numeric: A home sells for $420,000 with a 6% total commission. The listing broker and cooperating (buyer's) broker split it 50/50. Total commission = 0.06 × $420,000 = $25,200. Each side's brokerage gets $12,600. If the listing agent's internal split with her broker is 70/30 in the agent's favor, the agent earns 0.70 × $12,600 = $8,820, and her broker keeps $3,780. Commissions are always negotiable; a fixed rate set by an association would be antitrust price fixing.

Property Management Compensation and Trust Funds

Property managers operate under a management agreement and are paid by a percentage of collected rents, a flat fee, or a combination, plus leasing fees. Client funds (rents, security deposits) must be held in a separate trust account with no commingling of the broker's own money and no conversion (using client funds for personal purposes), which is a serious violation.

Earnest Money and Escrow Timing

Deposit checks tendered with an offer become trust funds the moment the contract is accepted. Most license laws require the broker to deposit earnest money into the escrow account within a short, fixed window — commonly the next business day or within 3 business days of acceptance. Holding a buyer's check uncashed in a drawer, or depositing it into the operating account, are classic exam traps that constitute commingling or conversion.

Ready, Willing, and Able

Absent contract language to the contrary, a broker classically earns commission once a ready, willing, and able buyer is produced at the listed price and terms — even if the seller later refuses to close. "Able" means financially capable (cash or a firm loan commitment). On the exam, a seller who backs out of a full-price offer typically still owes the commission, because the broker performed.