Understanding the Recent Changes in the Texas Listing Agreement: A Step by Step Guide

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Hey everyone, it’s September 2024, and there have been some changes to the listing agreement that all real estate agents should be aware of. Today, I’m going to walk you through these updates and explain how to complete the listing agreement correctly the first time. Whether you’re a new agent or a seasoned pro, these tips will help you navigate the latest contract changes.

Key Changes in the Listing Agreement

The changes we’re focusing on today primarily impact the broker compensation section, specifically Paragraph 5. Broker compensation and how fees are shared between brokers are fully negotiable and not controlled by law, the Association of Realtors, MLS, or any listing service. This means you need to sit down with your seller to discuss and negotiate this section of the contract.

Paragraph 5: Broker Compensation

In Paragraph 5, you will choose between two options:

- **5A: Compensation Offered** – This is selected if your seller decides to offer compensation to the buyer’s broker. You will fill in either the percentage of the sales price or a flat fee.

- **5B: No Compensation Offered** – This option is used if the seller is not offering any compensation to the buyer’s broker.

Always remember, the compensation terms should never be pre-filled in a template; they must be discussed and documented during your listing appointment.

Documenting Broker Compensation

If your seller chooses to offer compensation, you will detail how it will be paid. For example:

- **5A-1:** Enter the compensation amount the seller will pay to you, the broker.

- **5A-2:** Specify how much of the amount in 5A-1 will be paid to the buyer’s broker if they procure a buyer.

- **5B:** This section is used if no compensation is offered to the buyer’s broker. You’ll enter the amount payable to your brokerage only.

Seller’s Authorization to Disclose Buyer Expenses

Paragraph 11F covers whether the seller authorizes you, the broker, to disclose possible contributions towards buyer expenses, such as broker fees or other costs. You need to select either “Seller does” or “Seller does not” authorize this disclosure.

If authorized, use TXR 1412, the “Seller’s Authorization to Disclose and Advertise Certain Information” form, where you will document any agreed-upon contribution amounts.

Handling Offers: Compensation Agreement Between Brokers

When a buyer’s agent calls to ask about compensation, refer to Paragraph 5 of the listing agreement. If the seller offers compensation, the buyer’s agent will send a compensation agreement between brokers before submitting an offer.

This document, formerly known by another name, outlines the compensation terms between the listing and cooperating brokers, including who pays what fee and under what conditions.

Changes for Listing Agents

These updates mean that agents showing your listing may call you to confirm if compensation is offered. Always refer to the listing agreement and respond with the details you’ve been authorized to share. If the seller offers compensation, ensure the proper forms are completed before an offer is sent over.

Final Thoughts

The recent changes in the listing agreement significantly impact how we handle compensation disclosures and agreements between brokers. Be sure to thoroughly review these updates and discuss them with your seller during the listing appointment to ensure compliance and clarity.

If you have any questions about these changes or need further clarification on how they affect your role as a listing agent, feel free to leave a comment below. I’m here to help you navigate these updates and ensure your transactions run smoothly.

See you next week!