The listing broker has conveyed the seller’s willingness to pay buyer broker compensation, and shared a specific amount, how is this best memorialized in a contract? 

The first step is to determine if this is an offer directly from the seller or one that flows through the listing broker.

If the offer is directly from the seller and the buyer would like the seller to pay their broker, then the compensation should be reflected directly in the Contract to Purchase. Paragraph 2 of the Contract to Purchase provides the opportunity to memorialize the seller’s agreement to pay the buyer’s broker as a term of the parties’ agreement. If broker compensation is being reflected as a term of the buyer’s offer to purchase and there is no other compensation being offered through the listing broker, then the second box should also be checked.

Conversely, if the offer of compensation is flowing through the listing broker as a part of their contractual relationship with the seller, look to memorialize that offer and acceptance on Form 311 (or its equivalent). If the buyer’s broker accepts this offer of compensation and it covers the obligation between the buyer and the buyer’s broker, completion of Paragraph 2 of the Contract to Purchase is not necessary. However, if the offer of compensation falls short of the buyer’s obligation and the buyer would like the remainder to be reflected in their offer to purchase the property, that difference should be reflected in Paragraph 2 and the first box should be checked indicating the amount agreed to between the brokers in Form 311 or its equivalent.

As brokerages develop different policies, it’s important to note that a broker is not obligated to accept an offer of compensation from the listing broker and in consultation with their client can seek to have compensation be solely reflected as a term of the agreement between the buyer and seller on the Contract to Purchase. In this case, whatever amount of compensation the buyer would like to see paid by the seller as a term of their offer should be reflected in paragraph 2 of the Contract to Purchase and the second box should be checked.

The buyer I represent is related to me through marriage, do I have to disclose this? 

Yes, both Massachusetts law and the REALTOR® Code of Ethics mandate that conflicts of interest are disclosed in writing to the parties.

The Board of Registration of Real Estate Brokers and Salesmen’s Professional Standards of Practice, 254 CMR 3.11(a) provides, in part, that “A broker or salesperson shall not …. represent a client in the buying, selling, renting or exchange of real property in which the broker or salesperson or his/her kin has a personal financial interest unless the broker or salesperson shall fully disclose in writing to all parties…and unless the parties shall provide the broker or salesperson with written acknowledgment of such disclosure.”

Similarly, Article 4 of the REALTORâ Code of Ethics provides that REALTORS who have a present or contemplated ownership interest in the sale, purchase, or lease of property must make a written disclosure prior to the signing of any agreement. Standard of Practice 4-1 makes clear that present or contemplated interest includes transactions in which REALTORS “represent a member of their immediate family.”

Sometimes, the definition of “kin” or “immediate family” can seem subjective. As a best practice, if you consider the person to be family, make the disclosure using MAR’s Form #527: Disclosure of Conflicts of Interest, or its equivalent.

Can I add my business partner as a second signatory on the brokerage’s escrow account? 

If they hold a broker’s license, then yes. The Board of Registration of Real Estate Brokers and Salesmen’s Professional Standards of Practice, 254 CMR 3.10 regulates the broker’s responsibilities for maintaining an escrow account but is silent as to whether the broker may delegate check signing authority.

The Board of Registration has interpreted the regulation as allowing only a broker to keep and maintain escrow accounts meaning that neither a salesperson nor an unlicensed individual may have access to check writing ability over those funds. However, the Board has recognized that there may be instances that check signing authority needs to be delegated to another individual and therefore interprets its regulation to allow for affiliated brokers to be signatories on escrow accounts.

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Services provided through the Massachusetts Association of REALTORS® is intended for informational purposes and does not constitute legal advice, nor does it establish an attorney-client relationship. The Massachusetts Association of REALTORS®, by providing this service, assumes no actual or implied responsibility for any improper use of responses to questions through this service. The Massachusetts Association of REALTORS® will not be legally responsible for any potential misrepresentations or errors made by providing this service. For more information regarding these topics authorized callers should contact the MAR legal hotline at 800-370-5342 or e-mail at legal@marealtor.com.