Commission and Compensation in Arizona

Understanding how real estate compensation works in Arizona is essential for compliance.

Commission Basics

Negotiability

All commissions are negotiable. Arizona law does not set:

• Minimum commission rates
• Maximum commission rates
• Standard commission percentages

Each broker sets their own rates, and clients can negotiate.

Antitrust Warning: Discussing or agreeing on commission rates with competing brokers is illegal price-fixing.

When Commission is Earned

A broker typically earns commission when they produce a buyer who is:

• Ready - Prepared to buy
• Willing - Wants to buy on seller's terms
• Able - Has financial capacity

However, the listing agreement defines exactly when and how commission is earned.

Payment of Compensation

Flow of Commission

Compensation must flow through proper channels:

The Key Rule

Salespersons may only receive compensation from their employing broker.

A salesperson cannot:

• Accept payment directly from clients
• Accept payment from other brokers
• Accept referral fees directly
• Receive compensation from outside the brokerage

Referral Fees

Permitted Referrals

• Broker to broker (licensed parties)
• Must be disclosed to clients
• For legitimate referral of business

Prohibited Referrals

• Payments to unlicensed persons for referrals
• Undisclosed compensation arrangements
• Kickbacks for referrals to service providers

Exception: Certain gifts of nominal value to clients for referrals may be permissible, but should be disclosed.

Compensation From Multiple Sources

If a broker receives compensation from multiple sources in the same transaction:

Example: If a listing broker also receives a referral fee from a lender, this must be disclosed.

Commission Disputes

Between Brokers

If brokers dispute who earned a commission:

• The dispute does NOT delay closing
• Parties resolve separately
• May require arbitration or litigation

Procuring Cause

Procuring cause determines who earned the commission:

• The broker whose efforts resulted in the sale
• The continuous chain of events leading to sale
• Not necessarily the first broker to show the property

Advertising Compensation

When advertising compensation offers:

• Must be truthful and not misleading
• Cooperation offers (MLS) are between brokers
• Client compensation disclosures follow R4-28-701