The Seller Bonus Is Dead — What SC Agents Need to Do Now That It's Gone

In this episode of Dishin' Dirt, I answer the question as to whether or not you can still accept a seller bonus following the Sitzer/Burnett settlement. I will provide insight on the legality and realities of bonuses in real estate transactions, emphasizing the importance of written agreements and the business justification rule for any amendments to compensation agreements. 

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Gary

* Gary serves on the South Carolina Real Estate Commission as a Commissioner. The opinions expressed herein are his opinions and are not necessarily the opinions of the SC Real Estate Commission. This podcast is not to be considered legal advice. Please consult an attorney in your area.    

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This is Dish and Dirt with Gary Pickering, South Carolina's only podcast dedicated to the real estate agent craft. And now the host of Dish and Dirt, Gary Pickering.

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All right, and greetings, and welcome back, everyone, to another episode of Dish and Dirt. I'm your often opinionator, rarely wrong, and award-winning host, Gary Pickering, coming to you from the beautiful downtown Columbia South County offices of Blair, Cato, Pickering, Castelline, this the last week of March 2025. Jam-packed show for you today. Cannot wait to get started on the topic today. But before we do, a couple of things I want to talk about. Number one, I know everybody already has seen and heard the bad news that Eric Tucker did pass away from a very short battle with cancer. Eric will be tremendously missed. He was a wonderful person, very positive and optimistic in a world that is so pessimistic and just downtrodden all the time. Eric was always a breast, a breath of fresh air, was always in such a good mood and always wanted to encourage and bring people up. In fact, every time he came to the office, he was always bringing flowers or bringing candies or cookies for the staff, and they absolutely adored him for that. A lot of you probably do not know, but I used to have a show called Three Dudes Watch The Bachelor. Yes, every week during The Bachelor, I would watch The Bachelor and do a show with some couple of friends. One was John Stackhouse, who was a current real estate commissioner. And then originally it was Flynn Bowie, and then it moved over to Chris Clow when Flynn decided not to do it anymore. But our very first guest that we ever had on Three Dudes Watch The Bachelor was, in fact, Eric Tucker. And when Eric came to my office to record this show, he brought a rose. And then he also brought a signed picture from Chris Harrison, the host of The Bachelor. And I was beside myself. I absolutely think Chris Harrison's awesome. I actually have a bobblehead doll of Chris Harrison right there holding up a rose. So I was ecstatic. So the whole show we do the show with Eric, have a great time making fun of the show because that's really what we did. Just made fun of the show. And at the end of it, Eric finally admitted that the picture was forged by his uh partner, Paul. So good laugh. We all had a good time with that. But Eric was such a fun person to be around and he will be sorely missed. There is absolutely no doubt about it. It was very shocking news that we received. The other news I wanted to share with you today is we have been talking about clear cooperation for quite a while. Good news for y'all is you don't have to talk about it anymore because NAR has finally ruled, and good news, clear cooperation lives on. Now there will be a small change to it, but it will live on. And I think the change that they're allowing is a wonderful change. Clear cooperation, as I've mentioned multiple times, needed to stay away to stay because there's a lot of good, valuable reasons to have it. So what we have now is the multiple listing options for the seller. And what NAR says is that they have a new category listing called delayed marketing exempt listings. What this exemption does is it allows a seller to have their listing agent to put a delay on the IDX feed. And they can set it for a period of time that would be determined by the multiple listing services they're using. However, even though it would not go on the IDX feed, all members of the MLS, whether you are a subscriber, participant, whatever, real estate agent, you would still have access to that listing. It would still be on the MLS. And so your clients could continue to view these properties and buy these properties. That was the main thing, is it making sure that large brokerages could not hoard listings and keep smaller brokerages from seeing those? And so that was a wonderful change. NAR also used the opportunity to clarify that one-on-one or broker-to-broker communications about a listing does not trigger CCP. However, if you do multiple brokerage communications, that does trigger the public marketing requirements under CCP. Do understand that in South Carolina, you may not market or advertise any listing unless you have and until you have the listing agreement signed. I have to believe that one of the main reasons that CCP survived was the DOJ last week came out and said, we do not have a problem with CCP as it exists as a standalone entity. They said it was not anti-competitive antitrust. A lot of people making arguments against CCP had been stating that the DOJ was 100% against CCP. When the DOJ came out and clarified that, I think that gave the leeway for NAR to continue to do the policy. And I was excited to see that. A lot of people were involved as well in trying to push the ball over the finish line here. Leah Pray at EXP, James Dwiggins, next home reality. Comeini Lane, CEO of Coldwell Banker, came out recently in support of CCP. That was great to have a CEO of large brokerage like that come out in support of it. And then, of course, Carl Medford, one of the best writers over at Emin News, was writing a lot of articles on why CCP needed to survive. So we did it. We survived. I'm very excited about that. We needed to keep CCP. I was one of the hills I wanted to die on in 2025. So luckily we survived that. So our next hill to die on is hopefully getting rid of broker-to-broker compensation one day. I don't know if that'll ever happen, but I think it needs to go away. Now let's talk about our topic today as we roll right into our show. I've been going all over the state of South Carolina since the settlement talking about compensation after Citaburnett. We're now six months into the settlement. Recently, I started teaching classes for CCRA. If you don't have your CE classes or your MCE classes already, go ahead and reach out to CCRA. If you're a member, those classes are free. If you're not, there's a small fee. But we're teaching all the classes through CCRA. When I teach these classes, one of the things I always try to bring into the discussion is getting back to the compensation. There's many agents out there that are still not doing compensation correctly. Talk to a lot of lawyers and they're saying the same thing. They're seeing it all over the board that the agents still are not doing compensation correctly. We're seeing it restated in a Form 120, but also being restated in a contract. And so you don't know whether they're trying to hit it twice or that's just a restatement. And sometimes you'll ask the agent and they'll tell you, oh, well, this time it's both, but the next time it's not. And they're being written the same way. So there's a lot of real estate agents that aren't doing it correctly. And so we need to continue to get that education out there. Matter of fact, I'll probably do a podcast. I think I've already done several on this topic, but we'll do another one if we have to to make sure that the real estate agents understand how to do C uh how to do compensation, post it to Burnett. One of the questions I continue to get when I teach classes is can a real estate agent still receive and be paid a bonus, bonus for showing a property? We know that a lot of builders will do that. It'll be a sales bonus. You sell our house, we'll get you an extra two grand or five grand or extra percent. And up until today, when I'm asked that question in a class, I haven't been able to really answer that question definitively one way or the other. But today that changes. In this podcast, I will give you the definitive answer as whether or not you should be doing that. It's an absolute loaded question. And I think the reason it's a loaded question is because the guidance that we have been receiving is all over the place. Catchmark and NAR continue to make tons of points on this matter, and then there'll be a counterpoint. So Ketchmark will say something, NAR will come back with a counterpoint, then catch mark will have a counterpoint. And we've gotten so far afield from the original question, I don't know that anybody knows the answer at this point. I promise what I'm going to try to do today is make that muddy water a little clearer, and I think I can do that. But in order for us to get clear, we have to look at a couple things. There's really five areas we're going to go through. First of all, we've got to look at South Carolina law. What is required by South Carolina law in terms of compensation in your agency agreement? Secondly, we have to look at the NAR settlement terms in relation to any upfront agreements to commission. What has to be done before you show a house? What do you have to agree to? Then we're going to follow that up with can you amend your compensation agreement to try to capture a greater amount of compensation? Basically, can you amend and can you specifically amend for the sole purpose of making additional money? The fourth thing we have to look at. Do we have any exceptions to this rule? Is there anything that would allow us to say this is a rule, but under these situations or these circumstances, we can apply a different rule? And then finally, we have to look and see how all of these rules affect bonuses. Can you put a bonus in the original compensation agreement? If not, can I amend to capture that bonus later on? So we've got to talk about all those things. So let's start real quickly by looking at South Carolina law. Under 4057-135 I2, a listing or biorepresentation agreement must be in writing and must set forth all material terms of the party's agency relationship. And it's including but not limited to these three items I want to point out. Letter B says the amount of compensation to be paid if a flat fee or the method to be used in calculating the amount of compensation to be paid. That item right there says that's a pretty definitive number. It's not a speculative number. We're going to be a percentage or any some other method of calculating. Letter C is an explanation of how and when compensation is earned. You notice it didn't say if, it says how and when. And then thirdly, an explanation on how compensation will be divided amongst any participating or cooperating brokers. So we have to have that signed agency agreement for compensation. And it's got to detail how, when, where, what, and who's getting paid. And it's definitive. It's not a speculative, if this happens, then I might get offered a bonus, for instance. So it is a pretty definitive requirement in South Carolina. Now, there's a second statute we have to look at. And I don't want to get too much in the weeds here, but it's a major issue with bonuses when you look at 40-57710. Under number 15, it says if you receive compensation in a real estate transaction or directly resulting from a real estate transaction from more than one party, except with the full knowledge and written disclosure to all parties. Back when we were doing comp prior to the settlement, all comp was done as broker-to-broker compensation. Listing agent would take a listing, they would get paid comp, and they would agree to pay some of that comp to the buyer's agent by putting it on the multiple listing service. All the brokers were in agreement to that. They had signed agreements with MLS. Once you put it on the multiple listing service, then the comp was paid to the buyer's agent, they brought you an accepted contract. There was no documents that had to be signed. But back in that day, broker-to-broker comp truly meant that the listing agent was paying the commission for the buyer's agent. When you're asked who pays who's paying whose commissions, in that particular example, the listing agent was paying the buyer's agent, not the seller. Seller had no agreement with the buyer's agent. Buyer wasn't paying the buyer's agent, it was the listing agent. When however you brought in a bonus, a bonus was being paid directly by the seller. So if in a situation where you have brokered, broker, comp with a bonus, you're getting paid by two parties. You're getting paid your commission by the listing agent, and then you're getting paid your bonus by the seller. So when those situations arise, it has to be with full knowledge with a written disclosure. That's important because you can't put that into your original exclusive right to buy agreement because we don't have full knowledge and we're not disclosing it at that point in specificity to our buyer. Putting in the agreement that I might receive a bonus for showing you a house is not the same thing as saying I'm receiving a $1,000 bonus from Builder XYZ for showing you the house in this particular neighborhood and you're signing a contract. That's a whole different story. So the thing you need to understand here is essentially the bonus must be disclosed in writing with full information. And that's not at the time you sign the exclusive right to buy. So under South Carolina law, yes, you can accept the bonus as long as it is disclosed in writing to the buyer. So legally, the answer is yes. But as y'all know, whenever I talk about anything under real estate law, we talk about legalities and we talk about realities. The legality is under South Carolina law, if you do it correctly and disclose it when it's fully known to you, then you can legally accept a bonus. But the reality of it is under the settlement, you no longer can settle a bonus. Settlement only applies to realtor members, it does not apply to real estate agents. So 60% of our real estate agents are realtors, the 40% of us don't have to comply with it. You would be very foolish to take that position. Because if you look and see what Ketchmark has done, is not only did he sue the realtors, then he tried to sue people, and other lawyers are suing people that are not protected by the realtor settlement. So if you want to try to claim, well, I'm not part of that settlement, then that also opens you up from other law, another lawsuit. The reality of it is you're going to follow whatever that settlement says, or you're being very risky with your business otherwise. So let's look at what NAR says about the settlement in terms of compensation. If the seller, and this is question number 49, or they're frequently asked questions about the settlement, if the seller or the listing broker offers a bonus or financial incentive in addition to the offer of broker compensation, can accept the extra compensation? The answer is the buyer broker may not accept compensation for broker services from any source that exceeds the amount or rate agreed to in the agreement with the buyer. So that's kind of vague, and I think it's purposely vague. It doesn't really answer the question, I want to know, could I get a bonus? But the reality of it is that does kind of cover all compensation, which includes bonuses, because bonuses is compensation. So what it's saying is that you cannot get paid unless you have a written agreement with the buyer. So if you have a written agreement with the buyer saying you'll get paid zero, then you're getting zero. You can't later get more money. And we'll talk about the ability to mend, but you can't just take more money. You have to have a written agreement from the buyer allowing you to get the money in the first place. If you look at it this way, if you put X into a buyer representation agreement, the buyer's going to pay you X, and the seller is willing to pay you X plus one, you can only get X. You cannot get X plus one. You can only get what's in your actual agreement. Now, if your agreement said X plus one, then you could get X plus one, but your agreement in this situation says X, that's the maximum you can get. So that raises the bigger question. Can you ever amend your buyer representation agreement to capture more bonus, more compensation, more commission? Catchmark generally says the answer to that is no. And I think he's wrong, the actual case that it says you can't do that. Generally, I think he's correct, but I don't think in every situation. And what I mean by that is I do agree with catchmore that I don't believe you can amend your representation agreement to capture more commission without doing more work. So let's talk about that. What NAR has used is what's called the business justification rule. And I agree with the business justification rule, but we need to explain it. But first, as I explained, I want to talk about Summer Gorilik. She is a real estate compliance consultant. She's a former California Department of Real Estate investigator. Here's what she says this prohibition provides a straightforward compliance framework. Realtors could not use amendments to increase their commission, thereby reinforcing consumer protection principles and ethical real estate practice. And then she says this the intent was to prohibit any post-execution modifications that would financially benefit the agent at the seller or buyer's expense. So what does that mean? What she's saying is you can only capture what the buyer is obligated to pay, even if the seller agrees to offer more, and you can later talk the buyer into agreeing to that. However, what I think that's missing here is the ability to amend. And what NAR has said is when asked whether a realtor could accept a bonus in excess of what was initially agreed upon by the buyer, Leslie Muchals, who is the general counsel for NAR, she says, initially stated that a business justification would be required. But then she reinforced her earlier statement that the amendment could not exclusively be made to increase compensation. So what the world does that mean? Well, I think it's very simple. If I've signed an agreement for X and a seller's agreed to pay X plus one, I cannot go back to my buyer and say, good news for me, the seller is agreed to pay X plus one. Will you amend your agreement so I can get paid more? The answer is no, you cannot amend solely to capture more money. That's totally different, however, if you were hiring me to show you a house and paying me $100 just to show the house, and that was the entire extent of our agreement. I will show you the house, that's it. No client services, nothing else. And then after seeing the house, you said, I really like this house. I think I want to put an offer. Will you now provide me full client services? Then I can come and say, well, my fee is X for that. So yes, I have increased my fee, but I've also increased my work, my liability, and every aspect of what I do as a real estate agent. So that would be a business justification rule. There is no business justification for saying I was getting paid X and the seller's willing to pay me X plus one. So I'm gonna take this extra money. That's not a business justification. You putting more money in your pocket. A business justification would be I did more work. Now, doing more work doesn't necessarily mean, well, I just worked harder and helped them better. I did a lot of for I did more than I thought I was gonna have to do in this situation. It's more of these were the tasks I had, and then I was doing more tasks. But I think that's got to be agreed to before. You can't after trade, you have to before trade, and we'll talk about that. So let's look for a little bit more at what Gorlik said in her interview. She interviewed a law professor at the University of Buffalo School of Law, her name is Tanya Monaster. I probably pronounced her name wrong, so we'll just call her professor. This is what the professor said. Leaving aside the settlement for the moment, parties to the biorepresentation agreement can modify their agreements, including the compensation provision, as a matter of contract law. But this would require new consideration or must meet an exception to the consideration requirement of state law. Don't necessarily disagree with her. What she's talking about is the new considerations. I'm giving you more work, new work. Originally, I was only going to show you one house. Now you've asked me to come put an offer in, walk you through contract negotiations, do all the work for repairs and negotiations and all that stuff. That's a whole different ballgame. She gives an example. If a buyer broker agreed to show properties within a 20-mile radius and then the buyer agreed to 2% commission, the parties could decide to modify and both would have to do something new. The broker might agree to extend the geographical area to 50 miles and the buyer might agree to pay 3%, but it must be prospective. There's no such thing as modifying retrospectively. And this is exactly what I was talking about. If I was limiting it to 2%, 50 miles, and then you during the representation said, you know, I really want to go outside of this Columbia area now and go over and look in maybe Orangeburg or Kershaw County outside of the area I agreed to. I could then say, well, I'm happy to do that, but now my fee is 3%, and we can modify it's prospectively. What we can't do is I start showing you houses 50, 60, 70 miles from downtown Columbia, and then I come back to you and go, well, you know, originally I was only going to show you 20 miles. I wound up going about 60 miles out of the area, so I need you to pay me three. You can't make them go back in time and redo it. It's they have to agree, and then you do the work. And I have absolutely no problem with that. I think she's absolutely right. Going back to what uh Leslie Muchao said is did you contemplate that this was going to take you a month, but it ended up taking you a year and a half to represent them? Did you contemplate viewing one home but ended up touring a hundred homes? There are examples of potential ways that there might be a potential justification to go back to the buyer and ask them to amend. With all that, you have to remember that this is not a unilateral amendment. The buyer would have to agree to that amendment. I agree with what she said. You would just have to do it before, before. I don't think that you can show them 100 houses and say, well, I really thought I was only going to show you one. So let's, here's my business justification rule for you paying me more. No, I think at the time of showing her one or five or ten houses, you could then say, I'm showing you a lot of houses now. If you'd like me to continue to show you more houses, my fee's going to go up. I think that's fine. Gorling didn't like that. She's uh always talking about past tense. She's saying that after the broker did more work and expanded the scope, asked the buyer to sign a modification, and that is absolutely not permitted. The whole point of modification is to change your agreement going forward. I think she's right on that. If you agree to it before you do it, you can't just show 100 homes and go, I really thought I was going to show you less houses, so I want to get a little bit more money. She gives some context outside of real estate. You go to an automobile repair shop, they tell you that's going to cost you $1,000. You go to pick your car up and now they want $2,000. Would that ever happen? And she says, of course not. But she's actually wrong there. It happens all the time. Every time you take a car in there, it's going to be $75 or $100, and you come back and it's going to be more money because they had to do more. So I don't agree with her example, but she did say you can't perform the services and then say there's a legitimate business reason. I agree. You have to see there's a change, which would trigger the legitimate. Reason, business reason, ask for the amendment and then do the work. So I agree with her on that. It's like this. If I take my car to have my tires aligned and they tell me it's $250 for the alignment, and then they call me and say, we cannot do your alignment because your tires are bald. You need four new tires. I don't get to say, well, sorry, you've already agreed at $250, so I have you to do whatever I want. So I want new brakes and new tires and everything else. No, what we can say there is that I agreed for the service. The service was the tire alignment. They came back and said, in order to do that service, you now have to pay us $1,000 for tires. I can then agree, yes, I'll pay for the tires, and now I'm paying the $250 for the alignment and I paid $1,000 for the tires. Well, they can't do same thing with a real estate agent, is put the tires on and then send me a bill for $1,250 and say, you now owe me for the tires and the wheel alignment. I didn't ask for the tires. I should have to pay you more. That's really what she's getting at. And I understand where she's getting at. I don't think that her example was very good. So now, how does that affect bonuses? Let's talk about this in the bonus realm. Well, Ketchmark said last November that buyer brokers could not amend their written buyer agreement to collect a bonus offered by sellers or builders if the compensation exceeded what the parties had already agreed to. I hate to say it, but I agree with them. And what he's saying is in order to get compensation for that bonus, that would have to already be in your buyer representation agreement. But as I showed you earlier in South Carolina, I don't know how you can put a bonus in your compensation agreement because you don't know the full facts of what that bonus is. So that makes it pretty much impractical. In order to get the bonus, you'd have to have it in the commission agreement to begin with. To amend it later, after the fact would be retroactively, and that would be in violation. Even when the professor said the same thing. She has a 25-page manual for buyers about buyer representation after the settlement. And this 25-page manual says 31 times the word bonus. In 25 pages, she talks about bonuses 31 times. And what she says is basically you can't get a bonus. She talks about all the different states and says the provisions that allow agents to collect bonuses from sellers, certain sellers, particularly sellers of new home construction, offer very enticing bonuses to agents to get buyers to purchase their properties. One builder in Florida recently advertised an 8% bonus. Again, I do not believe this is permitted under the NAR settlement. Moreover, allowing agents to collect these bonuses means that they will continue to steer their clients to the bonus eligible properties. That's the bad word. Steer. There's your magic word. Everybody wants to avoid that word, but she's right that that brings up the argument that you're steered to that property solely for that bonus. And in her pamphlet, she even points to the South Carolina Realtor's exclusive right to buy document where it says if broker is offered a bonus in addition to the agreed-upon amount below, the broker will provide the buyer written notice of the bonus via an addendment addendum to the agreement. The broker may only accept this bonus if the buyer agrees to sign the addendum. Well, I don't think so anymore. She certainly doesn't agree with that. I mean, she doesn't like that provision, and she's specifically quoting South Carolina. So she's telling you she's already seeing that and she doesn't believe that is proper. So I don't think we're going to be doing bonuses anymore. I think the professor's right. If you think about it in terms of the settlement, the bonus should belong to the buyer. The whole idea is the buyer agreed to your maximum compensation when you agreed to represent them. And to come back afterwards and ask for additional compensation is doing nothing but increasing the cost to the consumer. Because if you forego the bonus and give it to your buyer, it would reduce the cost to the buyer. If you agreed that the maximum you would earn for compensation is 3%, and then the seller's offering you 3% and $2,500, that $2,500 credit should go to the buyer. They should reap that benefit, not you. You've already agreed to represent them for that set fee of 3%, not 3% plus $2,500. So any dollar above that 3% is coming out of the pocket of the buyer, essentially, because the seller could reduce the price of the house by $2,500. So if you look at it in terms of the settlement, what the settlement says, it does make good sense that no, you shouldn't be able to take the bonus. Conclusion, what do we have with this bonus? Technically and legally, under state law, sure, you can do the bonus. However, the reality of it is under the settlement, you probably can't commit amend. In fact, I would advise against it. You can't amend to get additional money without a business justification. A business justification cannot be to get you paid more. The business justification has to be that you've done more work above and beyond what the work was you agreed to and the exclusive right to buy. It isn't you just worked harder or it took longer, you had to show more houses. It has to be you did more services and it has to be agreed upon proactively and not retroactively. You can't do the work and then ask them to pay you for more money. Add to this that the bonus can't be paid to you simply because you showed a house. That would be steering. And the reality of it is that's exactly what a bonus is for. It's to get you to show the house. And under the settlement, that would be considered steering. If you are showing a house because of the bonus and the bonus is being offered to get you to show the house, that is considered steering. So that pretty much ends the whole argument there for me anyway. Even if you could collect it, let's say you could do it, you have to go back to your original exclusive right to buy agreement. You can only get what is in there and not a penny more. There's no way you can amend it to get more without the business justification rule. So my opinion is no more bonuses. Here's so there you have it. I think we're done with bonuses from here on out. Of course, you need to check with your broker to see what your broker's policy is. I don't set your broker policies. All right, well, that's all the time we have for our show today. I hope that helps clarify that information for you. And if you will come back again next week for another episode of Edition Dirt, please like us, share us, and subscribe and tell the other real estate agents about us. You'll have a great weekend.