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Question one to ask when interviewing brokers

There are many questions you should ask a real estate broker when deciding where to hang your license: what training they offer, what they offer in terms of support, what do they pay for and what do you have to cover out-of-pocket.

Most believe the first question to ask is what the broker split will be – how much of your commission check are you handing back to the broker for hanging your license with them (presumably to cover the back-office fixed costs.)

Not so.

In light of the shenanigans taking place here in the Phoenix real estate market recently, the first question has to be how are the commission disbursements handled.

When a property closes the title company cuts the commission checks. If a broker’s policy is for the commission check to be made out to the brokerage with them issuing a check to you after the fact, don’t settle for the answer.

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Ask if the title company can cut separate checks to you and your broker; your broker has the option of holding your check until the necessary paperwork has been filed, but the check is in your name and not that of the brokerage.

If the answer is anything but yes, move on.

At least one and possibly two local brokerages have gained some notoriety, either for floating the agents’ side of the commission for up to a couple of weeks or for having commission checks that could bounce for lack of funds in the account.

Don’t put yourself in a situation where that could happen to you.

Ask how the checks are cut. Demand a separate check cut by the title company. And if you can’t get it with the broker sitting in front of you, move to the next one down the road.

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Written By

Jonathan Dalton is a Realtor with RE/MAX Desert Showcase in Peoria, Arizona and is the author of the All Phoenix Real Estate blog as well as a half-dozen neighborhood sites. His partner, Tobey, is a somewhat rotund beagle who sleeps 21 hours a day.

8 Comments

8 Comments

  1. Athol Kay

    January 1, 2008 at 10:52 am

    So many deeply dug pits covered with leaves for new agents to deal with…. 🙁

  2. Chicago Real Estate

    January 1, 2008 at 5:59 pm

    Hold on a second.

    Laws vary from state to state, I’m sure. I don’t know what your laws in Arizona are, but in other states, you cannot accept compensation from anyone other than your broker.

  3. Benn Rosales

    January 1, 2008 at 10:40 pm

    Chicago, so long as the broker submits a disbursement form, it is absolutely legal. No Broker can hide behind that crap, I won’t tolerate it and neither should any any agent. The broker should always allow the title company to disburse funds in this fashion. The only reason a broker should not do it is if they have given a draw and money is owed to the broker by the agent. In that case the broker should disburse the balance to the agent through title. A lot of newbie agents do not know any better and Jonathan is right to point it out. Brokers are scared right now, offices are closing all over the country, desperation has a way of creeping into even the most honest of offices.

  4. Chicago Real Estate

    January 1, 2008 at 11:15 pm

    I’m not a lawyer, and I can’t give any advice about or interpret law for anyone. You can read the Illinois statute for yourself (see below) and make a judgement as to what it says.

    Maybe you’re right. But I just took my state mandated broker management class, and from everything we went over in class on compensation, the method you describe was never discussed.

    Again, every state has different laws, so blanket statements about this topic may be doing some agents a disservice.

    If anyone is in doubt about what is allowable, correct and proper compensation procedure in their state, they should check with a real estate attorney who has in-depth experience with real estate law in that state.

    —————————————-

    (225 ILCS 454/Art. 10 heading)
    ARTICLE 10. COMPENSATION AND BUSINESS PRACTICES

    (225 ILCS 454/10?5)
    (Section scheduled to be repealed on January 1, 2010)
    Sec. 10?5. Payment of compensation.
    (a) No licensee shall pay compensation directly to a licensee sponsored by another broker for the performance of licensed activities. No licensee sponsored by a broker may pay compensation to any licensee other than his or her sponsoring broker for the performance of licensed activities unless the licensee paying the compensation is a principal to the transaction. However, a non?sponsoring broker may pay compensation directly to a licensee sponsored by another or a person who is not sponsored by a broker if the payments are made pursuant to terms of an employment agreement that was previously in place between a licensee and the non?sponsoring broker, and the payments are for licensed activity performed by that person while previously sponsored by the now non?sponsoring broker.
    (b) No licensee sponsored by a broker shall accept compensation for the performance of activities under this Act except from the broker by whom the licensee is sponsored, except as provided in this Section.
    (c) Any person that is a licensed personal assistant for another licensee may only be compensated in his or her capacity as a personal assistant by the sponsoring broker for that licensed personal assistant.
    (d) One sponsoring broker may pay compensation directly to another sponsoring broker for the performance of licensed activities.

  5. Jonathan Dalton

    January 2, 2008 at 10:16 am

    My wife banned me from the computer yesterday this the delay …

    In Arizona the broker can authorize the title company to cut the checks, one to the broker and one to the agent. On the HUD, the commission is being paid to the broker. I’m receiving a 1099 from the brokerage, not the title company. All they’re doing is saving a step.

    As long as the broker authorizes the title company to cut the separate check on their behalf, it works just fine.

  6. Darren Kittleson

    January 3, 2008 at 5:59 pm

    this is a great post. I agree, it does vary from state to state but don’t let someone give you a blanket answer without digging deeper as to it’s possibilities in your neck of the woods. I was told we couldn’t have the title company pay the agent direct in Wisconsin. After some deeper digging it was discovered that with a “disbursement authorization” from the broker, commission checks could be cut direct to my agents on my behalf as the broker. My agents love getting paid at the closing table!

  7. Jonathan Dalton

    January 3, 2008 at 6:11 pm

    Good to know, Darren … I’m wondering how many other states fall into this latter category. I know we run the same as you and I’ll never again work for someone who doesn’t authorize title to cut the checks.

  8. shayne

    June 24, 2008 at 9:58 am

    what if your broker still hasn’t paid you for a loan you closed two months ago? I should have gotten payment through title. Now I’m bugging him everyday and getting fed up.

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