Contract Importance: Rebate Part Of Buyer's Agent Commission Was Oral Agreement

Added July 13, 2007 by Ilyce R. Glink

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Summary: What happens if you make an oral agreement, instead of a written contract, where the agent would rebate part of the commission in the purchase of a condominium? If the agent does paying the rebate, then you don't have a written contract to back up your claim. Ilyce explains that oral agreements often don't hold up in real estate law, unlike written contracts, and suggests using a real estate service such as BuySide Realty.

Q: I am in the process of purchasing a condo conversion close to where I live. I have done all the research about purchasing a condo and have decided that it is a good time to buy.

I made an oral agreement with a real estate agent to hire her as my referral agent under one condition. Out of the broker commission from the builder, she would be paid $1,000 and the rest of the commission would be credited back to us since she didn't provide any other services other than signing the builder's referral sheet.

We do not have a written agreement. She now wants to back out of our arrangement and keep the entire commission for herself.

I was wondering if we have a way to enforce our oral agreement. What kind of evidence can be use to prove the case? We have exchange emails about the fee issue but no signature from her.

To my understanding of real estate law, an oral agreement is also an effective agreement. The commission distribution is negotiable between buyer, seller, and broker because the broker fee ultimately comes from the pocket of buyers.

Thank you very much for your advice,

A: The agreement between you and your broker might not fall under the category of "real estate law." In general, oral agreements about buying and selling homes are typically unenforceable. These kinds of agreements must be in writing.

For real estate legal advice, you'll need to talk to an attorney

Your dispute concerns your agreement about what services would be performed for what fee. If there is enough information via email that you can establish that the broker agreed to the split of the fees as described by you, you may have enough to hold the broker. You should speak with an attorney who can tell you whether your "oral" agreement is binding in the state in which you live, and whether the email correspondence is enough to to prove your case.

That said, whether or not the agreement is binding doesn't matter much. You have an agent who isn't willing to help you out and isn't willing to live up to the arrangement you've outlined. By the time this case gets litigated, you'll have closed on your condo. You'll spend thousands of dollars and all kinds of time embroiled in a fight you might not win.

I think you should have a conversation with the managing broker and your so-called agent and see what they say. Depending on how that conversation goes, you can decide whether you want to bring in an attorney or chalk it up to your being a little naive about how easily an agent would let go of a commission in a slowing market. You also have the option to file a complaint against the broker with the agency that regulates brokers in the state in which you live and, although this won't have much of an effect, with the National Association of Realtors ethics committee (if your agent is a Realtor).

There are several new services that offer to rebate part of the buyer broker's share of the commission. One of them, BuySide Realty (www.buysiderealty.com), rebates 75 percent of the buyer broker's commission. (It is not available in every state.) For those buyers who do all of the work themselves, these services might be helpful.

July 13, 2007.

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