Can a California Agent Recover Commission on Out-of-State Transactions?
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Can a California Agent Recover Commission on Out-of-State Transactions?
An agent can earn a commission on out-of-state transactions, but must follow some simple rules set forth below.
1. Representing a Buyer in purchasing an out-of-state property.
In this example, the California agent represents a Buyer in purchasing an out-of-state property. This means a California agent is representing a California Buyer purchasing an out-of-state property.
First, the agent must use a written California Buyer-Broker Agreement that specifies the amount of commission due. That Buyer-Broker Agreement must contain a provision requiring the agreement to be enforced under California law. The CAR Buyer-Broker Agreement-Exclusive satisfies these requirements.
Second, the agent must conduct all “licensed activity” from California. This means that all negotiations must occur in California. The agent may not personally show the property or negotiate terms of sale while in another state. In other words, the agent must stay in California.
Third, the agent must enter into a Cooperating Broker Agreement with the listing agent that specifies the amount of commission due and contains a provision requiring the agreement to be enforced under California law.
Follow these three simple steps and the California agent can receive a commission as a selling agent for an out-of-state property.
2. Representing a Seller in listing an out-of-state property.
In this example, the California agent represents a Seller in listing an out-of-state property. This means that a California agent is taking a listing from a California Seller to list an out-of-state property.
First, the agent must use a written California Listing Agreement that specifies the amount of commission due. That Listing Agreement must contain a provision requiring the agreement to be enforced under California law. The CAR Listing Agreement satisfies these requirements.
Second, the agent must conduct all “licensed activity” from California. This means that all marketing, negotiations and sales efforts must occur in California. The agent may not personally show the property or negotiate terms of sale while in another state. In other words, the agent must stay in California.
Third, use a major title company to provide escrow for the transaction. Most major title companies have national divisions which allow you to maintain control of out-of-state escrows from California.
Follow these three simple steps and the California agent can receive a commission as a listing agent for an out-of-state property.
3. Paying commission to an out-of-state broker.
A California broker can share commission with an out-of-state broker as long as that broker does not engage in any “licensed activity” in California.
Business & Professions §10137 specifically authorizes a California broker to pay commission to an out-of-state broker.
However, this means that the out-of-state broker cannot market, negotiate or conduct any sales activities in California. The out-of-state broker cannot perform any services inside the State of California. The out-of-state broker must stay out of California or forfeit his/her commission.
4. Summary
The key for the California agent is to: (1) use CAR Buyer-Broker Agreement-Exclusive (if representing a Buyer) or use CAR Listing Agreements (if representing a Seller); (2) do not engage in any “licensed activity” while out-of-state; and (3) use a major title company with offices in California as escrow.
