Why this article matters: Bigger broker offices are yet to initiate any effort to comply with the paradigm shift mandated by California’s 2024 contract-law anti-price fixing legislation for brokers expecting a fee for representing a buyer. This article presents the appropriate reaction to a seller broker’s attempt to simultaneously fee-fix and unlawfully induce a buyer broker to violate California’s buyer representation agreement law which the DRE as a consumer protection agency is instructed to police.
A collaborative bump in fees as the deal
Picture an agent who enters into a buyer representation agreement with a buyer-client on behalf of the agent’s broker. Now employed, the broker and their agents are duty bound to diligently:
represent the buyer to locate and advise on suitable property;negotiate a purchase agreement; andclose an acquisition. [Calif. Civil Code 1670.50]
In the representation agreement mandated to collect and retain a fee, the buyer broker agrees to accept a fee equal to 2% of the purchase price. In turn, the fee sharing agreement between the agent and their broker sets the portion of the 2% fee the broker pays the agent when a transaction is closed on behalf of the buyer — and the broker. [See RPI Form 103.1]
The buyer agent helps the buyer locate a suitable property that meets the buyer’s criteria for ownership. An offer to purchase is prepared by the agent. [See RPI Form 150]
In the offer, the buyer agent includes the 2% fee in the provision which calls for entry of the buyer broker fee — the amount previously agreed to in the representation agreement. [See RPI Form 150 §10.1]
Separately, the seller broker offering the property for sale has entered into a seller representation agreement calling for a fee equal to 6% of the selling price. The justification given the seller for a fee of this amount is that the fee will be split with the buyer broker office. And unless the split is 3% to the buyer broker, they will not advise the buyer to make an offer on the seller’s property. [See RPI Form 102]
The seller broker, upon receiving the offer, is instantly uncomfortable about the 2% fee the buyer broker has agreed to receive. They know their seller client will feel cheated for demanding what now is a 4% fee (or a 3% or 2.5% fee) for the seller broker when the buyer broker fee is 2% — totaling the 6% fee the seller agreed to pay.
Instead of promptly submitting the offer to the seller as duty bound, the seller broker initiates a conversation with the buyer broker, offering to increase the buyer broker fee to 3% by splitting the 6% fee 50:50.
This offer to split is more than just a tortious interference with the buyer representation agreement. It is a solicitation of the buyer broker/agent to price fix the fees involved — a dishonest and unlawful activity on the part of the seller broker as carried out by their agent.
In response, the buyer broker is duty-bound to reject the seller broker’s offer as interfering with the terms of their buyer representation agreement — to the buyer’s financial detriment. The buyer will be paying at least 1% too much for the property in the form of an artificial unauthorized increase in the buyer broker fee.
Further, the seller broker fails in their fiduciary duty to the seller to present the offer upon its receipt by the seller broker.
Here, the conduct of the seller broker is an offense the Department of Real Estate (DRE) wants the buyer broker/agent to report to the DRE. Due to apparent fee-fixing and agency violations, the DRE will open an investigation. Whether some type of disciplinary action against the seller broker is necessary is decided by the DRE when the broker and their agent are determined to be dishonest in their dealings with their client and the buyer broker.
Related article:
Brokerage Reminder: Keeping offers a secret is a DRE violation
Fee negotiations are solely between each broker and their client
However, before the situation escalates to DRE involvement, the buyer’s offer as prepared may still be salvaged.
The buyer broker who receives the oral offer from the seller agent to match their 3% fee might go something like this:
The buyer broker points out to the seller broker that according to the new buyer representation legislation, the buyer broker fee is now legally severed from the fee the seller broker receives. This rule bars the seller broker from any conversation with the buyer broker about fees the buyer broker arranges with their buyer-client. None — fees are the exclusive domain of each broker and their client — no external discussion or influence permitted.
Yup. No more price fixing allowed, folks.
Each broker must now independently set out in a presentation agreement the single fee they expect to receive for their representation earned when they achieve the results the client retained the broker to pursue — agency law to the max.
In the end, any offer submitted by a buyer states only the fee due the buyer broker on closing on the acquisition of the property interest sought by retaining the services of the buyer broker. The buyer broker and the buyer may not provide for the seller broker fees arranged with their seller-client.
The seller broker, now understanding their error, will then inform their seller client of the offer, as written, with no change or side deal for the buyer broker fee.
Editor’s note — The reason for the inclusion of a fee provision in the purchase agreement for payment of the fee earned by the buyer broker on the deal is due to escrowing and MLO customs for closings. All broker fees are paid out of the total price paid for the property, not in addition to the price paid. The seller broker likewise provides escrow with instructions to pay their fee out of the seller’s proceeds on closing. Simple enough, unless deliberately complicated for sake of, well, fee fixing for higher earnings.
Related article:
Confronting the illegal practice of price-fixing fees in 2025 — California style
California laws designed for transparency
Prior to 2025, the 6% 50;50 split fee arrangement was the MLS environment norm enforced for all real estate transactions. Clients were led to believe they had no choice in the matter, as this was the industry’s “gold” standard.
Then, in 2024, the National Association of Realtors® (NAR) lost a price fixing and antitrust violations case in Missouri. No surprise here: that’s been the case law in California for decades.
However, this time around California’s legislature had already grabbed the momentum of the moment to break up the broker fee-fixing collaboration by barring broker-to-broker fee arrangements. Further, the new rules mandated the DRE to police licensees for any antitrust fee conduct in sales transactions involving fees expected by a buyer broker.
The enacted law mandated all types and varieties of buyer brokers — including tenant brokers — who expect a fee on their client’s acquisition of a possessory interest in real estate to enter into employment agreements, called buyer representation agreements. This mandate included a representation agreement (which states the fee, of course) with every client they assist now, or later while under a lease agreement, who acquires fee ownership of real estate of any type. [See RPI Form 103.1 and 103.2; Calif. Civil Code §1670.50]
As a result, fee arrangements for buyer agents working with individuals or entities seeking to acquire any possessory interest in property are mandated to be in writing to enforce collection or keep a fee already collected.
Specifically, legislation now requires a buyer agent to enter into a written employment agreement when the broker expects a fee for assisting a buyer client who seeks to acquire an interest in any type of real estate. Critically, a buyer agent includes a seller agent who acts as a dual agent in a transaction. [See RPI Forms 103.1 and 103.2]
The employment agreement also complies with the decades old agency requirement of upfront disclosure of the brokerage fee to earn a fee as a buyer agent for acquisition services. Further, the writing establishes the buyer will assure the fee is paid, as achieved when the seller agrees to pay the fee in a purchase agreement (or lease agreement). In either circumstance, the fees are included in the total purchase price the buyer offers to pay to acquire an interest in property.
The written Buyer Representation Agreement is entered into by the buyer agent:
as soon as practicable (ASAP) after determining they will be representing a prospective buyer client;always before the broker’s buyer signs an offer to acquire an interest in the property; andcritically, with commercial tenants as they often later acquire fee ownership of leased property and the tenant brokers expects a fee, requiring a buyer representation agreement entered into at the outset of leasing negotiations. [Calif. Civil Code 1670.50(a)]
Related article:
Buyer Representation Agreement — Exclusive Right to Represent Individuals to Acquire an Interest in Real Estate — RPI Form 103.1
