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Should A Seller Have The Right To See The Buyer’s Representation and Broker Compensation Agreement Before Agreeing To Pay Any Part Of The Buyer’s Broker’s Compensation?

By David Hamerslough and Victoria B. Naidorf

This issue was also the subject of an article we wrote in February of this year (link). That article was prompted by, among other things, revisions that C.A.R. made to its Residential Purchase Agreement (“RPA”) in December of 2024. 

In its June 2025 form release, C.A.R. has again revised its forms relating to sellers paying the buyer’s broker’s compensation. This article revisits that issue along with the revisions made by C.A.R. to its forms. This article will also explore what we understand to be C.A.R.’s rationales for the modifications to its forms, why we still have concerns regarding those revisions, and how PRDS has chosen to respond to this topic. 

Background 

In December of 2024, C.A.R. revised its RPA to include three affirmative representations by buyers that they had a written representation agreement with their broker that (1) was valid, (2) covered the property that was the subject of the purchase agreement, and (3) provided for compensation that was equal to or less than the amount the buyer was requesting that the seller pay (see ¶ 3(G)(3) and ¶ 18(A)(2) of the 2024 RPA). Paragraph 18(A)(2) also provided the seller with a remedy (no obligation to pay the buyer’s broker’s compensation) if any of the buyer’s representations were untrue. The December 2024 RPA also eliminated language authorizing the seller to ask for a copy of the relevant buyer-broker agreement (hereafter referred to as “BRBC”). 

Our February 2025 article discussed some of the concerns that we had with C.A.R.’s language, including (1) that the buyers’ representations required sellers to rely on the veracity of buyers, (2) that the lack of any requirement to produce the actual BRBC or other written documentation confirming that the statements in the RPA on this subject were true in a timely fashion could lead to various transactional problems, and (3) the potential impact that a later discovery of the representational inaccuracies might have on buyers’ ability to perform as well as the ability of the buyers’ broker to get paid.  Our article also highlighted three claims arising out of this issue in the period between the December 2024 revisions and the publication of our February 2025 article. 

We shared our concerns with C.A.R. After other brokers shared comparable concerns, C.A.R. reevaluated their approach and decided to remove the buyer’s affirmative representations in ¶ 3(G)(3) and ¶ 18(A)(2). C.A.R. also eliminated the language providing the seller with the remedy that had existed in ¶ 18(A)(2). 

These revisions have been introduced with C.A.R.’s June 2025 forms release. Paragraph 3(G)(3) of the RPA now includes space for indicating that the seller has agreed to pay compensation to the buyer’s broker in either a specified amount or a percentage of the purchase price. This is the same language that was included in the C.A.R. RPA that predated the December 2024 RPA. In the June 2025 RPA, Paragraph 18(A)(2) has now been eliminated. 

Instead of enabling sellers to obtain the BRBC, Paragraph 18(A)(1) now includes a statement that buyers are “advised that Buyer’s Broker should not receive compensation from any source in excess of the amount in the buyer representation agreement.” The RPA does not contain any recommendation or advisory to the seller about requesting written confirmation of the amount that the buyer has agreed to pay its broker. It also eliminates any remedy for sellers if buyers have requested compensation for their broker which they are not entitled to receive. 

In line with the revisions to the RPA, C.A.R. has added language to its June 2025 Residential Listing Agreement (“RLA”). Paragraph 10 of the RLA (entitled Seller’s Concessions) now contains language in bullet point 3 that if the seller agrees to pay compensation to a buyer’s broker, that the seller’s “Broker does not represent, nor will Broker confirm, that the amount specified is owed by buyer to buyer’s broker pursuant to a written agreement that covers Seller’s Property.” C.A.R. also revised its Seller’s Advisory to add a statement that the seller’s broker will not confirm compensation between the buyer and the buyer’s broker. 

While C.A.R. has neither issued a formal statement about these revisions nor provided a written rationale for making them, we understand that C.A.R.’s position and the June 2025 revisions to the RPA and RLA are prompted by antitrust and confidentiality concerns. We understand the latter concern relates to a broker having to share purported confidential brokerage compensation policies with competing brokers. When we reached out to C.A.R., they were willing to discuss the issues with us, but, unfortunately, we have not yet had an opportunity to do so. We look forward to doing so and will of course provide an update after that has taken place. 

Our Concerns

We do not specialize in antitrust laws, and therefore we will refrain from commenting on the revisions from that perspective. However, notwithstanding any potential antitrust issues, we have several practical, ethical, and agency law considerations that we believe are of greater significance. Some of our concerns are as follows: 

  • We believe that sellers should have the right to receive, prior to contract formation, a copy of a buyer’s BRBC if that buyer is requesting that the seller pay compensation to the buyer’s broker.  Sellers should be allowed to confirm that BRBC is valid, covers the property, and specifies compensation of no less than the amount that the buyer is requesting that the seller pay.
    • We believe sellers need to see the actual BRBC in order to make an informed decision on how to respond to a buyer’s offer that includes a request for payment of compensation to the buyer’s broker. We understand that C.A.R. believes that a seller should focus on the net amount that they will receive and negotiate with the buyer on that basis; that approach does not require confirmation of the amount of compensation set forth in the BRBC. However, based upon the three sellers who made claims against their brokers over this issue, many sellers will feel that they had left money on the table (requiring the seller to pay compensation that the buyer’s broker could not receive) and that their agent had not protected them against doing so. These sellers did not feel that they had made an informed decision once they had all of the facts regarding paying compensation to the buyer’s broker. 
  • C.A.R.’s current revisions do not provide an appropriate alternative methodology for the seller to confirm the amount of compensation being paid to the buyer’s broker. There is currently no contractual right to request this information. In order to obtain it, the seller will need to make their own request in a counteroffer, which would then obligate the seller’s agent to craft the correct terminology without any direction from C.A.R. 
  • We believe that if the BRBC fails to meet the three crucial requirements (it is valid, covers the subject property, and specifies an amount of compensation equal to or less than what the buyer is requesting), the seller should not have to pay any compensation to the buyer’s broker. C.A.R.’s current RPA does not provide any type of remedy in the event that a discrepancy is later discovered by the seller. As noted above, C.A.R.’s RPA and other transaction documents do not provide a method by which to obtain this information in a timely fashion. 
  • A seller’s agent who fails to discuss and/or address the issues in this article with their seller may not be fulfilling his or her fiduciary obligations to the seller.
    • In part, this stems from the fact that a fiduciary needs to put themselves in the shoes of the client and ask themselves the kind of questions that they would want to be asked if they were the party involved in the transaction. If the seller’s agent fails to question the amount of compensation in the BRBC, then that issue may not otherwise be raised by the seller; the argument will then be that the seller was not making an informed decision because of the agent’s lack of inquiry.
  • If it becomes common practice that sellers’ agents will not question or seek to confirm what is contained in buyers’ BRBCs during contract negotiations, we are concerned that that practice may promote unethical behavior on the part of buyers’ agents. Buyers’ agents might be “encouraged” to have buyers sign a BRBC with a low or negligible commission amount but then (either intentionally or otherwise) include a higher amount of broker compensation in the purchase contract. One of the agency duties included in the Agency Disclosure form is for all agents to act with good faith and fair dealing with everyone involved on both sides of the transaction, including the other principal and their agents. Requesting that a seller pay a buyer’s broker an amount of compensation that the buyer is not really obligated to pay their broker would constitute a breach of agency law. Brokers should actively counsel their agents against this practice to avoid potential liability. 
  • From a practical perspective, receipt of written confirmation of the amount of compensation to be paid to the buyer’s broker may also eliminate claims for deposit disputes/breach of contract, conflicts between buyers and their brokers resulting in negotiation between the two of them as to how any shortfall is going to be funded, claims by the seller against the buyer for fraudulent inducement, and those other potential claims outlined above. 

PRDS Forms Revisions In Response To This Issue 

Over the last six months, the PRDS Forms Committee has revised its counteroffer form (“RCO”) and its Broker Compensation Advisory (“BCA”) to address the issues in this article.

Paragraph 5 of the RCO now provides the seller with the option (if a box is checked) to only pay compensation to the buyer’s broker if, prior to contract formation, the buyer delivers to the seller a copy of the relevant BRBC. The RCO specifies that the BRBC must be valid, cover the subject property, and provide for compensation equal to or less than the amount that buyer requests seller pay to buyer’s broker. This paragraph also contains a remedy for the seller: Seller shall not be obligated to pay any compensation to the buyer’s broker if the BRBC fails to meet any or all of these three requirements. PRDS is thus providing its members with an appropriate mechanism to enable sellers’ agents to meet their fiduciary duties.  

The BCA now includes similar language and can be utilized by a seller’s agent to discuss these issues with a seller in conjunction with the execution of the PRDS Exclusive Authorization And Right To Sell Listing Agreement (“EXA”). 

What May Be On The Horizon

One of the potential solutions to this issue is for the California legislature to pass an amendment to the statute on buyer representation agreements requiring that the agreement must be provided to the seller with any offer. Alternatively, the legislature could require that a summary form of the key information regarding compensation be provided with any offer rather than the entire BRBC.

Absent the foregoing, real estate licensees need to be aware of the potential problems with sellers being asked to pay the buyer’s broker’s compensation and the different philosophies held by C.A.R. and PRDS. Prudent real estate agents should explain both sides of this issue to their buyers and sellers to meet their fiduciary duties.

We will continue to monitor this issue. Hopefully, we will soon have further input from C.A.R. on both the antitrust and confidentiality issues and why those topics are of greater concern than agents meeting their fiduciary obligations to their clients.