Answer
Form 40 is a form that serves the purpose of notifying and instructing escrow as to the compensation seller will pay to listing broker and/or buyer broker firms. Form 40, or a similar form, should be delivered to escrow in every transaction where seller is paying compensation to either or both of the brokerages at closing. The form should be delivered to escrow immediately following mutual acceptance. Form 40 is not, however, an addendum to the purchase agreement. Form 40 should be signed by an authorized member of the firm or firms receiving compensation but Form 40 should not be signed by buyer or seller. Thus, Form 40 should not be included with the purchase agreement during negotiations between the parties.
Similarly, Form 40A is the form brokers may use to notify and instruct escrow when buyer is paying the buyer brokerage compensation. Like Form 40, Form 40A (or a similar form) should be delivered to escrow immediately after mutual acceptance and should not be included as an addendum to the PSA. Form 40A has a place for buyer to sign, serving primarily as a reminder to buyer that buyer will have to bring additional funds to closing for payment to buyer's broker.
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