Sellers drop last-minute 'commission bomb'

REThink Real Estate

By Inman News Feed
Add Comment Add Comment | Comments: 0 | Posted Aug. 12, 2010

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REThink Real Estate

Tara-Nicholle Nelson
Inman News

Q: We verbally agreed to a three-month extension of our listing agreement. If we find a buyer for our house, do we still owe the agent money? --Frustrated in Fort Wayne, Ind.

A: Sigh. Seriously?

So, you had a listing agreement. An agent helped you decide on a list price, marketed your home, placed it on the multiple listing service and maybe even did some open houses. She undoubtedly invested some time into getting your home sold, and might even have invested some money in marketing it with photos, ads, fliers and/or property preparation. And she did this for the full extent of time that she agreed to up front.

Then, based on the relationship she thought she had built with you, the trust she thought she had with you, she took your word on an agreement that she would continue her marketing efforts and unpaid attempts to sell your home for three months, on the condition that if the home sells -- and only if the home sells -- you'll pay the agreed-upon commission. And you acknowledge that you did give her your word, albeit only verbally.

A quick aside -- yes, I am making some assumptions about what the agent did for you. But I doubt I'm far off, because if you were that unhappy with her, you would have simply found another agent after your listing agreement expired. That's how these things work.

You can probably already tell what I'm going to say, but I'm going to say it anyway. What on earth would possess you to want to avoid paying your agent, if your home does in fact sell? Greed? Heard of karma lately? Would you do that to your doctor, lawyer, landscaper, housekeeper, dog walker or even your babysitter? So, why would you do it to your real estate agent?

If a professional you hire does what she agreed to do based on your word that you would pay her, then your moral and ethical duty is to pay what you agreed. If she's not doing her job, fire her and find someone else.

Need-to-Knows

I suspect your question was actually less about what is moral to do and more about what you can do. So, after all this, you're asking whether you can legally avoid the commission if your home sells after all.

In most states, the answer is no. The fact that you continued to allow the agent to show, list and market your home will be construed as evidence of the listing agreement extension, even if you chose to lie about having entered into such an agreement. If the home sells, the fact that the buyers and their broker presented their offer to you through your agent would be further evidence.

While all agreements to buy or sell real property must be in writing to be enforced by a court of law, listing agreement extensions have been found in numerous states to be enforceable as implied from the seller's behavior and the facts of the purchase offer, especially when the original listing agreement was in a valid, written format.

Action Steps

If you're unhappy with your agent's work at this point, this is the time to negotiate a cancellation of the listing agreement. Cancel it in writing before you get a buyer. In addition to the moral and ethical repugnance and possible legal liability exposure involved if you try to avoid paying a commission after you have a buyer for your home, it can also cause a major glitch in being able to close the sale in the first place.

The buyer-broker's commission is tied to and paid from your agent's commission -- if you get into contract and decide all of a sudden not to pay your agent, that could very well create delays and other major repercussions for your transaction.

Brokers and agents are not parties to purchase and sale agreements, and are not supposed to allow commission disputes with the seller to interfere with the actual sale transaction.

But the reality is that your efforts to stiff the agents in your home's sale could certainly cause their work on facilitating the transaction and getting it closed to grind to a halt, and could also very possibly be a massive turnoff to the buyers, who (a) may not want to participate in a deal where their agent doesn't get paid (believe me, it happens) and (b) may wonder what underhanded behavior you're capable of committing against them, given what you're trying to do to your own agent.

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