Home Buying in San Francisco>Question Details

coffeeshop, Home Buyer in San Mateo County, CA

Buyers agent asking additional broker commission from buyer

Asked by coffeeshop, San Mateo County, CA Wed Oct 3, 2012

Hi, I had an offer accepted and I am signing escrow next week. I got the escrow statement summary and had 0.5% incremental commission for my broker (buyer). Tonight he explained that the listings on this property pays only 2.5%, and that he usually gets 3.5%, that the statement should actually have 1% additional instead of 0.5%.

This agent is highly regarded with 30 years experience in the market. He has been very helpful as we have been looking at properties for months. He has actually recommended me making a lower offer on this property than I was planning to, saving me $25k.

So he told me I don't have to pay additional commission, it could be 0%, 0.5% or 1%, but that he would normally get 3.5%. We don't have an agreement on minimum commission and I never thought I would have to pay it. It just hurts me that he is telling me this a couple days before I close escrow.

Not sure what to do. Appreciate advice.

Thanks

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Answers

22
Hi coffeeshop,

Unless you signed a Buyer Agent Agreement accepting this additional commission you DO NOT have any obligation to pay this added commission. While I appreciate the Agent helping you to save $25k, that does not justify him trying to pull this stunt. Your Agent is only due the 2.5% commission that was posted in the MLS at the time your offer was written and submitted. Your Agent clearly knows this since he made it clear to you that you're not obligated to pay it. I agree with the Agents who commented earlier that you must speak with his Broker and let them know what has happenned.
Good luck!

Warmest Regards

Matt
1 vote Thank Flag Link Fri Oct 5, 2012
As you have prevented it, I have never done this or heard of anyone doing this. And certainly the Broker has no right to ask for additional funds unless you signed something agreeing to it. Normally the seller pays the commission for both listing and selling (buyer's) agent. I would also call the managing broker of the company and ask if it is their standard policy to ask for more money after the fact, if that is the way it happened. Either way, I wouldn't agree to pay any professional any additional fee after the deal is done I hadn't agreed to.
1 vote Thank Flag Link Thu Oct 4, 2012
Hello Coffeeshop,

Unless you had agreed upon an additional commission in advance, you owe nothing more. In fact, the buyer's agent commission is determined by the the seller and their agent from the beginning. You can find the rate on any MLS listings.

If there is any doubt you can go directly to your agent's broker. I agree with Matt C too that you should NOT sign any documents until you have this thing resolved.

Best of luck!

Gabriel
1 vote Thank Flag Link Thu Oct 4, 2012
Unless you had fixed upon an extra commission in advance, you owe nothing more. If you’re unaware of the extra commission, and did not sign anything that agreed to it, then don’t pay it. You should rather such for a right real estate agent and discuss all the terms with him in advance. I found a broker from http://www.winstonestateagency.com he was really good. A proper search is always helpful.
0 votes Thank Flag Link Fri Oct 12, 2012
I'd refuse to pay any extra commission as everything you broker told you after the fact needed to have been disclosed and agreed upon prior to your going under contract and your broker know this which is why their backing off. What they did was unethical.

That said if when you close you wish to give your broker a gift for assisting you, that's up to you and perfectly fine if you feel as if they warranted it. Advising you to make a lower offer than you were originally considering is part of their job, their supposed to be acting in your best interest as a buyer broker.
0 votes Thank Flag Link Fri Oct 12, 2012
Have the agent refer to the Realtor code of Ethics. There is a defined protocol to asking for additional commission prior to submitting the offer.
0 votes Thank Flag Link Sun Oct 7, 2012
Folks, don't forget to tip your realtor before closing.

If you don't have much cash on hand i also accept American Express, Discover, Mastercard and Visa.

That was a dirty move. He didn't even provide you with notice before slipping that on the HUD-1.

DO NOT feel guilty about any of his 3.5% hogwash.

Some greedy listing agents around here are offering 2 percent while retaining their 4 percent split on a short sale. If its a good property, i'm going to show it, get it under contract, and keep it moving.

Best advice: Don't spend a dime out of pocket. No matter how well he handled this transaction, thats HIS JOB. Hold off on paying him gratituities. Even one solid referral is worth a whole lot more than a 1/2 point in commission. He must owe money to a loan shark or the IRS. I don't see how he could in good faith, try to pull a fast eddie at the last minute.

If you like the guy, just send him a referral or two in the coming weeks and months. Or better yet: don't do that, instead, say your peace and bid him adue after closing.
0 votes Thank Flag Link Sat Oct 6, 2012
Hi Coffeeshop,

This is a great post. I can imagine the feeling your surprise/ discomfort you felt when your agent asked you to pay additional commission a day before closing escrow.

This is not typical and additional commission is not required from the buyer.

I agree that this is not the best way to end relationship and kills the excitement of closing escrow.

Best,

Jae
Web Reference: http://www.soldbyjae.com
0 votes Thank Flag Link Sat Oct 6, 2012
Good morning Coffeeshop,

I would not worry about paying or gifting the agent anything!!! If you look, you'll find many fine agents you could ask real estate questions. Frankly, I don't know if I would even trust someone again to ask if the sky was blue after a stunt like that.

I have done many short sales, (sell/buy) bank owned, regular sales, contingent-upon sale purchases, negotiating credits where appropriate. I simply get paid upon what was agreed upon up front all the time working to save my clients money throughout the transaction.

Yes it certainly is a tough business and a move like that as you can read by the number of responses is UNUSUAL at best.

All my best,

Mike Ackerman
Building Trust for Life - Zephyr Real Estate
ABZ@ZephyrSF.com
DRE: 01232037
0 votes Thank Flag Link Sat Oct 6, 2012
Hi coffeeshop,

I agree with Lance. His explanation was very thin! Even thou he might have had to put in a alot more work on this transaction his return on that extra hard work would have come in the form of referrals and future business from you. I would imagine you would have sent as much business his way that you could. Think of all the additional referrals those referrals could have sent his way and so on. Now he has shot himself in the foot and hurt his business. What a shame!
0 votes Thank Flag Link Fri Oct 5, 2012
The logic for this is ridiculous. If he'd found you a place on day one and it closed right away with little effort I sincerely doubt he would have given you money back.
0 votes Thank Flag Link Fri Oct 5, 2012
Hi All, I don't have a way to reply to each of your comments so I will reply here.

First, thanks for all the advice. One thing I need to clarify is that the same day I saw the escrow statement, the agent did go over it line by line and then explain why he asked to add the commission. He said he worked a lot harder than usual, many months, nights, weekends, etc...

I actually went to escrow already and didn't pay the additional commission. Agent called after and said he was surprised and that it was the first time one of his clientes decided to not pay additional commission, that many times client add it voluntarily. I said I was planning to gift him in someway for all the great work advice, etc..But felt that adding that on the day before escrow was a bad move. We could have discussed it even a week ago and would be a different story. I would actually have paid it gladly. He insists he think it was not improper, and his intention was not to underhandedly throw that at me. Etc...

Just a bad way to end what had been a great agent/buyer relationship. But I don't want to be on his bad side as I might still need some help in the next days/weeks, or in the future I might need him to answer a question or provide a document.
0 votes Thank Flag Link Fri Oct 5, 2012
I've heard of agents getting extra large fees occasionally but it is just not the norm. Regardless of your agent's commission fee, the key question really IS whether he disclosed it when you wrote the offer or signed a buyer-agent agreement. It should NOT have come as a surprise.

If you were unaware of the added commission, and did not sign anything that agreed to it, I wouldn't pay it.
0 votes Thank Flag Link Thu Oct 4, 2012
This is normally discussed at the beginning when you engage a real estate broker, agent, or Realtor. Highly unusual at the end...but if he did a great job, consider it. Not illegal.
0 votes Thank Flag Link Thu Oct 4, 2012
Hi Coffeeshop-I'm with the consensus on this but would like to emphasize that you should definitely pursue this matter with this agent's broker. (Unless this agent is the broker)

Whatever you do, don't sign the documents until this additional fee has been removed.

Send the agent a link to this page if he or she disagrees. Perhaps that agent would like to clarify what exactly it is they're thinking about. I'd sure like to hear it!

Good luck!

Matt Ciganek
Barbagelata Real Estate
415-240-9901
0 votes Thank Flag Link Thu Oct 4, 2012
This should have been disclosed to you prior to your signing a contract to purchase. You do NOT owe the additional commission if it was not disclosed prior to you signing the offer.
0 votes Thank Flag Link Thu Oct 4, 2012
After 30+ years in the business this is a new one on me. Although one time, while sitting with buyers and reviewing the closing statement, I came across a demand for the buyers to pay $10,000 to their mortgage broker. This fee was in addition to the fee the lender was paying the mortgage broker. When I asked the buyers whether they had agreed to this fee they said not only they never had but they had not even heard about it before.

Our session at the escrow company started at around 8 am. We finally left at around 4:30 pm, but I got that fee taken out.

Moral of this story: do not sign closing documents that you do not agree with.

Astrid Lacitis
Keynote Properties
415 860 0765
0 votes Thank Flag Link Thu Oct 4, 2012
The answer is 0% additional commission is due. This is extremely improper to say the least. I would not use this agent again. Saving you money on the transaction is his job. Whether he saved you a $1 or $100,000, his commission is based on the broker agreement on the listing. If anything additional is due, it should have been agreed to in writing between you two prior to writing any offers.

Oggi Kashi
Broker Associate, Paragon Real Estate Group CA DRE 01844627
All data from sources deemed reliable but subject to errors and omissions, and not warranted.
0 votes Thank Flag Link Wed Oct 3, 2012
Something is off here. This agent may have saved you money and is now playing a different game. Please speak with his or her broker immediately after asking him or her to explain to you why this is coming up now and that you have no obligation to pay that additional percentage. Should s/he be the broker, you may have to dig deeper and involve a real estate attorney (who naturally will cost you money).
0 votes Thank Flag Link Wed Oct 3, 2012
Thanks for the advice. I wouldn't sue, he is not forcing me to pay, it's a suggestion, but I do find it odd. If a week ago or months ago he had asked me to agree on complementing comission so it makes up to 3% or 3.5% I might have accepted because I really liked him and the work done. It's not about the money even, just seems shady to ask for it now. Is it common practice or is it shady? We have never agreed on this.
Flag Wed Oct 3, 2012
This is one of the strangest things I've ever heard. An agent is making you pay him money that he never told you about? If that's correct, why not do the same thing. Explain that you were assuming he'd pay for your move, or all new furnuture, or something equally ridiculous ;-)

Or, just simply say "no, we never agreed to that."
Web Reference: http://www.SFisHOME.com
0 votes Thank Flag Link Wed Oct 3, 2012
not making me pay exactly, but asking to. He said I don't have to, but for all the work he has done for several months, negotiating with this seller, who wanted to take another offer, suggesting us to bid less than we wanted to, etc... He has been really nice the whole time, always explained everything, gave us very good advice. But I feel that now, when we are inebriated and happy that we are finally closing on a home, he is asking for a "tip". That's how I feel.
Flag Wed Oct 3, 2012
I would talk to your agent first, if you feel that you are not getting the answer you like I would advise talking to the agent and Broker.
0 votes Thank Flag Link Wed Oct 3, 2012
Hi, he is my agent. The listing says CSO 2.5. I actually just opened 3 other property disclosures we had considered before and they all are CSO 2.5. So it's difficult to understand why one would expect additional 1% . Is that normal?
Flag Wed Oct 3, 2012
Good evening coffeeshop,

It is normal practice that the commission is negotiated and agreed upon and ratified as part of the listing brokers listing agreement between the seller and the broker representing the seller. It is widely understood that commissions are not fixed by law but are set by each broker individually and negotiated between brokers. This is usually performed in the onset of the contract signings and accepted as such at that time. So "normally" our commissions are set at 6% with a 50/50 split to cooperating brokerages or 3% for residential transactions. As professionals, we are relied upon to offer wise opinions and fact based responses to practical circumstances as part of our due diligence in serving our fiduciaries. Stay strong and good luck in your closing!
0 votes Thank Flag Link Wed Oct 3, 2012
The listing says CSO 2.5, so it has been negotiated before, seller agent is probably getting 2.5% also. I actually just opened 3 other property disclosures we had considered before and they all are CSO 2.5. So it's difficult to understand why one would expect additional 1% . Is that normal?
Flag Wed Oct 3, 2012
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