Must I compensate my agent if I don't buy?

What you should know if you entered into written agreement

By Inman News Feed
Add Comment Add Comment | Comments: 0 | Posted Oct. 23, 2012

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What you should know if you entered into written agreement

Benny Kass
Inman News®

DEAR BENNY: Could you advise me of the appropriate (and legal) way to compensate the buyer's agent we used for our unsuccessful house hunt?

After a stressful summer spent engaged in multiple bidding wars and a short sale that fell through due to a surprise judgment, we're taking a break. We are happy with our agent's performance, and we plan to utilize her services in the future.

Should I offer a simple thank-you note and reassurance that we will recommend her to family and friends, or do we owe her cash for real estate services rendered? Does she or her brokerage keep the money we placed in escrow for the short sale? --Lisa

DEAR LISA: Yours is an interesting question. I know a lot of real estate agents and brokers read my column so I welcome input from out there.

Did you sign an agreement with the agent? Presumably you did, because to my knowledge most states require agents and brokers to enter into a written agreement with a potential client before any actual work is done. Read that agreement carefully; it may obligate you to pay, even if you did not buy a house.

I would ask the agent directly: "We are very pleased and will use your services when we resume our search. We would like to give you a little gift; do you have to share it with your brokerage firm?"

One suggestion: Give her a gift card for a dinner for two at a nice restaurant or at an upscale clothing store. I think such a gesture plus a nice thank-you card would be appreciated and appropriate.

Since the agent did actually do work on your behalf, I am not concerned about anyone claiming this will be a "kickback" in violation of the Real Estate Settlement Procedures Act (RESPA). It is only when money is given for no services that RESPA can kick in.

I welcome any and all suggestions on this question.

DEAR BENNY: I refinanced in January (3.85 percent) and a friend advised me to inquire about a "direct reduction loan schedule." He tells me it is a method to pay down principal significantly faster than overpaying the monthly installment. I have asked my mortgage banker about this, but so far no response. Can you clarify if there is such a thing and explain how it works? --Jim

DEAR JIM: Many lenders (but apparently not all) have a biweekly payment arrangement, whereby you make two payments a month instead of just one. The net result is that your principal balance is reduced every two weeks, thereby requiring you to pay less mortgage interest in the long run as well as paying off the loan faster.

My understanding is that lenders have to create a new computer program payment schedule, and not all lenders are prepared, or even willing, to do this.

Of course, you could add a little extra to your monthly payment and basically pay off the loan early. If you do this, however, make sure that each check you send in (and the coupon that accompanies the payment) specifically states "extra principal in the amount of $XXX." If you are making a direct, automatic bank payment, make sure your lender understands this and properly credits the additional payment to principal.

DEAR BENNY: My husband and I are separated, but we own a condo together. I live in the condo and have paid all the costs, mortgage, taxes, upkeep and homeowners association (HOA) fees. Our incomes are separate. I want to pay off the condo, thus owing only taxes and HOA fees. My income is very low and the lower I can keep my monthly costs the better.

I'm 65 and eligible for a tax break on the condo, but I will get only half the amount because it is jointly owned. I was unable to purchase on my own because of my small income. I want the full tax break, so do I pay off the condo, thus clearing the deed? At that point, how can the property be in my name only so I can have only my name on the relevant documents and then apply for the full tax break? --Sally

DEAR SALLY: You are facing a dilemma that many divorced couples encounter: how to take title in your name. Unfortunately, in my experience, the only way is to refinance the existing loan, but in your name only. That means that you will have to have sufficient credit to qualify for the new loan.

Do you have any relatives or friends who can assist you? Your ex can (should he decide to be agreeable) convey his interest in the property to you, but he will still be legally obligated on the existing mortgage.

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