Myths and Misuse of Rider GG
Know your tools: Some forms help navigate compensation, but they're not required and are often misunderstood or misused.
ORLANDO, Fla. — Have you ever tried to build something and realized you didn’t have the right tools or materials? Most homeowners have had this experience at some point. As Realtors®, the tools you use may not be a wrench or screwdriver. It’s more likely to be a contract or form. With this visual in mind, think of the Florida Realtors® forms as tools in the Realtor’s toolbelt or toolbox.
The Florida Realtors Legal Hotline consistently receives questions about Comprehensive Rider GG. Seller’s Agreement with Respect to Buyer’s Broker Compensation (“Rider GG”). Myths and misuses of the form have become a common theme of these questions. It is one of the newer tools in your toolbox and not well understood. Let’s dispel some of the common myths and misuses of Rider GG.
For purposes of this topic, keep in mind that compensation is fully negotiable and not set by law.
Myth #1 Do I have to use Rider GG with every offer I submit?
NO. This form should be used for a specific purpose, to add a contingency to the Buyer and Seller’s sales contract when no compensation agreement has been entered into beforehand. Remember, no Florida Realtors form is required to be used. It is up to the parties to decide how to negotiate their sales contract and which forms they choose to use. Let’s put this into practice.
For example, Buyer decides after a long day of showings to write an offer on their dream home on Friday night at 9:00 p.m. The listing agent is not responding to the Buyer’s agent, and no compensation agreement can be discussed. The Buyer doesn’t want to wait to make an offer on their dream home, but they want their agent to be paid by the Seller or Listing Broker, so they decide to make the offer contingent on the Seller or Listing Broker agreeing to that payment. After discussing the options with the Buyer, the agent writes up the FloridaRealtors/FloridaBar AS IS contract, checks the box for GG in Paragraph 19, and fills out and attaches Rider GG. This allows the Buyer to submit the offer with an additional contingency that within three days after the Effective Date of the contract the Seller or Seller’s Broker will enter into a compensation agreement with Buyer’s Broker. If not, then the Buyer has the right to cancel the contract.
Notice that the Buyer still makes the offer when they choose to, and they have the ability to ask for their agent’s compensation to be negotiated since it could not be done before the offer was submitted. In this scenario, Rider GG is an appropriate tool to get the offer submitted for the Buyer.
Myth #2 Do I have to use Rider GG and Rider FF together?
NO. Rider GG as we now know is a contractual contingency that can be used to negotiate compensation when it was not done so before an offer is submitted. Comprehensive Rider FF. Credit Related to Buyer’s Broker Compensation (“Rider FF”) addresses compensation a little differently in the sales contract. It is not a contingency, but a credit between parties.
Notice Rider FF uses a credit between the Buyer and Seller to address how some or all of the compensation obligation of the Buyer may be paid. So, if no compensation or not enough compensation is agreed upon between Seller or Seller’s Broker to the Buyer’s Broker, then the Buyer can use Rider FF to ask the seller for a credit to help cover the Buyer’s Broker’s compensation that the Buyer is obligated to pay. This is a different tool in the toolbelt that can be used to negotiate compensation. If Rider FF is utilized, then Rider GG may not be needed because the other tool did the job and there is nothing more to do.
Myth #3 As the Buyer’s Broker, if I’ve already signed a compensation agreement with the Seller or the Seller’s Broker, do I still need to use GG?
No. If a compensation agreement has been entered into between the Seller or Seller’s Broker and the Buyer’s Broker and there is no additional compensation being requested by the Buyer’s Broker, then there is no longer a need to use Rider GG because it was done before the offer was submitted and compensation has been adequately addressed. Not only do you not need it, but you are doing extra work. Why would you attempt to hammer a nail that is already in place? That means adding Rider GG would likely be ineffective at doing anything beyond creating confusion between the parties, since it’s adding a contingency for something that already happened.
Myth #4 I thought Rider GG was a compensation agreement and that it is a part of the sales contract.
No. Rider GG itself is not a compensation agreement. It is a contractual clause that is contingent upon the execution of a separate compensation agreement. And once the compensation agreement is signed between the Seller or the Seller’s Broker and the Buyer’s Broker it does not become part of the sales contract. The sales contract and Rider GG are signed by the Buyer and Seller. The compensation agreement is between the Seller or Seller’s Broker and the Buyer’s Broker. Since they are not the same parties, they are not considered part of the sales contract.
Takeaways
- Contract negotiation looks different for each deal depending on the parties’ best interests and needs. Hear me say, THAT IS OKAY. It is necessary for the parties to know their options so they can make informed decisions.
- As the Realtor, it is important to know what forms are available to you so you can present options to the parties.
- Florida Realtors strongly recommends using an approved form created by an attorney, whether by Florida Realtors, a local board or brokerage before putting your own pen to paper. It avoids practicing law without a license as well as writing ambiguous language that could become the source of litigation if a dispute arises. Many forms are available on Form Simplicity. If parties want customized language, point them to consult their legal counsel.
Before you write that next offer, make sure you know what tools are in your toolbelt. Florida Realtors has a forms description list with a brief description of each form offered.
Heather Rhodes is Associate General Counsel
Note: Advice deemed accurate on date of publication
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