Home Buying in Belmont>Question Details

Darryl Jai, Home Buyer in Belmont, CA

Is it legally just for a listing agent to ask for the selling agent's buyers to pay extra commission?

Asked by Darryl Jai, Belmont, CA Mon Aug 18, 2008

on a short sale where the lenders didn't approve the commission the listing agent wanted?

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The listing agent should not be asking the buyer anything. Commission agreements are between brokers. If the buyer has an agreement to pay commission to his or her own agent (erroneously called the selling agent) that is their decision. After 30 years in the business of representing Belmont and San Mateo County home buyers and sellers in good and bad markets, I've seen many of these money grabs particularly when markets dry up.

Furthermore, in my opinion, lenders who interpose themselves into broker commission agreements are guilty of torteous interference of a contract, but we have accepted it.

For those readers in the blog-a-sphere who are interested in learning more about Buyer's Agents and How To Select A Buyer's Agent, there is an interesting article at: http://LivingWellinSanMateo.com/?$=buyer%27$+agent.

Final question: Did you as the Buyer have a Buyer's Agency Agreement with your agent, and if so, what does it say about compensation?
1 vote Thank Flag Link Tue Aug 19, 2008
The listing agent cannot ask the buyer to kick in for commission whether it’s a short sale or not. I’ve heard of buyer’s agents asking their clients to pay them extra because the commission wasn’t high enough. Either one is ridiculous. The bottom line is that you don’t have to pay anything extra and shouldn’t be asked by either agent in my opinion. Once the commission is set, the listing agent’s job is to work hard for their client and get the property sold.
Web Reference: http://thebayblog.com
0 votes Thank Flag Link Sun Aug 24, 2008
It is not legal if it is not disclosed to the lender on the HUD-1. The lender specifies the commissions, as well as all costs on the HUD-1 before the deal records. The lenders would catch this in a heartbeat.
Web Reference: http://www.cindihagley.com
0 votes Thank Flag Link Tue Aug 19, 2008
The Hagley G…, Real Estate Pro in Pleasanton, CA
MVP'08
Contact
I've not heard of this one before and I close a LOT of short sale listings. The Short Sale Lenders slash commissions on every deal. The commission is typically reduced and both Brokerages take a reduction most times equally sometimes not equally. If the Short Sale Lender has approved a short payoff, the Listing Brokerage is given the approval. In 99% of the cases it is simply a final dollar figure that needs to be sent to the lender upon closing. Most times no one can figure out where the figure came from and teh listing agent calls the lender to get an explanation.

Having said all of this, I cannot imagine either the Listing Brokerage or the Selling Brokerage asking the Buyer to cough up the commission unless the selling agent talked to you the buyer about it in advance and if you signed a Buyer's Representation Agreement that specified you would be paying any shortage in commission.

I think a heart to heart with your agent is warranted. At the end of the day, if the Brokerages are not getting much commission, it's not your fault and they need to take one for the team (you). Because if they make you happy you'll tell many people of your great experience. If you're not happy you will tell EVERYONE of your bad experience.

Best of luck,

Cheers to you,

Thom Colby
Realtor
Irvine, CA & Houston, TX
2008 Chair, Pacific West AOR MLS Committe
2008 Member SoCal MLS Board of Directors
2008 Member SoCal MLS Steering Committee
2009 Member-elect, Pacific West AOR Board of Directors
2009 Member-elect SoCal MLS Board of Directors
Web Reference: http://www.thomcolby.com
0 votes Thank Flag Link Mon Aug 18, 2008
Hi Darryl,

As you have probably gathered, there are rules on how agents interact over commissions.

1. Listing agent posts a commission in the MLS & is OBLIGATED to honor it.
2. There is a provision that allows listing agents to disclose that a property is a "short sale" and that the commission is subject to the banks approval.
3. The buyer's agent is entitled to enter into an agreement with the buyer.
4. Agents have a responsibility to NOT permit commission disputes between the agents to become controversial with respect to the buyer &/or seller.
5. "Short Sale" lenders will try to make up their shortage by getting money from anyone in the transaction.

From what you've said it may be that the bank is trying to get money from the agents and you. If this is the case it could easily seem to you that the agents are the ones trying to get money from you to make up the commission.

I would suggest getting a list of all of the bank's demands on you and the agents in writing so that you can try to understand what's going on.

Short sales can be incredibly sloppy because the banks don't feel that they have to follow any "rules".

Good luck,

John Hickey
Dilbeck Realtors, GMAC
818-541-7311
John@JohnHickey.com
0 votes Thank Flag Link Mon Aug 18, 2008
Interesting question - you hear a new one everyday.
Commision is between agents and who pays who and how much is usually outlined in the listing agreement. I take it that the offer was written with somesort of clause subject to bank approval of payoff/shortsale... (if not the listing agent has a bit more to worry about!!) so bank isn't chuffed with their net amount. If the property was in the MLS and advertised a co-op to the selling agent, that has to be honored (typically as part of the terms of memebership to the MLS).

In a round about way... your question's issue per se is between the bank, the listing agent and the seller... not between you, your agent and them. I am willing to bet that the listing agent is realizing that they are not earning a lot from this transaction and wanting someone else to pay them. **Double check to see how your buyer agency relationship addresses responsibility of 'sucess fee' with your agent. Under the scenerio you have given, you are not obliged to pay extra.... they may try and raise the purchase price though.
0 votes Thank Flag Link Mon Aug 18, 2008
Hello Darryl. You have to be kidding me. Are you saying what I think you are saying? You are the buyer in a short sale transaction and the listing agent wants you to pay him/her a commission because the bank cut the commission. If that's what you are asking, then I have to tell you that I have never heard of a listing agent asking for that. I am assuming that the short sale contract for the purchase of the house did not include a provision concerning the commission in the event the bank were to cut the commission. Unless you have some other written agreement with the listing agent, you have no obligation to pay a commission or anything else to the listing agent. I am assuming that you have your own agent and the listing agent is not also acting as your agent. When an agent takes a short sale listing, the agent knows that there's a chance that the commission that was stated in the short sale listing agreement will be cut and the buyer's agent knows too that he/she may not get the commission that was advertised in the MLS (if it was properly disclosed). Getting a lower commission is part of dealing with short sales and a listing agent should not try to put his/her own financial interests in the mix. If the bank approved the short sale and cut the commission as part of the approval, it's not in the seller's best interest if the listing agent disturbs the approval by trying to get more money from the buyer. That's my opinion only and I would never even think of making such a request. Perhaps there are extenuating circumstances that might lessen my outrage, but I have not seen anything in your post that would lead me to believe that such a request could be justified. Correct me if I am wrong.
0 votes Thank Flag Link Mon Aug 18, 2008
Ute Ferdig -…, Real Estate Pro in New Castle, DE
MVP'08
Contact
GREAT QUESTION: Not the 1st time I heard request...buyer is not responsible for listing agent commission. Most of time as listing/buyers agent for a short sale our office has "eaten" loss moved on. Normally buyer do not have extra income pay for any additional money or ready approved for $xxx,xxx lending paperwork to late make any changes.
http://www.lynn911.com http://www.homes-for-sale-dallas.com
Web Reference: http://www.lynn911.com
0 votes Thank Flag Link Mon Aug 18, 2008
it is not illegal but may be unethical. Usually the sellers agent would not offer part of their commission to the buyers agent and the buyers agent would ask the buyer to pay their fee. The whole key is when submitting an offer for a short sale, the listing agent should have a short sale disclosure staing teh commission is subject to change or even be eliminated by the bank. if they didnt do that then it comes to ethics if they will kill a deal over money. all banks do this to all short sales, i havent had one yet that it didnt happen to and i make sure i am aware and any other agent is aware BEFORE the offer of what will happen. Good luck
Web Reference: http://www.ScottSellsNH.com
0 votes Thank Flag Link Mon Aug 18, 2008
welcome to the world of short sales. Is the listing agent requesting the agent reduce their commission?
0 votes Thank Flag Link Mon Aug 18, 2008
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