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Real estate commission - would we legitimately owe one?


BrianT

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This doesn't really have anything to do with RVing but I know this is a very diverse group that may have some insight to this one.

 

The question is, basically, whether a Realtor is legitimately entitled to a commission in a certain situation.

 

My wife and I are practically best friends with a couple in this area. They got married about three years ago, shortly after we met them. Both had houses of their own and decided that they didn't need both of them. So they decided they'd sell hers. We knew all about it but weren't sure that her house would quite be the right place for us so we continued to shop around for other properties. They sold it on a land contract and ended up taking it back when the buyer went to prison and failed to make a little less than a year's worth of payments.

 

Anyway, we know the people, they're practically our best friends at this point and were good friends all the way back then. We were in the house long before it was ever for sale, by anyone.

 

About a year ago, our friends listed the house with a Realtor. They've shown it several times but due to a certain feature, a lot of people don't want it. (I think I can deal with it and do a lot towards fixing the problem, but that's not really material to the discussion.)

 

The real estate agent that's been showing me places on and off for a little less than a year wanted to show me about 4 of them one day a couple of months ago. And our friend's home was on his list. I told him that I really wasn't interested in looking at that house as we already knew the house and the owners and weren't really interested in looking. But the agent insisted on looking at it, I had thought, for his own information, as he had not seen inside the house before. I didn't think a lot about it at the time but am wondering about it now, whether I shot myself in the foot by even setting foot on the property with him.

 

IF, and I do mean IF we decide (and we have NOT) that maybe we'd want to purchase this home at some point in the not so distant future, the big question is, since neither the listing agent or the agent that I happened to be with when he got to see the property were actually material in bringing together the owner and ourselves, are they actually due a commission? If they really are entitled to one, I have no issue with paying enough to cover that. But if they really are not entitled to a commission, I'm not so sure I want to pay one.

 

(Yes, I know, it's the seller who pays the commission. But I also know that the seller, our friend, wants a certain sized payout when she leaves closing. So the number that we officially offer has to take into account whether or not there is a commission.)

 

Curious what you all think.

 

Thanks!

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I'm no agent and don't know the law in all states.. however.. in most real estate deals I've been a part of, it depends on how the owners have it listed. If they are under contract (many real estate agents require a 3-6 month exclusivity contract) then yes.. the agent will need to be paid. That's not to say that listing contracts aren't negotiable, but it all depends on what your friends signed with any particular agent/broker.. if any. If it's just a "free" listing then they only get paid if and when.. through their direct efforts/marketing.. the asset is sold. Ie., they brought the buyer to the "table" and acted as an intermediary between the two parties.

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As said, the listing contract terms will tell the tale. There are typically three types of real estate listing contracts:

 

Exclusive Right-to-Sell Listing: A contractual agreement under which the listing broker acts as the agent or representative of the seller, and the seller agrees to pay a commission to the listing broker, regardless of whether the property is sold through the efforts of the listing broker, the seller, or anyone else. There may be an option to exempt specified individuals or entities from the contract terms.

 

Exclusive Agency Listing: A contractual agreement under which the listing broker acts as the agent or representative of the seller, and the seller agrees to pay a commission to the listing broker if the property is sold through the efforts of any real estate broker. If the property is sold solely through the efforts of the seller, the seller is not obligated to pay a commission to the listing broker.

 

Open Listing: A contractual agreement under which the listing broker acts as the agent or as the legally recognized non-agency representative of the seller, and the seller agrees to pay a commission to the listing broker only if the property is sold through the efforts of the listing broker.

 

Individual states may have varying specifics for each type of contract, but the general terms are pretty much the same everywhere.

Dutch
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I'm no agent and don't know the law in all states.. however.. in most real estate deals I've been a part of, it depends on how the owners have it listed. If they are under contract (many real estate agents require a 3-6 month exclusivity contract) then yes.. the agent will need to be paid. That's not to say that listing contracts aren't negotiable, but it all depends on what your friends signed with any particular agent/broker.. if any. If it's just a "free" listing then they only get paid if and when.. through their direct efforts/marketing.. the asset is sold. Ie., they brought the buyer to the "table" and acted as an intermediary between the two parties.

 

Thanks! I'll have to ask about the contract. Sounds like that could vary considerably. :)

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We had a deal somewhat like you are going through. It is difficult to find a good real estate attorney but we finally found one. He found a way to get us out of our contract to sell and we eventually made a deal with a neighbor. Another time we were approached by a neighbor before a contract ended. It was a complex deal that we tried to work out at our dining table. We were not quite able to complete the deal as we were a couple of thousand apart. I asked the realtor if he could give a little since we put the deal together. Since he would represent both the buyer and seller he agreed. The common thread here is we still had to pay some for an attorney or realtor. If you and the seller are willing to give a little there may be a way. My suggestion would be to have the seller review the contract. If the seller isn't comfortable with what it means then that needs to be solved by getting competent reliable help. Once that is known then you can begin to make a plan. I am not an attorney but from my experience the seller needs to be very careful here.

Randy

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... If the seller isn't comfortable with what it means then that needs to be solved by getting competent reliable help. Once that is known then you can begin to make a plan. I am not an attorney but from my experience the seller needs to be very careful here.

 

Absolutely. The seller is a personal friend and I have no desire to put her in a bad situation. I'll walk away from the whole thing before I'd willingly do anything to intentionally harm her.

 

Thanks for your input!

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Others info here about the types contracts is correct. As a former Realtor I'm amazed at people who want to find ways around, under and through what they signed. I'm happy that you are willing to take the steps required to fulfill the terms and not end up with you and your friends in a less than tenable situation. I'm sure you may be able to negotiate with all parties involved

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Others info here about the types contracts is correct. As a former Realtor I'm amazed at people who want to find ways around, under and through what they signed. I'm happy that you are willing to take the steps required to fulfill the terms and not end up with you and your friends in a less than tenable situation. I'm sure you may be able to negotiate with all parties involved

 

Had either the listing agent or the agent that insisted on seeing the house despite my objection actually facilitated any part of bringing the seller and myself together, there would be no discussion. They would have earned their commission. In the above case, I am not so sure. I have found various legal decisions regarding real estate commissions / breach of contract and they haven't been all that helpful.

 

No, I'm not trying to weasel out of something rightfully owed. I'm more interested in a particular real estate agent (one of the above in particular) weaseling themselves into something they really are not rightfully owed.

 

Nothing has happened yet. And it may not.

 

Thanks for your input!

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"No, I'm not trying to weasel out of something rightfully owed. I'm more interested in a particular real estate agent (one of the above in particular) weaseling themselves into something they really are not rightfully owed."

 

Sorry didn't mean to imply that you were. As stated I'm p!eased your attempting to do the right thing by all parties involved.

Ron & Linda

Class of 2007
2000 Monaco Diplomat

2005 Honda Element

"Do what you can, with what you have, where you are" Theodore Roosevelt

"We can't control the wind, but we can adjust our sail"

"When man gave up his freedom to roam the earth, he gave up his soul for a conditioned ego that is bound by time and the fear of losing its attachments."

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If the seller signed a contract in which he/she agreed to pay a fee to the agent if the property sold within a specific time line, the selling agent is entitled to the fee. It makes no difference how the buyer and seller came to know one another or how the buyer discovered the property.

 

There's more to the duties of a selling agent than just attracting buyers. A seller under contract to a selling agent is represented by that agent and the agent has a legal obligation to represent that seller. An agent can not represent both the seller and the buyer. The selling agent is entitled, under the contract, to reasonable fees for representing the seller's interest.

Everybody wanna hear the truth, but everybody tell a lie.  Everybody wanna go to Heaven, but nobody want to die.  Albert King

 

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One other factor not mentioned is how long ago was the property listed and how long ago shown to you? Those contracts do have time limits so that is part of the question. This is really a two part question, legality and ethically. The two do not always have the same answer.

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Wait till the listing expires. When re-listed, have the seller put you in as an exception to the commission.

 

Most seller contracts I've seen have a carryover protection period. Since a realty agent showed OP the home, if the OP buys the property within a given period, the selling agent could still be entitled to a fee. Common time period is 90 days after end of contract.

Everybody wanna hear the truth, but everybody tell a lie.  Everybody wanna go to Heaven, but nobody want to die.  Albert King

 

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I still have not had a chance to have a private moment with my friend to find out exactly what the contract says. What the contract actually says will trump speculation. I've appreciated the comments, though, as I'm finding out that there seems to be quite a lot of variation in what a typical contract says.

 

IF we buy her house within the timeframe that the listing contract is in force and IF the contract is worded clearly to entitle the real estate agents to a commission, they will get it.

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The listing agent may be entitled to receive a commission per the listing contract as mentioned above. However, the buyer may not have a contract with the selling agent and therefor own nothing to him/her. Some agents require a contract to show buyers homes for sale some do not. If the buyer did not have a contract with their agent the listing agent may be willing to reduce their commission since they will not have to split it with another realtor. Just food for thought.

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