Real Estate Commission Agreements MUST be in Writing to be Enforceable

Real Estate commissions paid to brokers and realtors are often the subject of legal disputes in Texas. Participants in real estate sales and purchases often squabble over who, if anybody, is entitled to a commission arising from that sale.

Disagreements frequently arise between brokers over who was the "procuring cause" of a certain sale. Likewise, sellers sometimes dispute that their listing agent or salesperson has adequately represented his or her interests. Real estate professionals, on the other hand, must be wary of clients who benefit from their services, but do not wish to compensate them.

No broker or agent should be required to freely provide services, advice or expertise. But -- at the same time -- brokers must disclose to their customers the method and amount of compensation they intend to realize from a given transaction.

This dilemna has a simple solution -- PUT IT IN WRITING!

The Texas Real Estate Commission, and local Boards of Realtors, frequently publish materials encouraging that commission and representation agreements be in writing so as to avoid disputes over commissions.

Texas law does NOT require that agreements for the engagement of Realtors as either "Listing Agents" (Seller's Representatives)or "Buyer's Representatives" be in writing. However, a broker/agent MAY NOT file a suit to enforce any commission claim, unless theagreement to pay a commission is in writing and signed by the customer.

Section 1101.806(c) of the Texas Occupations Code (the Texas Real Estate License Act) expressly provides as follows:

A person may not maintain an action in this state to recover a commission for the sale or purchase of real estate unless the promise or agreement on which the action is based, or a memorandum, is in writing and signed by the party against whom the action is brought or by a person authorized by that party to sign the document.

A prudent broker, seller and/or buyer will not enter into a real estate transaction without a written agreement concerning payment of commissions. This arrangement protects all participants in real estate purchases and sales.

Further, Buyers or Sellers from whom a broker/agent/salesperson seeks a commission, based upon anything other than a written agreement might be spared the expense of paying that commission.