Questioning commission for buyer's broker

REThink Real Estate

By Inman News Feed
Add Comment Add Comment | Comments: 0 | Posted Aug. 26, 2010

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REThink Real Estate

Tara-Nicholle Nelson
Inman News

Q: Are we liable to pay our broker the full commission if the seller is a builder who will pay only a $1,000 referral fee?

My boyfriend and I were looking for a home in California and decided to use an old acquaintance as our agent. Prior to signing a buyer's agent agreement, we found a "new build" on our own while driving around the neighborhood, but the home we wanted wasn't available at that time. We later went to view other homes with our agent and signed a buyer's agent agreement, which was backdated.

The only proof we have of when we received the contract is a copy of the e-mail in which the contract was sent to us and a copy of the e-mail of when we sent the signed copy back to our agent.

Two weeks after we signed the contract and returned to Texas, my boyfriend received a call from the seller for the home we found on our own. The seller stated that the home fell out of escrow and was back on the market. We contacted our agent, told her we wanted to proceed with purchasing the home, and my boyfriend contacted the seller and made an offer.

The purchase price of the home is $359,900. Who's liable for the full commission payment? --R., Texas

A: Short answer: It depends. You need to closely read the terms of the agreement you signed with the buyer's broker. These agreements come in several flavors. If the agreement was an exclusive one in which you agreed (a) to work exclusively with your agent friend, who (b) would make a particular, set commission (either by percentage or by dollar amount) so long as you bought a home within a given time frame, then you could be liable for the difference between that $1,000 referral fee and whatever you agreed to pay.

In no event that I can think of would the fact that you signed a buyer's broker agreement render the seller responsible to pay your agent anything more than he or she offered from the get-go.

However, these types of buyer's broker agreements are very rare in California. Much more frequently, the agreement is just that (a) you, the buyer, will work with that agent and that agent only for the term of the agreement and that (b) your agent will work for the commission offered by the seller of the home you eventually agree to buy.

If this reflects the terms of your agreement, then your agent is owed only the $1,000 referral fee that the seller is offering.

This seems unfortunate for the agent, but is par for the course in the business of real estate. Many buyer's brokers make business decisions about who they work with and properties they show -- specifically around how they value their time and at what level of commission they are willing to work for.

I'm not at all clear on why your agent would backdate a buyer's broker agreement, or why you would sign it if it were in fact backdated. If you hadn't made an offer on the property before the agent showed you homes, then backdating the agreement to some date before they began working with you would have been meaningless.

If the offer was simply backdated to the date you actually began working with the agent, and you signed it, then your agent has a good argument that the date you all placed on the document was, in fact, the date on which your agent-client relationship (and its exclusivity clause, if applicable) began.

Of course, you may have a good argument that even if it began on that date, it didn't begin until the time the agent met with and showed you some homes. If you saw this other property before that time, then the agreement still might not apply to that particular home.

All of this assumes you did not have your agent actually write up the purchase offer. Also, some buyer's broker agreements simply state the terms of the relationship if the agent finds and/or shows you the property, but doesn't prohibit the buyer from working with other agents, or with no agent at all.

So, there are really two questions here. First, did your agent actually represent you for purposes of purchasing this property? This could go either way, depending on whether the agent wrote the offer paperwork, whether your buyer's broker agreement was exclusive or not, and the date and time at which the agreement became binding.

More important, though, is the issue of the commission provisions in the agreement. Since it is highly unlikely that the agreement requires a commission to be paid above and beyond what the seller is offering, chances are that no one is liable to pay the agent anything more than the $1,000, even if you have an exclusive relationship that is found to have been in effect at the time you saw this property.

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