Rentals in 20708>Question Details

Sanjlk, Home Buyer in 20708

Utilized a realtor for renting, found a tenant, and now the broker wants to bind us with paying them 6% commission if I ever sell tot he same tenant

Asked by Sanjlk, 20708 Sat Oct 23, 2010

We hired a realtor's services to help us with renting out our single family home. He helped us find the tenant and everything is fine as far as paying the one-month rent as commission. Now they are saying that they will be including a clause in the renal lease contract that if I see my house to the same tenant then I will also be paying the realtor 6% typical sale commission!

I want to understand if this is a standard arrangement with realtors when renting? Also, it seems out of line to pay for the full selling commission since a) the tenant we have was a Craiglist lead, and b) the realtor doesn't have to do any heavylifting of search or showing the property and its pretty much paperwork.

What is reasonable and what is a typical arrangement with rental contracts?

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Dear Sanjlk,
I understand your concern. It is a normal clause in the contract that should you sell the home to the tenant, that the REALTOR would be due a commission. Why? It is known as "procuring cause", which means the person is buying the home as a result of the marketing and listing of that home through that agent. In other words without that agent not only would you not have rented to the people, but they wouldn't have ever seen the home and ultimately end up buying it. 6% is high; however, if you arleady signed for 6%, then you'd be obligated to that fee. I put 3% for my rental listings who later end up in a purchase. You can try to negotiate it down to that figure since 6% is normally split between buyer and seller side. In this case your agent would be representing you still in the purchase and 3% should be more than enough. Try to talk with him or her and ask for an addendum changing it from 6% to the new figure you both agree upon.
Good Luck.

Ariana Loucas

Keller Williams Realty Centre
2 votes Thank Flag Link Sat Oct 23, 2010
First, the chances of selling to a tenant are slim.

Everything is negotiable, but your rental listing agreement should have spelled all this out upfront.

Yes, it is standard to put a commission payment in if the property is sold to the tenant in our area as well.

There is no "standard percentage" as that would be price-fixing and is illegal.

Since the rental agreement was exclusive, it doesn't matter where the lead came from or even if it was your best buddy. The agent and the broker still marketed your property and they have office expenses to pay.

What is "heavylifting" anyway? So, if an agent works for a year to rent or sell your home, do they get more percentage in commission for their time and effort than if they sold it in a week? The answer is No, but yet you want to judge how much effort and work they do in "showing the property" and "paperwork."

The 6% is only paid on the price you agree to sell it at. What do you care if you get the Net price you want for the home after closing costs, loans, commissions, etc. are paid?

Of course, you could do it all yourself from the rental to the sale. Just get your real estate license and pay your office dues, local mls dues, state dues. Then you need to take some contract law classes since they don't teach you that in real estate school. Plus you probably need to run the contracts by your broker and make some contacts with a title company or attorney to assist with the closing, And..., well you get the idea.

Of course there's no "heavylifting" so you should be just fine on your own.
1 vote Thank Flag Link Sat Oct 23, 2010
Thank you very much for your advice folks.

Based on your collective comments, I discussed the commission with my realtor and negotiate it to lower acceptable amount. I was not opposed to paying the commission - I just didn't think it was fair to have 6%. It was also good to understand the "procuring cause" reasoning.

Thanks again for all your prompt responses.
1 vote Thank Flag Link Sat Oct 23, 2010
Sanjlk, it is standard to have a clause as such in a regular/standard Maryland Residential Lease. The amount may have already been determined in your rental listing agreement with that agent and his brokerage from the beginning.

Check your original listing agreement with the brokerage to find out if it is in there, and if it is not, you may want to call your agent and the broker to figure out how to proceed.

Good luck!

Marney Kirk
Keller Williams Excellence Realty
1 vote Thank Flag Link Sat Oct 23, 2010
Here in New Jersey it is a clause in the 'standard' lease, however, everything in the lease is negotiable. I have seen rental agents do this, and to be honest I do think it's fair, however the percentage is negotiable and I also think it is only fair to advise the client at the time of listing that the realtor will be asking for a commission on the sale should the tenant purchase the house at some future date.

Talk to your realtor, try to negotiate the fee and if you need to go to the broker as well.
1 vote Thank Flag Link Sat Oct 23, 2010
If you are not happy with the clause, do discuss your concerns with your agent, if the chat is unsatisfactory do contact the broker owner and or office manger and express your concerns again, and go from there--also do keep in mind that commissions are always negotiable between you and your agent, there are no set standards.
1 vote Thank Flag Link Sat Oct 23, 2010
Is there a timeframe required for commission to be due? For instance, a year or two after the lease terms?
0 votes Thank Flag Link Sat May 21, 2016
Just in case anyone needs to fill out a Residential Lease or Rental Agreement forms, I found a blank forms in this site PDFfiller. This site also has tons of fillable real estate forms that you might find useful. Here is blank Residential Lease Agreement form that I was able to use and fill out
0 votes Thank Flag Link Thu Feb 5, 2015
Hi Sanjik,

It depends upon your terms of your contract.
0 votes Thank Flag Link Wed Oct 3, 2012

As I see below, you received good advice. Yes, this is pretty typical, but the fee is negotiable. It sounds like you worked out a more favorable commission, which is probably the right thing to do since the agent wouldn't have to do the full marketing of the home in the future if you and the tenant would work on selling/purchasing the home.

Thanks and good luck.
0 votes Thank Flag Link Sat Oct 23, 2010
Most of the people here who think having an additional % fee on top of the sizeable finders fee for procuring a renter seem to be agents - so not exactly unbiased opinions.

I am paying a REA over $3,500 to find me a renter. I refuse to then open myself up to a further fee if many years down the road someone who may have been a former renter wants to buy my house. If this practice becomes widespread it will effectively force LL's to pay fees whenever they sell to a former renter - no matter how many years have passed. I guess it's REA's retirement fund.
Like all fees this is negotiable. I would recommend refusing to agree to it. Fortunately, most REA's will cut their own mother's throats for a listing, so LL's and owners should not be shy of using that leverage. :)
Flag Thu Jun 30, 2016
Thanks for this thread. I ran into the same issue with a rental listing. I crossed out the sale commission language when I signed the rental listing agreement, but later ran into a controversy when I struck similar language from an application to lease form provided by the procuring agent. My agent told me that both major real estate companies "require" this language. I am in agreement with the poster that this seems unfair and borders on unethical. From my optic, you are paying a commission for them to perform one specific service, to rent the house. This hypothetical language strikes me as an overreach. Neither broker has expended any effort to sell the house. The boilerplate language also locks you into a commission rate that is supposed to be negotiable. I am being told that they will not let the lease go forward unless I agree to sign. Kind of mafia-like tactics. And they wonder why people have a negative view of the real estate industry...
Flag Sun Mar 1, 2015
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