2.4 Commission and Compensation Rules

Commissions Are Always Negotiable

Every real estate commission in Ohio is negotiable. No statute, the Ohio Division of Real Estate and Professional Licensing, a local board, or a multiple listing service may set, suggest, or enforce a standard rate.

Antitrust warning: Two competing brokerages agreeing to charge "6% across town" is illegal price-fixing under the Sherman Act. Each firm must set its rates independently. This is a favorite exam scenario.

When Commission Is Earned

Absent contrary contract terms, a broker earns commission by producing a buyer who is ready, willing, and able:

• Ready to enter a contract now
• Willing to buy on the seller's terms
• Able to finance and close the purchase

The listing or buyer-agency agreement controls the exact trigger, so always read the contract before assuming when payment is due.

The Cardinal Payment Rule (ORC 4735.21)

A salesperson may receive compensation only from the broker with whom they are affiliated. Money flows through the broker, never around them.

Worked example: At closing the seller pays the listing broker, who pays the cooperating broker; each broker then pays their affiliated agent. A buyer who tries to hand a check straight to the salesperson must be redirected to the broker, or the salesperson violates ORC 4735.21.

Sharing Commissions and Referral Fees

Ohio brokers may share commissions with other licensed brokers, including out-of-state brokers properly licensed where they operate. They may not pay an unlicensed person for performing or referring real estate services.

Exam trap: "May a broker pay a $500 referral fee to a friend who is not licensed for sending a buyer?" The answer is no, regardless of the amount or disclosure. Paying unlicensed persons for real estate services is barred.

Commission Disputes Between Brokers

If two brokers argue over who earned the fee, the transaction still closes on schedule. The fee dispute is resolved separately, often through MLS arbitration, with litigation as a last resort.

Earnest-Money Disputes

When the buyer and seller dispute earnest money the broker is holding, the procedure differs sharply:

1. The broker keeps the funds in the trust/escrow account.
2. The broker does not release the money to either party without written agreement.
3. If no agreement is reached, the broker may file an interpleader action so a court decides ownership.
4. The broker never simply hands the deposit to whichever party demands it.

Key contrast: A commission dispute does not stop the closing, but a disputed earnest-money deposit is frozen until the parties agree or a court rules. The exam often pairs these to test whether you can tell them apart.

Net Listings and Conflicts of Interest

A net listing lets the broker keep everything above a stated net price the seller wants. Ohio does not prohibit net listings, but they are strongly discouraged because the broker profits more by paying the seller less, an inherent conflict with the duty of loyalty. If used, the arrangement must be fully disclosed and the seller must understand the structure.

Procuring Cause and Earning the Fee

When two brokers each claim to have brought the buyer, procuring cause decides who is paid. Procuring cause is the broker whose continuous, unbroken efforts actually led the buyer to purchase, not merely whoever first showed the home. MLS arbitration panels weigh who introduced the buyer, who maintained the relationship, and whether the chain of events was broken.

Worked example: Broker A shows a home once, then goes silent for two months. Broker B works with the same buyer daily and writes the winning offer. An arbitration panel will likely find Broker B was the procuring cause, even though Broker A showed the property first.

RESPA and Kickback Prohibitions

Beyond Ohio license law, the federal Real Estate Settlement Procedures Act (RESPA) bars kickbacks and unearned referral fees for settlement services on residential federally related mortgage loans. A broker cannot accept a fee from a title company or lender simply for steering business.

Exam trap: Combine the Ohio rule (no pay to unlicensed persons) with RESPA (no kickbacks). If an answer choice involves paying an unlicensed referral source or receiving a kickback for steering settlement business, it is the wrong, prohibited practice.