Beginning January 1, 2027, Wisconsin's new compensation rules will change how firms working with buyer customers receive compensation in residential transactions involving one to four dwelling units. Under 2025 Wisconsin Act 69, firms may no longer pay other firms for brokerage services in these transactions. However, a seller may agree to pay compensation directly to a firm working with a buyer if the payment is documented in the executed offer to purchase or option to purchase.
What happens when a seller offers compensation to a subagent but later refuses to pay it?
A seller's offer of compensation is not a guarantee of payment
The revised WB-1 Residential Listing Contract includes an Offer of Compensation section in which the seller may indicate whether the seller is offering compensation to another firm working with a buyer.
If the seller offers compensation, the listing firm may communicate that offer if the seller authorizes disclosure of that information. However, the seller's offer of compensation in the listing contract does not independently obligate the seller to pay another firm.
Under Wis. Stat. § 452.19(4)(a), the seller's agreement to pay compensation to a firm other than the listing firm must be expressly stated in the fully executed offer to purchase or option to purchase signed by the buyer and seller.
The revised WB-11 Residential Offer to Purchase includes a Seller Offer of Compensation (Buyer Customer) provision for this purpose. The provision allows a subagent working with a buyer customer to document compensation the seller has already offered.
Importantly, the provision is not intended to allow a subagent to independently request compensation from a seller who has not offered it.
What if the seller counters out the compensation provision?
Consider a transaction in which a seller has offered to pay compensation to a firm working with a buyer customer. A subagent drafts an offer to purchase that includes the Seller Offer of Compensation (Buyer Customer) provision reflecting the seller's offer.
The seller responds with a counter-offer removing the compensation provision.
The seller is not required to agree to pay the subagent merely because the seller previously indicated a willingness to offer compensation. Like other terms of the transaction, seller-paid compensation is negotiable.
If the buyer accepts the seller's counter-offer and the resulting executed contract does not include an agreement requiring the seller to compensate the subagent, the subagent cannot rely on the seller's earlier offer of compensation to collect payment.
The subagent may therefore perform brokerage services in a transaction without receiving compensation.
Can the subagent ask the buyer to negotiate compensation?
This is where the distinction between a buyer client and a buyer customer becomes particularly important.
A firm representing a buyer under a WB-36 Buyer Agency Agreement may assist the buyer in requesting seller payment of the buyer's firm's compensation. The buyer may make that request regardless of whether the seller previously offered compensation.
A subagent working with a buyer customer is in a different position.
The subagent is not representing the buyer. Instead, the subagent owes duties to the listing firm's client, generally the seller. Those duties include acting consistently with the seller's interests and not placing the subagent's own interests ahead of the seller's interests.
Consequently, a subagent cannot use the buyer customer's offer to independently request compensation from the seller when the seller has not made an offer of compensation. The same concern arises when a seller counters out an existing compensation provision. The subagent cannot disregard its duties to the seller in an effort to preserve its own compensation.
Can the listing firm pay the subagent instead?
For transactions involving residential property containing one to four dwelling units, the answer is no.
Effective January 1, 2027, Wis. Stat. § 452.19(3) prohibits firm-to-firm compensation for brokerage services, including when the receiving firm acts as a subagent. The prohibition does not apply to otherwise lawful referral fees, but a referral fee is not a substitute for compensation for brokerage services actually performed in the transaction.
Accordingly, the listing firm cannot resolve the subagent's compensation problem by paying the subagent for drafting the offer, negotiating the transaction or performing other brokerage services.
Understanding the risk before providing services
The new compensation rules make it particularly important for firms practicing subagency to understand whether a seller is offering compensation and how that compensation must be documented.
Even when a seller initially offers compensation, the seller may negotiate different terms or decline to pay compensation in the final agreement. A subagent should not assume that an initial offer of compensation guarantees payment.
Firms should evaluate their compensation practices and discuss the financial risks of subagency with their licensees when providing brokerage services to buyer customers.
