Compensation and payment of broker fees are a complicated part of the forms. We’ve received comments in the past that the financial terms sections of the OR Forms are confusing. This tip is designed around explaining the complication:
The baseline is that the Buyer pays the Buyer Agent and the Seller pays the Listing Agent. If no agreement otherwise is struck, that’s the way payment flows after a transaction is completed. This has essentially always been the case, for as long as Buyer Agents have officially represented Buyers [though before 1984, this was not how it worked, see Easton v. Strassburger to learn more]. When the Buyer signs a contract with the Buyer Agent, they are agreeing to a service exchanged for money.
Prior to the Sitzer/Burnett lawsuit settlements all those years ago [2024], compensation was regularly paid to Buyer Agents in the form of a cooperative compensation arrangement. The Listing Agent would take their compensation and split some of it with the Buyer Agent, paying the Buyer Agent out of the Listing Agent’s payment. In large part, this was a result of the process that existed before Easton v. Strassburger, where Buyer-side agents were regularly just a subcontractor of the Listing Agent, hired by that Listing Agent to help the Buyer across the transaction. In the context of paying a subcontractor, it made sense that the Listing Agent would just pay the Buyer-side agent – after all, the Listing Agent hired them!
After Sitzer/Burnett, settlement practice changes the process of a Listing Agent paying a shared compensation to the Buyer Agent was not completely removed, but the MLS was prohibited from taking part in any element of the cooperative compensation. In addition to that, one of the express agreements of the settlement was that the MLS had to “require REALTORS® and REALTOR® MLS Participants acting for sellers to conspicuously disclose to sellers and obtain seller approval for any payment or offer of payment that the listing broker or seller will make to another broker, agent, or other representative acting for buyers; and such disclosure must be in writing, provided in advance of any payment or agreement to pay another broker acting for buyers, and specify the amount or rate of such payment.” In other words, there has to be an agreement disclosing the payment of a Buyer Agent when it comes from anyone who is not the Buyer. Hence, lines 4f and 4g.
Line 4f represents a situation where the Seller is directly paying the Buyer Agent’s fees. It’s not technically correct to call it a “concession,” but think of it as a concession that doesn’t count towards IPC limits on concessions and has been specifically earmarked to only be used to pay the Buyer Agent’s fees. If you’re doing this, you need to get the Seller’s approval for that payment and disclose the specific amount the Seller is paying out. Line 4f, as part of the sale agreement that the Seller must sign to agree to, provides both of those requirements.
Line 4g represents a situation where the Seller Agent is still trying to do pre-Sitzer compensation through a cooperative compensation agreement. It cannot be facilitated through the MLS, and from a risk management perspective, any time you have an agreement for payment, you should put that in writing. Hence, if someone is trying to do a cooperative compensation agreement, that has to be done outside the MLS, outside the sale agreement, and with the client’s express permission and knowledge. If it does happen, though, Line 4g is there to provide that information on the sale agreement as well, to have the information for posterity’s sake.
Line 4h is somewhat redundant, but exists because the Sitzer/Burnett lawsuit also applied a very specific practice change: “a REALTOR® or Participant may not receive compensation for brokerage services from any source that exceeds the amount or rate agreed to in the agreement with the buyer.” Line 4h should represent the addition of any choices on line 4f and line 4g. Said mathematically: 4h = 4f + 4g. If the Seller has comprehensively refused to pay Buyer Agent fees and the Listing Agent isn’t providing any compensation, it should read “$0.” If the Listing Agent is paying part of the Buyer Agent’s fees and the Seller is paying the other part, the number on 4h should be the addition of those two items. Line 4h should always be checked back against the Buyer Representation Agreement. If you are working through a Sitzer/Burnett compliant MLS, the number in Line 4h should never be greater than the number in your Buyer representation agreement’s compensation section.
The language in Line 4i is there for the other closing costs that aren’t related to compensation. The warranty payments, extra closing costs, etc.