Do Agent Bonuses Violate “Pay at Close”

by | Mar 9, 2018 | Legal Tips

As discussed in last week’s post, South Carolina Code §40-57-135(B) states, “An associated licensee may not receive compensation from an activity requiring a real estate license from an entity or person other than the one for which the license is issued.”  Pay at Close is a process where the Broker in Charge gives written authorization to the closing attorney to issue two checks at closing: one to the brokerage firm for its portion of the commission, and one to the agent for his/her portion of the commission.  The Pay at Close process attempts to circumvent the statute. Recently, the South Carolina Real Estate Commission ruled that Pay at Close violates this South Carolina law.

Today’s post examines how the Real Estate Commission would approach the payment of agent bonuses. Specifically, whether or not the  selling agent bonus can be paid directly to the agent or must it also be paid through the Broker.  Under South Carolina law, bonuses are no different that commissions. Both are considered compensation. Thus, the Real Estate Commission would most likely take the position that a bonus is compensation under the statute. Therefore, any cash bonus (or it’s equivalency) would have to be paid to the Broker and then the Broker would pay the real estate agent.

Secondly, bonus payments can be subject to a commission split with the brokerage. The real estate agent’s compensation agreement with the brokerage covers this issue.  Some brokerages allow the real estate agent to receive the full bonus while others hold it subject to the agreed upon commission split. The real estate agent should carefully review their compensation agreement for information on this issue.

The Real Estate Commission has not provided guidance on the payment of bonuses when the bonus is a cruise, gift card or other tangible item. Perhaps the impractical nature of paying the cruise or gift card to the broker and then having the broker pay it to the agent would allow it to be paid directly to the real estate agent. It just does not make practical sense otherwise. However, no one can guarantee that the Real Estate Commission will rule based on what is practical and impractical.  Regardless, the real estate agent still needs to be cognizant of any arrangements the agent has with their Broker as to the bonus/commission split agreement.

Lastly, if an agent receives a bonus it must be disclosed in writing to the client before receiving the bonus because the agent is being paid by two parties (listing agent pays commission but seller pays bonuses). The real estate statute requires disclosure to the client when an agent is being paid by multiple parties in a transaction. All bonus regardless of the type must be disclosed on a settlement statement to comply with federal law  and the agent must receive a W-9 for the value.

BLAIR CATO PICKREN CASTERLINE was honored to present a $16,500 check to the SC Military Family Care Association. The check represents the money raised from our October fund raiser. The South Carolina Military Family Care Association assists South Carolina military family who are suffering from a financial crisis such as a funeral expense, foreclosure or repossession. We offer a special thanks to General Harry Burchstead, Col. Ronald Taylor and Command Sergeant Russell Vickery for their service and hard work with this worthwhile organization. 

Call Now Button