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Real Estate Q & A: Can Arizona brokers pay commissions to out-of-state brokers?

Posted by   /  March 1, 2017  /  No Comments

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Adam D. Martinez | Chairman of Real Estate Litigation Department

Question:  I am a real estate broker licensed in Arizona. I am selling a commercial building to a buyer from Chicago. The buyer also happens to be a real estate broker licensed in Illinois, and he wants to receive the commission for the buyer’s side of the transaction. I don’t mind splitting the commission, but I don’t know how to do this because Arizona law only allows me to pay licensed Arizona brokers. Is there a way for me to pay her without getting in trouble with the Arizona Department of Real Estate?

Answer:  Yes, you are correct that Arizona law generally prohibits an Arizona broker to pay a commission to anyone else other than a licensed Arizona broker. However, the statute carves out a very narrow exception for licensed out-of-state brokers if they enter into a written cooperation agreement that satisfies the requirements of A.R.S. § 32-2163, including a statement that the out-of-state broker will comply with Arizona law, and that the Arizona broker will handle all negotiations, funds, and be responsible for the out-of-state broker’s activities. The out-of-state broker also cannot list, advertise, or market real estate in Arizona.

Note: A.R.S. § 32-2163 also allows an Arizona broker to receive a commission from an out-of-state broker.

Adam Martinez is the Chairman of the Real Estate Litigation Department at Rose Law Group pc., and can be reached at amartinez@roselawgroup.com.

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