Who gets commission?

Discussion in 'The Buying & Selling Process' started by NewBuyer17, 1st Oct, 2017.

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  1. NewBuyer17

    NewBuyer17 New Member

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    We started negotiations to buy a property which ended in a stalemate and the offer was rejected based on price. Our finance was pre approved, dates were all standard (7 days P&I, 14 days finance, 30 days settlement) and the sellers agreed on all conditions except they wanted a higher price. Price was above what buyers were willing to pay, thus it still being on the market 2 months after initial listing.

    The property has since been taken off market with the previous agent and listed with a new one, at a price lower than our rejected offer. We're keen to make another offer but would like to understand if the sellers would be obligated to pay double commission as this may prevent a successful second round.

    Assuming the contract with the first agent has ended, do they have any claim to commission because we dealt with them in the past? We visited the inspection based on listing on realestate.com and had no prior dealings with that agent (nor would I ever want to deal with her again, she was very rude). From my perspective the first transaction ended unsuccessfully so our business with her is complete but I'm not clear on the legalities.

    Appreciate any information or suggestions on this.
     
  2. wylie

    wylie Moderator Staff Member

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    We had this situation ten years ago. We looked at a house listed at $650k (stupidly overpriced) with an agent. About a year or more later, it was listed with a different agent for $460k (market value).

    We signed a contract and next thing I get a call from the original agent who showed us the house saying if the vendors didn't pay her some commission, she would be chasing us for it.

    I've no idea what the legalities are, whether she could have got money from us, what is hidden in the listing agreement (which we are not party to anyway) or contract. I always thought the commission was only ever between the vendor and the agent, but she did say we could be brought into it.

    I called the agent we bought through, and he had already contacted her (or maybe she contacted him?) and he had agreed to split the commission with her, seeing she'd shown us through at least a year before.

    My understanding is that it used to be that if you saw a property with an agent, that agent was entitled to commission if you bought after the listing agreement ended. I know agents used to check this methodically (when my mother was selling houses).

    I've read since that the agent has to have materially facilitated the sale, or something like that, and perhaps the rules have changed, but I've never looked into it.

    I'd suggest you get advice from a lawyer (who you will be engaging for the sale anyway) and ask this question, or the real estate body in your state, and if there is any doubt that you (as purchaser) could be asked for money, get a clause drawn up to include in the contract that protects you from this.
     
  3. NewBuyer17

    NewBuyer17 New Member

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    Thanks for this information. Very helpful. I will talk to the current agent and our lawyer prior to making an offer. I agree with you - they're the seller's agents so the seller should pay commission! But it's best to confirm and avoid unpleasant phone calls.
     
  4. hobartchic

    hobartchic Well-Known Member

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    Either way, it's not really your problem. You did not sign the documents for a listing agent, the seller did. Let the agent and seller fix their liabilities. It's a while since I studied in this area (Tas) but I can not see how the buyer is in any way liable for this.
     
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  5. Xenia

    Xenia Well-Known Member

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    What should happen is that one agent cancels the contract with the previous agent.

    If the previous agent still has an agency agreement over the property then they will go after the current agent for commissions.
     
  6. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    This will depend on the terms of the contract the seller has with the first agent. Something you are not privy to.
     
  7. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    You would have no obligation to pay the agent - you would have had no contract with them.
     
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  8. wylie

    wylie Moderator Staff Member

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    Exactly what I thought, but the phone call was concerning for me. I suspect the first agent was trying to get me to coerce the second agent in her quest to make sure she got something.
     
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  9. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    Bully tactics! You should ask them on what basis would they be chasing you.
     
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  10. wylie

    wylie Moderator Staff Member

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    This was ten years ago now. Once the new agent told me he'd already spoken to the first one and they'd agreed on a split, I got on with other things.

    I've always wondered though when this topic comes up, whether she had any claim on us. I cannot imagine why or how.
     
  11. hobartchic

    hobartchic Well-Known Member

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    I get wiser with every unsubstantiated legal claim :D I'm not as nice as I look!
     
  12. Scott No Mates

    Scott No Mates Well-Known Member

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    IIRC, there's a declaration that you have not been introduced by another agent (usually in the special conditions).

    Essentially you warrant that you have not been introduced to the property by another agent and indemnify the vendor against any claim.

    By advising/declaring that you have, puts the vendor on attention to cancel any previous agreement with agents or to come to their own settlement or terminate/renegotiate your contract.
     
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  13. Dan L

    Dan L Well-Known Member

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    Commission is payable by the seller in accordance with the agency agreement between the seller (principal) and the agent. The agency agreement will generally contain a clause along the lines of the following:-

    'the agent shall also be entitled to a fee at the agreed amount if at any time following the exclusive agency period the principal enters into a contract for sale of the property to a purchaser effectively introduced to the principal of the property during the exclusive agency period by the agent, by any other agent or by the principal’

    The payment of Commission is not normally the purchasers concern. In NSW however, it is a common practice in most contracts for a 'special condition' to be inserted into contracts which provide for an indemnity from a purchaser if they were introduced to the property by an agent (Agent A) other than the selling agent (Agent B) on the contract where Agent A makes a successful claim for commission. These clauses will often be accepted without much thought. The purpose of these clauses is to prompt the purchaser to disclose any previous connections to other agents who may attempt to claim commission from the vendor. Such connections can then be addressed prior to entry into the Contract for Sale of Land.

    The legal position as I understand it is that in order for Agent A to make a successful claim for commission, they must show that they were the 'effective cause of sale'. Where the agent has shown a prospective buyer the property or even managed to have the purchaser make an an unsatisfactory offer to the vendor, the agent's actions may not be the effective cause of the sale. In order for Agent A to be entitled to a commission in these circumstances there must be a 'causal connection' between the actions of the agent and the eventual sale.
     
  14. D.T.

    D.T. Specialist Property Manager Business Member

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    No, doesn't matter about that
     
  15. Mick Butterfield

    Mick Butterfield Well-Known Member

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    Great post.
     
  16. wylie

    wylie Moderator Staff Member

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    This helps to explain our situation ten years ago. Perhaps that is why the original agent called me. Perhaps there was such a clause. Or perhaps she was just covering all her bases and hoping I'd use some pressure on the agent we bought through.

    He certainly knew we'd seen it with her more than a year (maybe two?) before when it was stupidly overpriced.

    What I do know is that agents used to scour the sold properties and cross check them with their open house listings to check if their buyer ended up buying the house shown by the agent, through another agent, or privately.