How should compensation normally flow?

The correct response indicates that compensation should normally flow through the Broker-in-Charge (BIC). This reflects the standard structure in real estate brokerage operations, where the BIC is responsible for overseeing transactions, ensuring compliance with legal requirements, and managing the disbursement of funds. By routing compensation through the BIC, the firm maintains control over financial processes, helps protect against potential disputes, and ensures that all transactions adhere to regulatory standards.

This method also facilitates load-sharing of duties and helps to maintain a consistent and organized approach to compensation, fostering a transparent relationship between the firm and its licensees. The BIC plays a crucial role in safeguarding the interests of all parties involved in the transaction by acting as a central point for financial flow.

In contrast, direct compensation from the firm to the licensee or directly from broker to broker might lead to a disorganized practice where oversight is diminished, and it could increase the potential for mistakes in accounting. Relying solely on written contracts for compensation could limit flexibility in compensation structures, which might not align with industry practices where compensation is often negotiated verbally before being formalized in a written agreement.