5.1 Broker Responsibilities, Brokerage Agreements, and Compensation

Broker responsibilities and the broker-salesperson relationship

On the national exam, the broker is the legal principal in the brokerage. The salesperson and associate broker are agents of the broker, not independent operators. Every listing, buyer agreement, and commission legally belongs to the broker, even when a salesperson did all the work.

This creates the central compensation rule: a client pays the broker, and the broker pays the salesperson under their employment or independent-contractor agreement. A salesperson may not accept compensation directly from a buyer or seller, and may not pay another broker's salesperson.

Supervision and the responsible broker

The broker must actively supervise affiliated licensees, review contracts, oversee advertising, and maintain transaction and trust records. A broker cannot delegate away liability by labeling agents as independent contractors. "Independent contractor" controls tax and benefits treatment; it does not remove license-law supervision.

The four brokerage (listing) agreements

Buyer-representation agreements mirror these (exclusive-right-to-represent, exclusive-agency-buyer, open-buyer). All listing and buyer agreements should be in writing, name the parties, describe the property or search criteria, state the fee, and include a definite expiration date. Most jurisdictions prohibit automatic renewal clauses.

Procuring cause and when commission is earned

A broker earns commission when they are the procuring cause of a ready, willing, and able buyer who meets the seller's terms. Once that buyer is produced, the commission is earned even if the seller backs out, changes their mind, or has a defective title. Procuring cause disputes between cooperating brokers usually go to arbitration, not to the client.

Trap: If a seller accepts a full-price offer that exactly matches the listing terms and then refuses to sell, the listing broker has still earned the commission. The buyer's failure to close for the buyer's own reasons is different and usually defeats the claim.

Ready, Willing, and Able — and the Safe-Harbor (Protection) Period

"Procuring cause" turns on producing a ready, willing, and able buyer who meets the seller's stated terms. "Able" means financially capable of closing — a buyer who cannot fund the purchase does not earn the broker a commission even if enthusiastic. Once the broker produces such a buyer on the listing's exact terms, the commission is earned regardless of whether the seller later refuses to close.

A listing's safe-harbor (protection) clause extends the broker's commission right for a set number of days after expiration if the property sells to a buyer the broker introduced during the term. The protection period typically does not apply if the seller relists with a different broker in good faith.

Commission math and trust funds

Commission is normally a percentage of the final sale price, then split between cooperating brokers and again between each broker and salesperson. Work these in order and label each split.

Worked example: commission split

A home sells for $420,000 at a 6% total commission. The listing and selling brokerages split the total 50/50. Each brokerage then pays its salesperson 60% of that brokerage's share.

• Total commission: $420,000 x 0.06 = $25,200
• Each brokerage share: $25,200 x 0.50 = $12,600
• Listing salesperson: $12,600 x 0.60 = $7,560
• Listing broker keeps: $12,600 - $7,560 = $5,040

Always multiply by the sale price, never the list price, unless the question explicitly ties the fee to the list price.

Net-to-seller / seller's net proceeds

When a question asks what list price a seller needs to net a target amount, divide, do not just add the commission percentage.

A seller wants to net $200,000 after paying a 5% commission and $3,000 in closing costs. The price P must satisfy: P - 0.05P - 3,000 = 200,000, so 0.95P = 203,000, and P = 203,000 / 0.95 = $213,684.21 (round to about $213,685). Common wrong answer: 200,000 x 1.05 = $210,000, which under-collects because the 5% applies to the higher sale price, not the net.

Trust / escrow account rules

Earnest money, rents, and deposits the broker holds for others are trust funds owned by the client, not the broker.

• Deposit into a separate trust/escrow account by the legal deadline (often 1-3 business days; some states say "immediately").
• Commingling (mixing trust money with the broker's operating funds) is a serious violation.
• Conversion (using client trust money for the broker's own purposes) is worse and is often grounds for license revocation.
• The broker keeps reconciled records; disputed deposits stay in trust until the parties agree, a court orders release, or the broker interpleads.