We had a caller today who had gotten divorced in January and her neighbor (who turned out to be a real estate agent) said she had a buyer for her house. The seller found herself quickly agreeing to sell her house and now is wondering why she paid a 3 percent commission to the neighbor/agent, and whether she sold her house for too little. She also complained that a couple of weeks before the closing, the neighbor/agent presented her with a document (that she didn’t read, but that she signed) that may have said something about her being responsible for the commission. What did I think?

I told her that I thought she had buyer’s remorse, and that if she found the document, it would probably disclose that she was a buyer’s agent but that the seller would have agreed in writing to pay a half commission (3 percent) to the neighbor/agent for bringing the buyer. I also said that she might have sold at a great price, given that prices had declined and we were in the worst real estate market since the Great Depression.

I think she probably made a good deal for herself, but sometimes sellers get seller’s remorse if they sell too quickly and easily. It’s a common scenario. It sometimes happens to buyers if they buyer the first house they see, and then after closing feel like maybe they missed out on their one “true” home.

I received this email tonight from a Georgia Realtor who was listening to the show:

Dated: 7/30/2008
I have some suggestions for one of your callers today. It was the woman who was tricked by a real estate agent.

You were absolutely correct that it was her fault for not standing her ground and that once she had signed a commission agreement that she was legally responsible for the commission.
And it sounded like the agent acted incorrectly and unethically, and I don’t like the idea of the agent getting a pass on this one. I missed the very beginning of the call so I am not sure which state she was calling from.

I am a real estate broker in GA and am licensed in several states. Each state is different but agents are generally licensed by real estate commissions, subject to state laws and members of real estate boards. She probably has no direct recourse against the agent who is in fact due a commission for procuring the sale. However the agent may well have also violated rules and laws. That doesn’t negate the seller’s obligation to pay commission but it does provide some opportunity to reign in a rogue agent.

In most states, agents have obligations to explain their agency relationships to buyers and sellers earlier in the process, and often an obligation to disclose who is paying them. While states differ, the disclosures are generally required before a sale or lease contract is signed. Now an agent does not have to an agency relationship in order to be due a commission but that disclosure and conversation usually results in discussion of how the agent is being paid.

In many states (not Georgia) an agent represents the Seller by default unless they expressly represent the buyer. So the agent may have been representing Seller even if not brought in by the seller. But that doesn’t mean a Seller has to pay them.

You were absolutely correct that she should have called the agent’s bluff and refused to sign. And this agent was way out of line. Apparently the contract did not include a commission section and apparently it wasn’t clear to the seller that she was expected to pay. While this does not negate the later signed commission agreement, it is unethical behavior and the kind of behavior that gives the rest of us a bad name.

I would have liked that caller to be advised to report to her state’s real estate commission (REC) what happened. The REC cannot help her recoup the commission payment but they can fine the agent for any violation of state law or real estate commission rules and regulations or suspend or terminate the agent’s license. I would recommend her looking into this.

In GA the rules and applicable law are a link on the REC’s web site. The local real estate board may not be of direct assistance either but it is worth making a complaint just in case. To get a feel for local rules and laws without having to pay an attorney, I would also suggest that she could go to an open house this weekend. It is often a relatively inexperienced agent on site but they ought to know the basics of disclosure rules and whether or not the agent violated them. Agents are stuck at the open house for the advertised hours and my guess is that in today’s market there would be breaks in visitor traffics. If the caller agrees to leave the agent alone whenever someone comes and asks if they can just pick their brain between visitors, they could probably learn the basics for that state.

We agents aren’t in the business of giving legal advice nor are we in the business of giving out our knowledge for free but in that situation I would probably be more than happy to give someone some general direction like the web site and our BBRETA disclosure form. Since I think that agent took advantage of the seller – convincing her to sell at a number not realizing the commission involved (and granted a little dumb on the callers part as who did she think was paying the agent??), I would recommend playing hard ball back.

I would approach the agent nicely at first explaining that things were not handled as they should have been, that she recognizes that the agent provided a service, but that in light of the way things went, you want to only pay 1/2. The agent will say ‘no’ and then I would say that you plan to report her conduct (once armed with the facts).

If I had made a mistake as an agent, I might take that deal in order to avoid jeopardizing my license. Additionally, if the agent works for a firm, the caller should talk to the managing broker of the firm.

In GA for example we have salesperson licenses and broker licenses and the managing broker is responsible for making sure that his /her employees, who only have a salesperson license, follow all rules. If my salesperson violates a rule, I can be fined or lose MY license. The boss may be a little more willing to deal.

Finally presumably the caller knows her neighbors and since the buyer will be living in that neighborhood (plus I got the impression that this agent was somehow connected to the neighborhood as well), I would threaten to tell everyone how she was tricked by this agent and buyer (who also failed to notice the commission not in the contract??), if they don’t negotiate on the commission. The caller would need to be careful to be 100% factual in order to avoid a libel suit but she is free to broadcast any facts. This might also incentivize the agent who presumably wants to have a good reputation locally.

I think of Clark’s picketing of stores scenario. It is important to emphasize personal responsibility and tell women they have to stand up for themselves or deal with the consequences, but I also think it isn’t right to let an agent pull a fast one and get away with it.

July 30, 2008