real estate commission agreement

Why Real Estate Commission Agreements Should Always be in Writing

It's easy as a real estate agent to forgo the signing of important documents when performing services for a new client, friend, or family member. All to often, not getting your real estate commission agreement signed could make for issues trying to collect in the end.

As a real estate agent in Pennsylvania, payment for your services is almost always contingent on the sale of a property. Such a commission structure assures that when you have closed a sale, you will be paid for your services. In order to assure that you get paid, your real estate commission agreement must be in writing and signed by your client.

The Real Estate Licensing and Registration Act (RELRA), 63 P.S. 455.606a, provides in relevant part:

“A licensee may not perform a service for a consumer of real estate services for a fee,  commission or other valuable consideration paid by or on behalf of the consumer unless the nature of the service and the fee to be charged are set forth in a written agreement between the broker and the consumer that is signed by the consumer. This paragraph shall not prohibit a licensee from performing services before such an agreement is signed, but the licensee is not entitled to recover a fee, commission or other valuable consideration in the absence of such a signed agreement.”

Further, the Pennsylvania Superior Court has upheld the requirement that a real estate commission agreement be set forth in writing and signed. In the case of Coldwell v. Dreslin, the realtor only had an oral agreement with its client for payment of a commission. When the realtor was not paid, the realtor filed a lawsuit to recover its commission. The court ruled that the oral fee agreement was not enforceable.

While it is often standard practice to obtain a written fee agreement prior to performing services, it is vital that the agreement is signed prior to performing any services for a client. Sometimes realtors may begin performing services expecting that the fee agreement will be signed in due course. However, if the client is successful in buying or selling a property quickly, the realtor could face a difficult position if the commission agreement has not been signed. This may be especially true in a situation where the realtor and client are friends, longtime business acquaintances, or family.

If you are not sure if you have an enforceable real estate commission agreement for the distribution of fees, you should contact a real estate lawyer.

As a realtor, you should always obtain a signed fee agreement in Pennsylvania before performing any services for a client. This holds true throughout the Commonwealth including for real estate transactions in Montgomery, Bucks, and Philadelphia County.

For more information about real estate agreement, feel free to contact Kevin Cornish at (610) 275-0700 or by email at kcornish@highswartz.com.

The information above is general: we recommend that you consult an attorney regarding your specific circumstances.  The content of this information is not meant to be considered as legal advice or a substitute for legal representation.

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