In August, two new riders, FF and GG, were introduced to address a common challenge in real estate transactions—buyer’s broker compensation that hasn’t been pre-negotiated. These new riders offer a more streamlined and legally sound way to handle compensation directly in the contract, making it easier for both buyers and sellers to navigate the process.
Rider FF: Clarifying Buyer’s Broker Compensation
Rider FF allows for the buyer’s broker compensation to be included in the contract, ensuring transparency and protecting all parties involved. Here’s how it works:
Separate Agreement: The rider states that the buyer has entered into a separate brokerage agreement with their buyer’s broker. The seller then agrees to credit the buyer the amount described in that agreement, covering the cost of the buyer’s broker at closing.
Credit Adjustments: If the credit exceeds the amount the buyer’s lender allows for such contributions, the excess can either be paid directly by the seller to the buyer’s broker or the credit will be reduced to the lender’s maximum allowed amount.
By using Rider FF, there’s no need to include compensation details under additional terms—it’s all laid out clearly in the rider. This also ensures that agents don’t overstep into legal territory, as the precise wording is already provided.
Rider GG: Compensation Contingency
Rider GG offers another approach. Instead of pre-determining compensation, this rider makes the contract contingent on negotiating an agreement after the contract has been signed:
Broker-to-Broker Agreement: The contract is contingent upon either the buyer’s and seller’s brokers, or the seller themselves, coming to terms on a compensation agreement within a certain number of days—three days being the default.
No Pre-Negotiation: With Rider GG, there’s no need to settle on a specific compensation amount upfront. It simply states that the parties will negotiate an agreeable amount after going under contract.
Why These Riders Matter
These new riders simplify a process that has traditionally been tricky to navigate. Instead of relying on additional terms or separate legal agreements, both FF and GG allow for clear, contractually bound methods to ensure buyer’s broker compensation is handled fairly. This is particularly helpful for real estate agents, as it minimizes the legal complexities and ensures all parties are on the same page.
By understanding and utilizing these new riders, both agents and clients can approach their transactions with greater confidence, knowing that compensation will be handled in a straightforward and legally sound manner.
Listen to our latest podcast episode to hear Dion and Ashley share more insights into these new riders and how you should use them!