March 10, 1999
Questions have arisen about the proper disclosure to make on a settlement statement when a real estate broker has presented a "commission disbursement authorization" to the title agent requesting that a number of checks be issued, splitting a single commission among several undisclosed parties.
This practice, without further disclosure, would be a violation of Texas Insurance Code Article 9.53 which clearly states, "Every such settlement and closing statement furnished to a party to the transaction shall state thereon the name of any (emphasis added) person, firm, or corporation receiving any sum from such party to the settlement or closing."
The name of every person, firm, or corporation receiving a portion of the commission must appear on the settlement statement. Accordingly, the following notation should be made on the settlement statement directly beneath the line showing the name of the real estate broker and the total commission amount:
"The following persons, firms or corporations received a portion of the real estate commission amount shown above: "
The names of all persons, firms or corporations receiving a portion of the total amount shall then be listed. The dollar amount or percentage of the commission that each party receives is not a required part of this disclosure. If there is not enough room on page two of the settlement statement, simply attach another page, which must be signed by all parties to the transaction.
Should you have any questions concerning the above, please call us.
_______________________Robert R. Carter, Jr.
Texas Department of Insurance - Title Division