Pending Transactions and the Pipeline at Closing in a Brokerage Sale
A real estate brokerage never stops in the middle of its pipeline. On the day a sale closes, agents will have listings, buyers they are showing, leases being negotiated and deals under contract that have not yet funded. Commissions on those deals may not arrive until well after closing. How brokerage pending transactions are handled can affect price, working capital, agent relationships and what each party receives, so it should be settled clearly in the purchase agreement.
This article is general information for buyers and sellers of existing, operating brokerages. Who is entitled to a commission, and when, depends on agreements, contracts and state rules. Buyers and sellers should rely on qualified attorneys and accountants. Nothing here is legal, tax or accounting advice.
Earned, Pending and Prospective Business
- Closed and earned: commissions on transactions completed before closing, which may still be in the process of being paid
- Under contract: deals signed but not yet closed, which may fall through
- Active listings and representation agreements: engagements that may or may not produce a transaction
- Property management and leasing: fees that accrue on an ongoing basis
Ways Parties Allocate Pending Commissions
Some agreements give the seller commissions on deals closed before a cutoff and the buyer everything after. Others allocate pending deals individually or adjust the price. The right approach depends on the deal, and counsel should draft the terms. Agreements should also address who pays the agent’s share, who handles disputes or fall-throughs and how any refunds or chargebacks are treated.
Earnest Money and Escrow
Deposits held by the brokerage on pending deals are not the seller’s money or the buyer’s. Responsibility for them must be transferred properly. If the firm has a property management division, similar issues apply to rents and security deposits. See our article on property management trust accounts.
Referral Fees and Co-Brokered Deals
Pending deals may involve referral fees owed to or from other brokerages, or commissions shared with a cooperating firm. Those obligations should be listed and assigned so that neither party is surprised when the transaction closes.
Agents and the Pipeline
Agents care about being paid accurately and on time for deals they started under the seller. Confusion during the transition can unsettle them. Clear communication and consistent payout procedures can help preserve trust.
Working Capital at Closing
If the seller keeps commissions on pending deals, the buyer may begin ownership with expenses due before new commissions arrive. Buyers frequently plan for that gap. See our page on real estate brokerage working capital.
What to Request in Due Diligence
- A schedule of deals under contract with expected commission, agent and expected closing date
- Active listings and representation agreements
- History of deals that fell through
- Commission receivables and payout records
Our real estate brokerage due diligence checklist covers the broader review.
How Lenders Look at the Pipeline
Lenders base decisions on documented historical cash flow rather than on the pipeline alone, but they may ask how pending commissions are allocated and how the buyer will fund early operations. See our article on real estate brokerage loan requirements.
Pipeline-Linked Deal Terms
Some parties tie part of the purchase price to results after closing. See our article on real estate brokerage seller financing and earnouts.
US Professional Funding helps buyers finance the acquisition of existing, operating real estate brokerages. Learn more about our real estate brokerage acquisition financing.
