{"id":27982,"date":"2024-06-27T00:05:51","date_gmt":"2024-06-27T05:05:51","guid":{"rendered":"https:\/\/pintailcos.com\/web\/how-to-use-addendum-regarding-brokers-fees-txr-2406\/"},"modified":"2024-06-27T00:05:51","modified_gmt":"2024-06-27T05:05:51","slug":"how-to-use-addendum-regarding-brokers-fees-txr-2406","status":"publish","type":"post","link":"https:\/\/pintailcos.com\/web\/how-to-use-addendum-regarding-brokers-fees-txr-2406\/","title":{"rendered":"How to Use Addendum Regarding Brokers\u2019 Fees (TXR 2406)"},"content":{"rendered":"The new Addendum Regarding Brokers\u2019 Fees is used with TREC residential sales contracts (i.e., the One to Four Family Residential Contract, Unimproved Property, and New Home contracts). This form documents the payment of brokers\u2019 fees in the transaction, including from a listing broker or seller to a buyer\u2019s broker.\nNote: This addendum should not be used with the Farm and Ranch Contract (TREC 25-15; TXR 1701), which already contains provisions regarding broker fees in the contract.\nParagraph A. Addendum Controls. This paragraph states that if there is any conflict between this addendum and the sales contract, the terms of this addendum will control.\nParagraph B. Fees. Insert the county in Texas where the fees must be paid in cash. This county can be the where your brokerage office, the property, or the title company that is closing the transaction is located.\nParagraph C. Listing Broker\u2019s Fees. This paragraph states that the listing broker will be paid a fee by the seller as specified in a separate written agreement (i.e., a listing agreement).\nParagraph D. Other Broker\u2019s Fees. \u00a0This paragraph states that the buyer\u2019s broker may be paid by the seller or listing broker, depending on which box, if any, is checked. Also, it states that the buyer shall pay any remaining amount due to the buyer\u2019s broker as specified in a separate written agreement (i.e., a buyer representation agreement).\u00a0 Any payment from the seller or listing broker will be applied before the buyer\u2019s payment. Both D(1) and D(2) may be checked depending on how the buyer\u2019s broker will be paid.\nNote: If a buyer\u2019s broker is receiving compensation from a listing broker or seller that exceeds the amount the buyer and buyer\u2019s broker previously agreed to in a buyer\u2019s representation agreement, the buyer\u2019s broker will need to amend the representation agreement to have the buyer authorize the buyer\u2019s broker to receive the full amount.\n\nParagraph D(1) (Listing Broker Pays Buyer\u2019s Broker). Check this box only if the listing broker has agreed to pay the buyer\u2019s broker under a separate written agreement such as the Compensation Agreement Between Brokers (TXR 2402). Insert the amount of the agreed upon payment.\n\nThe amount inserted in Paragraph D(1) does not change the amount agreed to in the separate compensation agreement. If there is a conflict, the amount specified in the separate compensation agreement will control.\n\nParagraph D(2) (Seller Pays Buyer\u2019s Broker). Check this box only if the seller agrees to pay the buyer\u2019s broker. If you check D(2), you also need to check either D(2)(a) or D(2)(b). Do not check both.\nParagraph D(2)(a). Check this box only if the seller has agreed to pay the buyer\u2019s broker using a separate written agreement such as the Compensation Agreement Between Broker and Owner (TXR 2401). Insert the amount of the agreed upon payment.\n\nThe amount inserted in Paragraph D(2)(a) does not change the amount agreed to in the separate compensation agreement. If there is a conflict, the amount specified in the separate compensation agreement will control.\n\nParagraph D(2)(b). Check this box only if the seller agrees to pay the buyer\u2019s broker as part of the sales contract. Insert the amount of such payment.\n\nNote: This paragraph creates a new obligation for the seller to pay the buyer\u2019s broker the specified fee. Only check this box if there is no previous separate agreement between the seller and buyer\u2019s broker, such as Compensation Agreement Between Broker and Owner (TXR 2401). This addendum is the agreement between the parties.\nParagraph E. Authorization. This paragraph authorizes the title company to disperse funds in accordance with this addendum.\nFrequently Asked Questions\nWhat box do we check if the seller agrees to pay the buyer\u2019s broker fee?\nFirst, check the box next to Paragraph D(2) which states, \u201cSeller shall pay.\u201d Then check either D(2)(a) or D(2)(b) or both, depending on which contract is used to establish buyer broker\u2019s compensation.\n\nCheck box D(2)(a) if the seller has signed a separate compensation agreement with the buyer\u2019s broker, such as the Compensation Agreement Between Broker and Owner (TXR 2401).\nCheck box D(2)(b) if the seller agrees to pay any of the buyer\u2019s broker\u2019s fees as an additional term under the sales contract. This option creates a new obligation for the seller to pay the buyer\u2019s broker\u2019s fee as stated in this addendum.\n\nWhat is the difference between the seller paying buyer\u2019s broker\u2019s fee in the Addendum Regarding Brokers\u2019 Fees (TXR 2406) and the seller paying buyer\u2019s expenses under Paragraph 12 of the sales contract?\n\nParagraph 12A of TREC residential sales contracts allow the parties to agree that the seller will pay a negotiated amount towards buyer\u2019s expenses. \u201cBuyer\u2019s expenses\u201d is a defined term in the contract and does not include broker fees. Buyer\u2019s expenses includes items such as appraisal fees, loan origination charges, and credit reports.\nParagraph D(2)(a) and D(2)(b) of Addendum Regarding Brokers\u2019 Fees (TXR 2406) allow the parties to agree that the seller will pay an amount specifically for buyer\u2019s broker\u2019s fees. This is a separate obligation from paying buyer\u2019s expenses under Paragraph 12.\nBoth provisions can be used depending on what expense seller agrees to contribute to, either buyer\u2019s expenses under the sales contract, buyer\u2019s broker\u2019s fees under the addendum, or a combination.\n\nIs the Addendum Regarding Brokers\u2019 Fees (TXR 2406) required on every transaction?\nNo, the Addendum Regarding Brokers\u2019 Fees (TXR 2406) does not have to be used in every transaction. However, it should be used when the seller agrees to pay the buyer\u2019s broker under the sales contract. In that case, Paragraph D2(b) must be checked to specify the amount and authorize the payment. For the other options listed in the Addendum Regarding Brokers\u2019 Fees, the form can still be used to provide information to the title company on how the parties are handling brokers\u2019 fees. So, it would be good to use but is not required.\nWhen is the Addendum Regarding Brokers\u2019 Fees (TXR 2406) executed?\nThe Addendum Regarding Brokers\u2019 Fees is designed to be used when the seller is agreeing to pay buyer\u2019s broker fees under a sales contract. It can be included as part of an offer package delivered to a seller. It may also be executed later in the transaction.\nHow will the title company, lender, etc. know how much to pay if Addendum Regarding Brokers\u2019 Fees (TXR 2406) is not used?\nBrokers can continue to use a compensation\/commission disbursement authorization (CDA) form supplied by their brokerage to notify title companies of disbursement instructions.\nCan the Addendum Regarding Brokers\u2019 Fees (TXR 2406) be used in an intermediary transaction?\nYes, the form can be used in an intermediary transaction. The form provides notice to the title company of the parties\u2019 agreement regarding the payment of broker\u2019s fees. Also, the seller and buyer are authorizing the title company to disperse funds in accordance with prior compensation agreements, in this case, the listing and buyer representation agreements.\nWhich forms to use\u2026\nIf the seller and the buyer will pay their own brokers:\n\nNo additional compensation agreements are required other than the listing agreement and buyer representation agreement.\nThe representation agreements authorize the title company to pay broker fees.\n\nIf the listing broker agrees to pay the buyer\u2019s broker:\n\nCompensation Agreement Between Brokers (TX 2402). Executed by the listing broker and buyer\u2019s broker before the offer is presented.\nAddendum Regarding Brokers\u2019 Fees (TX 2406). Executed by the seller and the buyer and can be included as part of an offer package delivered to a seller. It may also be executed later in the transaction.\nCheck box D(1) and insert the agreed upon amount.\n\nNote: Paragraph D(1) serves the same function as the compensation disclosure located at the bottom of Page 10 of the One to Four Family Residential Contract. It notifies the title company of the broker-to-broker compensation agreement. If the only fee the buyer\u2019s broker receives is from the listing broker, you can insert the amount on Page 10 of the sales contract and would not need to use\u00a0Addendum Regarding Brokers\u2019 Fees (TXR 2406).\n\n\n\nIf the seller agrees to pay the buyer\u2019s broker using a separate compensation agreement:\n\nCompensation Agreement Between Broker and Owner (TXR 2401). Executed by the seller and buyer\u2019s broker.\nAddendum Regarding Brokers\u2019 Fees (TXR 2406). Executed by the seller and the buyer and can be included as part of an offer package delivered to a seller. It may also be executed later in the transaction. Check box D(2) and box D(2)(a) and insert the agreed upon amount.\n\nIf the seller agrees to pay the buyer\u2019s broker as part of the sales contract:\n\nAddendum Regarding Brokers\u2019 Fees (TXR 2406). Executed by the seller and the buyer and can be included as part of an offer package delivered to a seller. It may also be executed later in the transaction. Check box D(2) and box D(2)(b) and insert the agreed upon amount.\n\nNote: Multiple boxes may be checked under Paragraph D if the buyer\u2019s broker will be compensated from more than one source. For example, if the listing broker and seller both agree to pay a portion of buyer\u2019s broker\u2019s fee, check box D(1) and box D(2)(a) or (b) inserting the appropriate amounts under each paragraph.\nDownload this information as a PDF.\nDisclaimer: The above information is being provided as a general guide and is not intended to be and should not be considered legal advice. Use of any form and how to complete each form depends on the needs of the parties on a case-by-case basis.","protected":false},"excerpt":{"rendered":"<p>The new Addendum Regarding Brokers\u2019 Fees is used with TREC residential sales contracts (i.e., the One to Four Family Residential Contract, Unimproved Property, and New Home contracts). This form documents the payment of brokers\u2019 fees in the transaction, including from a listing broker or seller to a buyer\u2019s broker. Note: This addendum should not be [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"footnotes":""},"categories":[108],"tags":[],"class_list":["post-27982","post","type-post","status-publish","format-standard","hentry","category-news"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/pintailcos.com\/web\/wp-json\/wp\/v2\/posts\/27982","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/pintailcos.com\/web\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/pintailcos.com\/web\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/pintailcos.com\/web\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/pintailcos.com\/web\/wp-json\/wp\/v2\/comments?post=27982"}],"version-history":[{"count":0,"href":"https:\/\/pintailcos.com\/web\/wp-json\/wp\/v2\/posts\/27982\/revisions"}],"wp:attachment":[{"href":"https:\/\/pintailcos.com\/web\/wp-json\/wp\/v2\/media?parent=27982"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/pintailcos.com\/web\/wp-json\/wp\/v2\/categories?post=27982"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/pintailcos.com\/web\/wp-json\/wp\/v2\/tags?post=27982"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}