Q. Is the listing broker required to provide the cooperating broker the commission check at the closing?
No, the Massachusetts laws and regulations are silent as to the timing payment is due to a cooperating broker. For those transactions that result from an MLS listing, the rules state that compensation is due to a cooperating broker who was the procuring cause of the transaction. Failure to compensate a cooperating broker may result in a complaint being filed with the local board and may even result in suspension from the service. For transactions occurring outside of the MLS, compensation due to a cooperating broker is a matter of contract, which may specify the timing of payment.
While it is not uncommon for commission checks to be provided at closing, this should only be done with the understanding that the funds will not be deposited until the property is on record and the funds have cleared. A listing broker may also choose to wait until the property is recorded and funds have cleared prior to issuing any payments. In this later situation, the listing broker should take care to issue payment as soon as possible.
Cooperating commissions may be paid from either the escrow account or the brokerage’s operating account, however, no funds may be transferred from the escrow account prior to the transaction closing. As with any monies flowing into or out of the escrow account, all funds must be properly accounted for.
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Written by: Justin Davidson, General Counsel; Catherine Taylor, Associate Counsel; and Jonathan Schreiber, Legislative & Regulatory Counsel.
Services provided through the Massachusetts Association of REALTORS® are intended for informational purposes and do 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 legalhotline@marealtor.com.