Cooperating Commission: Paying an Attorney

Q: I listed a property for sale and offered a cooperating commission of X% through the MLS. An attorney called me today to present an offer on behalf of a buyer, and asked that I pay him X%. Can he do that?

A: Really, the question being asked is: "Do I have to pay an attorney the cooperating broker fee?" The answer is more complicated than you might first think, and the answer is not crystal clear. The restrictions and limitations imposed by RELRA do not apply to attorneys at law. Lawyers can legally perform all of the functions of brokers or salespeople without having to be licensed (whether they perform them well is a different article!). Because RELRA does not restrict how attorneys are paid, they are permitted to receive a fee equal to the cooperating commission.

A word of caution, however. RELRA prohibits certain actions of licensees. One such prohibition is to pay "a commission or any valuable consideration by a broker to anyone other than his licensed employees or another real estate broker for the performance of any acts specified in this act." One might interpret this provision to preclude a broker from paying an attorney a cooperating commission even though the attorney can accept that fee. To our knowledge, the Real Estate Commission has not taken a position on this relationship, so our best advice is proceed with caution.

Is there a way that the buyer's attorney can be compensated for bringing the buyer and seller together? Certainly; there is nothing prohibiting a seller from paying the buyer's attorney's fee. Can an attorney's fee be equal to the cooperating commission? That would be between the buyer and his attorney, and not something in which you (as listing broker) should become entangled. In reality this might mean your seller asks you to reduce the commission you are charging him so that the seller can pay the buyer's attorney. No, before you ask, you are certainly not obligated to reduce your fee.

What is seemingly an innocent and straightforward question is far from easily answered. As is often the case when licensees call the Hotline, check with your broker and local counsel before you act. The one answer that can be given with certainty: If anyone other than the buyer pays the attorney's fees, make sure they are shown on the HUD-1!