Legal Hotline: When is Payment Due to the Cooperating Broker?

The buyer’s agent is demanding their commission check at closing, but I’m not comfortable paying out funds until the transaction is on record. When is payment due to the cooperating broker?

A cooperating broker is due a commission in a completed transaction in which they were the procuring cause. Almost all offers of compensation made through the MLS are unconditional.* Massachusetts laws and regulations, as well as the MLS rules and regulations, are silent as to when the payment is due to the cooperating broker.

Oftentimes, commission checks will be brought to closings with the understanding that they will not be deposited until the transaction is on record with the Registry of Deeds and the funds have cleared. While this is permissible, it is not required as the funds are not available for deposit at the time the check is given. Some brokers choose to wait until the transaction is on record before issuing any payments to the cooperating broker or excess funds to the Seller. When subscribing to the latter practice, it is best to issue payments as soon as possible after the funds are available so as not to delay compensation due to the cooperating broker.

Payment may be made either directly from the escrow account or transferred to the operating account and paid from there. Keep in mind that funds may not be transferred out of the escrow account until the transaction has closed, and any monies paid from the escrow – either as transfers or checks to cooperating brokers – must be properly accounted for.

*Unless the cooperative broker has received notice in writing in advance of submitting an offer that the compensation offered to their brokerage will be different from what is listed in the MLS.