Definitions

 

Agent

There are different types of real estate agents.  Listing agents focus on selling properties, buyer's agents assist in purchasing properties, and dual agents represent both buyers and sellers in a transaction.  Dual agents can lead to conflicts of interest and is illegal in some states.  See REALTORS®.

Broker

A real estate broker is a licensed professional who can oversee real estate transactions and often supervises real estate agents.  They may represent buyers or sellers in property transactions.

Commission

The fee paid to a real estate agent or broker for their services in facilitating a property transaction.

It's important to note that while commissions are a standard part of real estate transactions in Texas, the specific terms can vary depending on the agreement between the seller and their agent.

Commission Structure: Commissions are typically a percentage of the property's sale price.  The standard commission rate in Texas is around 5-6% of the sale price, but this can vary.

Payment Responsibility: The seller usually pays the commission, which is then split between the listing agent and the buyer's agent.

Negotiability: Commission rates are negotiable between the seller and the listing agent. There is no fixed or mandated commission rate in Texas.

Timing of Payment: Commissions are typically paid at closing when the property sale is finalized.

Split between Agents: The total commission is often split equally between the buyer's agent and the seller's agent.  Each agent then typically shares a portion of their commission with their brokerage.

Regulation: The Texas Real Estate Commission (TREC) oversees real estate transactions and licensing in the state, but does not set or regulate commission rates.

Disclosure: Real estate agents are required to disclose their commission structure to their clients.

Variations: Some agents may offer alternative commission structures, such as flat fees or lower percentages, especially for higher-priced properties.

License Holder

A real estate broker or sales agent licensed under Chapter 1101, Texas Occupations Code.

Principal

A principal typically refers to the main parties in a real estate transaction, such as a buyer, seller, or property owner.  The Principal is the person on whose behalf a real estate agent or broker acts.

REALTORS®

While all REALTORS® are real estate agents, not all agents are REALTORS®. REALTORS® are members of the National Association of REALTORS® (NAR) and adhere to a strict code of ethics.  See Agent.

Rebate

A rebate is part of a license holder’s commission that the license holder gives to a principal in a transaction in which the license holder represents one of the parties.  A rebate can be cash or anything of value and there is no limit on the amount of rebate paid to a Principal of the transaction.  All rebates should be reflected in the closing disclosure form and any cash rebate to a buyer should be made with the consent of the buyer’s lender.  A license holder may not pay a rebate outside of the transaction.  Further, if the rebate is being paid to a party the license holder does not represent, the license holder must obtain the consent of the party the license holder represents before making the payment. 

Referral

A referral is part of the license holder’s commission that is paid to another person for sending a client to the license holder.  If a person wants to be paid for a referral, the person receiving the referral fee must have an active real estate license at the time the referral is made.  However, a license holder may give an unlicensed person a gift or a gift card worth up to $50.  The card may only be redeemable for merchandise.  A gift card from a bank that can be converted into cash is impermissible.  If a license holder donates a portion of the commission to a church or other non-profit organization for a referral from an unlicensed person, the person making the referral may not receive anything that may be defined as valuable consideration from the organization or the license holder. (TREC 5/20/2020).

Referral Rebate Agreement

A contractual arrangement between the Referring Agent, the Referring Agent's Broker, and the Receiving Broker, wherein the Receiving Broker commits to provide a predetermined financial rebate to the Principal (buyer or seller) at the closing of a real estate transaction.

Terms shall include but may not be limited to:

  1. The Referring Agent, Referring Agent’s Broker or authorized staff, shall introduce the Principal to the Receiving Broker for the purpose of facilitating a real estate transaction.

  2. The Receiving Broker agrees to remit a portion of their commission, as mutually agreed upon, in the form of a rebate to the Principal.

  3. The rebate amount shall be clearly disclosed and documented in the closing statement.

  4. The Receiving Broker shall provide a referral fee to the Referring Agent’s Broker to be split between the Referring Agent’s Broker and the Referring Agent.

  5. The rebate shall be contingent upon the successful closing of the real estate transaction.

  6. All parties agree to comply with applicable state and federal laws governing real estate transactions and rebates.

  7. This agreement is subject to the approval of all involved brokerages and must adhere to their respective policies and procedures.

  8. The terms of this agreement shall remain confidential between the involved parties.

  9. Any disputes arising from this agreement shall be resolved through mediation or arbitration as prescribed by local real estate board regulations and the Referring Agent’s Broker.

TREC

Texas Real Estate Commission, the regulatory agency in Texas that oversees and regulates the real estate industry in the state.

Updated 9/25/2024