How to avoid counterparty risk in a large deal
If you move money in high-value deals for a living, you already know the deal can die at any stage — but the particular kind of pain that nobody talks about enough is the deal that closes and still doesn’t pay. Counterparty risk in large transactions is not just the risk that the other side walks away before signing. It is the risk that the payout structure itself fails: that funds go to the wrong account, that a split is renegotiated at the last minute, that a wire is delayed while someone decides whether to honor what they agreed to. The larger the transaction, the more people are in the distribution chain, and the more opportunities exist for something to go wrong between the moment the deal closes and the moment everyone is actually paid. This article is about how to think about that risk structurally — how to identify where it lives in a given deal, and how to design settlement so that the default scenario becomes almost mathematically impossible.
What counterparty risk actually means in a closing transaction
Counterparty risk refers to the likelihood or probability that one of the parties involved in a financial transaction may fail to fulfil their contractual obligations — it is also known as default risk. In capital markets, that framing is well understood. In a commercial real estate transaction or a large M&A deal, practitioners sometimes treat it as someone else’s problem — the lender’s problem, the title company’s problem, the lawyer’s problem. That is a mistake, and an expensive one.
Counterparty risk takes two distinct forms: pre-settlement risk and settlement risk. Pre-settlement risk is the risk that a counterparty will default prior to the final settlement of the transaction. Settlement risk is the counterparty risk that arises during the settlement process itself — when the parties to a transaction do not perform their obligations at the agreed time. For a broker, an advisor, or a closing attorney, the pre-settlement window is the entire lifecycle of the deal — every day you spend sourcing, underwriting, negotiating, and shepherding a transaction to close is a day you carry pre-settlement risk on your commission or fee. The settlement window is what happens at the table or the wire transfer screen, and it is where most payout failures actually occur.
Settlement risk is the risk that a counterparty fails to deliver value in cash as per agreement after the other party has already delivered. The term also covers factors incidental to the settlement process that may suspend or prevent a transaction from completing, even when the parties themselves are acting in good faith and are otherwise competent to perform. That second clause deserves attention: good faith is not protection. A seller who genuinely intends to honor the commission split but runs into a cash-flow squeeze at closing, a buyer who authorized a fee but disputes the amount when the invoice arrives three days later, a principal who agrees verbally to a co-broker arrangement but puts nothing in writing — these are all settlement failures that have nothing to do with bad intent and everything to do with structural weakness in how the deal was set up.
Where counterparty risk hides in large transactions
In a simple bilateral transaction, the risk surface is small: one buyer, one seller, a defined price, a defined close date. As deals grow in size and complexity, the risk surface expands in ways that are easy to underestimate.
The payout chain is longer than it looks
Consider a commercial real estate transaction with a gross sale price of $12 million. On that deal there may be a listing broker, a co-broker representing the buyer, a debt advisor or mortgage broker, a transaction advisor who provided financial modeling, a referral partner who sourced the deal, and a closing attorney managing disbursements. Each of those professionals has a contractual claim on some portion of the proceeds. Each of those claims was probably documented in a separate agreement, negotiated at a different point in the deal’s timeline, and payable through a different mechanism. The listing broker’s commission is in the listing agreement. The co-broker’s split is in a separate co-broker agreement. The referral fee may be a side letter that only two of the five people in the room even know about. The debt advisor’s fee may be payable by the buyer, not the seller.
Traditionally, fees are paid by sellers, and sellers consider the payment of those fees as a legitimate cost of doing business. If a tenant represents himself, the same fee will likely be paid, but all to the listing broker. If that same tenant works through his own broker, the full fee is paid but split between the brokers. On a $12 million deal at a 4% total commission, you are distributing $480,000 — potentially across four or five separate recipients — in the same closing window where the principals are also wiring loan payoffs, transfer taxes, title insurance premiums, and prorations. That is a complicated disbursement event, and complications create exposure.
Commercial brokers are typically compensated only after a successful transaction, and this “success-based” model means brokers assume significant risk — months of work may not result in payment if a deal fails. But the subtler and more underappreciated version of that risk is this: the deal can close and a professional can still not get paid, or can get paid the wrong amount, or can get paid three weeks late — all because the settlement structure was never explicitly designed to prevent it.
Ambiguity in the agreement creates default optionality
Many commission disputes involve the following common facts: the broker claims a commission but has no exclusive agreement; and the brokerage agreement can be, and often is, oral — meaning there are no term sheets spelling out the commission percentage. On large deals this is not because people are careless. It is because large deals are long deals. Relationships shift during underwriting. Partners are brought in mid-stream. Fee structures that seemed obvious in conversation in month two become contested in month fourteen when the deal closes and the check is being written. Oral agreements, handshake splits, and informally documented referral arrangements are all sources of genuine settlement risk — not because of fraud, but because ambiguity creates default optionality for whoever controls the wire.
It is good business practice to include provisions in the principal agreement that spell out the right to a commission in the event one party cancels the contract. Brokers should pay special attention to the commission provisions in their agreement to ensure that it accurately reflects the rate, the events that trigger payment, and the method of when and how the commission payment will be made. This is correct as far as it goes. But the contract only matters once you are in litigation, and litigation on a $150,000 co-broker commission in a state that takes eighteen months to get to trial is not a practical remedy. The goal is not to win a dispute — the goal is to design the settlement so the dispute never has standing.
The gap between close and payment
Even when everyone agrees on who gets paid what, there is often a gap — sometimes hours, sometimes days — between the moment the deal closes and the moment all fees are actually disbursed. In that gap, the funds sit somewhere, typically in an attorney’s trust account or a title company’s disbursement account, controlled by a single party. Settlement timing risk — delayed payment or delivery of assets — is a recognized sub-category of counterparty default risk. It exists because the parties to a transaction do not execute their obligations at precisely the agreed time. A professional who is owed $200,000 and has been told “the wire goes out tomorrow” is carrying counterparty risk for that entire intervening period. The funds exist. The obligation is acknowledged. But the payment is not yet final.
The concept of settlement finality sits at the heart of any commercial transaction. Transaction finality refers to the exact moment when proprietary interests in the object or medium of transaction pass from one party to the counterparty, and the obligations are discharged in an unconditional and irrevocable manner — in a way that cannot be reversed even by subsequent legal defenses or actions. Until that moment of finality arrives, you are still exposed.
Concentration risk in the disbursing party
In most large transactions, one professional controls the disbursement: the closing attorney, the title company, or the escrow agent. That concentration of control is entirely appropriate — it is how real estate and commercial transactions are supposed to work. But it means that every other party in the payout chain is dependent on a single node. If that node makes an error, delays, disputes a claim, or receives conflicting instructions, the entire distribution stops. The listing broker, the co-broker, the referral partner, and the advisor are all waiting, all exposed, and none of them has independent access to the funds.
This is not a criticism of closing attorneys or escrow agents — they are doing their job correctly, and that job requires maintaining control of disbursement until conditions are met. The point is that the professionals who are recipients in this structure need to understand the exposure they carry and design around it wherever possible.
Structural mitigations: designing default-proof settlement
The goal of counterparty risk mitigation is not to eliminate trust — it is to reduce your dependence on trust by building structure that performs correctly regardless of whether every party acts optimally. Here is how that looks in practice at each stage of a large deal.
Front-load the documentation
Everything about your fee — the amount, the trigger, the recipient, the timing, the disbursement instruction — needs to be in writing, signed, before the deal goes hard. Not before closing. Before the deal goes hard.
One of the best ways brokers can protect themselves is by ensuring their agreements are carefully drafted from the beginning. Too many brokers rely on generic forms without realizing how much exposure they create when deals go sideways. A properly structured agreement can dramatically reduce the risk of litigation later. The same logic applies in reverse to preventing payout failure even when the deal succeeds: the agreement needs to be specific enough that the disbursing party has a single, unambiguous instruction. The more specific the instruction — wallet address, wire routing, exact dollar amount or exact percentage of net proceeds, sequence of disbursement — the less discretion anyone has to delay or dispute.
For co-broker arrangements and referral fees, document the split in a separate instrument that is incorporated by reference into the primary commission agreement and acknowledged in writing by the party controlling disbursement. If the seller’s counsel is handling the closing, they need to see — and acknowledge receipt of — the co-broker agreement before the wire instructions are submitted. Surprises at the closing table are the most common trigger for payment delays on deals that were never genuinely in dispute.
Build explicit disbursement instructions into closing documents
On a commercial transaction, the closing statement is the controlling document for where every dollar goes. Most professionals understand that their commission appears as a line item on the closing statement. Fewer think carefully about the downstream disbursement from the commission line. If the listing broker receives the full commission and is responsible for paying the co-broker out of it, that creates a secondary settlement risk: the co-broker is now exposed to the listing broker’s operational reliability, cash position, and administrative competence. A co-broker who receives $240,000 from a listing broker three weeks after close, after two follow-up calls, is not a co-broker who had good settlement structure — regardless of whether they were ultimately paid the right amount.
The cleaner structure is to have each recipient’s payment appear as a separate line on the closing statement, with separate wire instructions, so that disbursement to each party is independent and simultaneous. This requires more coordination in advance — you need the closing attorney or title officer to acknowledge and include all payees — but it eliminates the sequential dependency entirely. No one is waiting on anyone else.
The vast majority of commercial sales use percentage-based commissions, and the advantages include aligned incentives and no upfront cost — the seller pays nothing until the property closes. The percentage structure is sensible, but at closing it needs to translate into exact dollar amounts — not a percentage reference that the disbursing party still has to calculate. A closing instruction that says “pay 2.5% of net proceeds to Broker A” leaves room for a disagreement about what “net proceeds” means. An instruction that says “pay $148,250 to Broker A” leaves no room at all.
Require written acknowledgment from the disbursing party
Before closing, obtain written confirmation from the closing attorney, title company, or escrow agent that they have received and will honor each disbursement instruction. This sounds elementary, but it is routinely skipped. The confirmation does two things: it surfaces any conflicts or objections before the table, when they can be resolved without the deal being at risk; and it creates a contemporaneous record that eliminates any later claim that the instruction was ambiguous or never received.
On large transactions where multiple parties are receiving funds — particularly transactions involving referral arrangements or advisor fees that the seller may be seeing for the first time on the closing statement — early disclosure to the disbursing party is not just protective, it is necessary. Buyers and sellers often focus almost entirely on the purchase price and closing date while overlooking brokerage provisions buried deeper in the contract, and that can become a costly mistake. Surfacing every fee, every split, and every payee early in the process removes the possibility of a last-minute objection that delays disbursement while the deal is trying to close.
Understand the trigger for your fee — and make sure it is written correctly
When a brokerage agreement states that commission is to be paid upon the close of escrow, many brokers, buyers, and sellers interpret this to mean that the close of escrow is a requirement before the broker earns the commission. However, the law often recognizes that unless the agreement specifies otherwise, the commission is earned at the time the buyer enters into the purchase and sale agreement, and must be paid regardless of whether the deal closes.
This distinction is not academic — it determines whether you have any recovery at all if the transaction fails at the last minute. But it also has a counterpart implication: if your commission agreement is triggered by a signed contract rather than a closing, and the deal does close, you want to make sure the disbursement mechanics at closing still reflect that obligation. The legal trigger and the practical payment mechanism are two different things, and both need to be correct.
Commercial real estate commission disputes are often more aggressive than residential disputes because the commission amounts are significantly larger. In commercial deals, brokers may spend months or years negotiating, and when those deals collapse shortly before closing, commission disputes can involve hundreds of thousands of dollars. At that scale, even a dispute that you ultimately win is a dispute that cost you real money in time, legal fees, and carrying cost on a payment that should have been automatic.
Know exactly who can issue a conflicting instruction
In any deal, the disbursing party can receive a conflicting instruction — a last-minute demand from a principal to withhold a fee, a dispute between co-brokers, an attorney hold pending resolution of an undisclosed encumbrance. You need to understand, before closing, who has authority to issue a conflicting instruction and what the disbursing party’s policy is when they receive one. Most title companies and closing attorneys will not disburse a disputed amount — they will hold it in trust pending resolution. That is entirely correct behavior on their part. The mitigation is to ensure, through documentation and early disclosure, that there is nothing to dispute.
This is why the front-loading of documentation is not just a legal protection — it is a settlement design decision. Every ambiguity in the underlying agreement is a point at which a conflicting instruction has standing. Eliminate the ambiguity and you eliminate the leverage.
The specific exposure on split transactions
Transactions involving multiple professionals on the same side of the deal — listing broker and co-broker, lead advisor and referral partner, senior partner and junior partner — have a structural split exposure that straight bilateral deals do not.
Listing brokers typically split their fees with other brokers who represent the tenant or buyer in a transaction. In theory, the split is documented. In practice, the co-broker’s rights are often contingent on the listing broker acting as an intermediary, which creates a second-order settlement risk: the co-broker is exposed not just to the deal closing, but to the listing broker’s willingness and ability to disburse correctly. This is true even when everyone’s intentions are good. An advisory firm that receives a $500,000 transaction fee and owes $125,000 to a referral partner is a single-point-of-failure disbursement structure. The referral partner has no direct claim on the closing proceeds — their claim is on the advisory firm. If the advisory firm has cash flow issues, operational delays, or an internal dispute about whether the referral agreement applies to this transaction, the referral partner is waiting on a second collection event rather than a first.
The structurally superior approach — where the deal permits it — is to have each recipient paid directly from closing proceeds, simultaneously, under the authority of separate disbursement instructions. This eliminates the sequential dependency and means that every professional’s payment is as final and immediate as every other professional’s payment.
When Shaka is used to structure the payment layer of a deal, the professional sets each recipient wallet and each percentage or fixed amount upfront, before the transaction closes. When funds move, they move in a single transaction — directly to every wallet simultaneously, without any party acting as an intermediary in the distribution. The split happens automatically and instantaneously, which means there is no settlement gap and no sequential dependency. Every recipient gets the same finality at the same moment.
Settlement finality as the ultimate mitigation
Every structural improvement described above — documented agreements, explicit disbursement instructions, early disclosure, parallel rather than sequential distribution — is ultimately in service of a single goal: making payment final at the earliest possible moment.
Settlement finality is the point at which a transaction becomes irreversible. After finality, the payment cannot be reorganized, double-spent, or unwound. In traditional commercial transactions, finality is not an event — it is a process. The wire clears, but it can be reversed. The check is deposited, but it can bounce. The ACH settles, but it settles on T+1 or T+2, and something can happen in that window. In traditional finance, money moves through layers of intermediaries, and each layer has the ability to halt, dispute, or reverse a transaction. Every layer is another point of exposure.
Settlement plays a key role in reducing counterparty risk, and once a transaction is settled — ownership transferred and the transaction irreversible — it eliminates ambiguity and reinforces trust between parties. The professional who structures their settlement to reach that moment of finality as quickly as possible, with as few intermediary steps as possible, has done the most important thing available to them in terms of counterparty risk mitigation.
Blockchains introduce a fundamentally different settlement model. Atomic settlement enforces simultaneous, conditional exchange: either both sides of a transaction execute, or neither does. Combined with rapid, economically enforced finality and around-the-clock availability, this architecture eliminates a wide range of risks that have long been forced to be managed by traditional means. For professionals who disburse large payments to multiple recipients, an onchain payment router like Shaka translates that architecture directly into the closing workflow: the split is defined in advance, the wallets are set before the deal closes, and when funds move, every recipient receives their disbursement in the same atomic event. Payment is not pending. It is not waiting for a secondary wire. It is done.
The deal that almost paid — and why almost is the most dangerous outcome
The most instructive scenario for understanding counterparty risk in large transactions is not the deal that falls apart before closing — it is the deal that closes, where everyone agrees that fees are owed, and where payment still fails or delays due to structural weakness in the disbursement layer.
A $20 million industrial sale closes on a Friday afternoon. The title company confirms funds received. The listing broker’s wire instruction is on file. The co-broker’s split — 40% of the total commission — was agreed verbally and documented in a one-line email nine months earlier. At the closing table, the seller’s attorney, reviewing the closing statement for the first time that morning, raises a question about the co-broker arrangement. He has never seen the email. The title company, correctly, will not disburse the co-broker’s portion until the dispute is resolved. The listing broker receives their 60% on Monday. The co-broker — who spent eight months working the deal and flew across the country twice — waits three weeks for a wire that was never genuinely in question, spends two hours on calls with the title company, and eventually receives payment after the listing broker signs a supplemental disbursement authorization.
Nobody in that scenario acted in bad faith. The deal closed. The full commission was paid. And yet the co-broker carried three weeks of settlement risk after close on a deal that had already performed — because one document wasn’t in front of one attorney early enough.
As a commercial real estate broker, there can be nothing quite as disappointing, even as disastrous, as not being paid a commission when a transaction closes. The best chance of getting paid is to make sure the right steps are complied with from the outset. The qualification matters: from the outset. Not at the closing table, not when the commission invoice is submitted. From the moment the deal is documented.
The standard for a well-structured payout
A payment structure that is genuinely default-proof has four properties. First, every recipient is identified and documented before the deal goes hard, not at closing. Second, every recipient’s payment is an independent disbursement with its own instruction — not a downstream distribution from another recipient. Third, the disbursing party has acknowledged in writing that they have received and will honor every instruction, before closing day. Fourth, the payment, once made, is final — not pending, not reversible, not dependent on subsequent administrative steps.
Most professionals hit two or three of these, most of the time. The deals that generate disputes — or delays, or the particular quiet despair of a professional chasing a wire they were promised — almost always have a gap in the fourth or second property. Either the payment goes to one party who then redistributes it, or the payment clears but sits in a pending state while something administrative resolves.
The work of designing default-proof settlement is not glamorous. It is documentation review, it is early disclosure, it is insisting that your co-broker agreement is in front of the closing attorney thirty days before close rather than the morning of. It is also, increasingly, choosing settlement infrastructure that compresses the gap between deal close and payment finality to zero — where every party receives their disbursement in the same transaction, simultaneously, with no secondary steps and no dependency on anyone else’s action to receive what they are owed.
The professionals who get paid cleanly on large transactions are not the ones who got lucky. They are the ones who treated the settlement structure with the same rigor they applied to the deal itself — and who understood that the deal isn’t done until every wallet reflects what was agreed.
