A California buyer signs a written buyer representation agreement providing for compensation to the buyer's broker of 2.5% of the purchase price. The buyer's offer asks the seller to credit 2.5% of the price toward that fee, but the accepted counteroffer credits only 1.5%. Escrow is ready to close. Who is responsible for the remaining 1%?
Correct Answer
B) The buyer, because the written representation agreement fixes that fee and the seller's credit only offsets part of it
California requires a written buyer representation agreement, signed no later than the buyer's offer to purchase, that states the broker's compensation and when it is payable (Civ. Code §1670.50). That agreement is a contract between the buyer and the buyer's broker. A seller credit toward the fee is a funding source: it reduces what the buyer has to bring to closing but does not amend the buyer's promise. Unless the representation agreement caps the fee at whatever the seller contributes, the buyer remains responsible for the shortfall.
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Related Topics & Key Terms
Key Terms:
Related Concepts
An agency relationship created when a principal's actions or words lead a third party to reasonably believe that an agent has authority, and the principal fails to correct this belief.
An agency relationship created when a principal approves or accepts an agent's previously unauthorized actions, effectively granting authority after the fact.
The legal requirement for real estate agents to inform all parties about who they represent in a transaction, typically provided at first substantive contact.
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