Your tenant moves out after 2 days...commission returned?

Asked by Steve Ragghianti, San Rafael, CA Fri Jan 25, 2008

Lets say that you are referred a renter who is in need of a short-term rental. They sign the lease and move in. Two days later they move out for no given reason. Should the commission be returned?

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David Dorfman’s answer
David Dorfman, Agent, Neptune, NJ
Fri Nov 26, 2010
IF you're greedy, keep it and never see the client again.Not even worth the breath to argue over it.

This is REAL problem with "regular" agents.

A commission should be earned when it's PAID by the tenant. This is more so in commercial real estate.
Most agents/brokers will ask and get paid a comm when the deal is signed - for the LENGTH of a contract.

So assume a 50,000 year lease for 5 years - $250,000 total rent.

At 5% (most comm want more) that's $2500 per year or $12500 for the term over 5 years - what if ten years? $25,000 per year.

Well, what if the tenant leaves after 6 months and the landlord paid you a $25,000 commission.

Guess how my broker who has been around for 40 YEARS handles this - WE TAKE commisison on the anniversary of the lease. IF THE LANDLORD MAKES MONEY< WE MAKE MONEY - YEAR AFTER YEAR.

It's an annuity.

I get MORE listings working this way, have a great tax planning, and know I have incomefor the next 12-18 years - assuming my tenant who I swore to is a GOOD tenant today and tomorrow.

It builds TRUST.
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0 votes
Dot Chance, Agent, Burbank, CA
Sat Jan 26, 2008
Steve, you earned your commission when you did the deal...I don't think you need to return your commission. You cannot guarantee your tenant/clients - we never know what is going to happen!

The best thing to do in this situation is whatever your heart tells you!

Best of luck!
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1 vote
Dot Chance, Agent, Burbank, CA
Sat Jan 26, 2008
I agree with Rebecca. The meager commission is probably yours to keep. Choose your battles - do you want to keep the client? If so, credit him that amount until you get a new tenant.
1 vote
Rebecca Cham…, , Palos Verdes Estates, CA
Sat Jan 26, 2008
I would say, if you want to keep the client..then YES return the meager commission. Find a new tenant and get paid then. You may be entitled legally to keep it, but they've already had the hassle of losing a tenant due to no fault of their own and now they also have to pay an agent twice to rent the place? Come on.
1 vote
Donna Ferrell…, Agent, Los Angeles, CA
Wed Nov 24, 2010

Commission is earned when you secure a ready and able renter who voluntarily enters a Lease Agreement. I assume all the usual steps of checking out the tenant's qualifications were done (credit check, employment check, prior residence check, etc.)--to the landlord's satisfaction--before the lease was signed. I also assume the Landlord had enough sense to require a security deposit. If the answers are "yes" in both instances, then you've done your job and are entitled to keep your commission. In addition, since the tenant moved out without any real reason and therefore, broke the Lease, the Landlord should be entitled to keep the deposit. If you feel bad for the Landlord, you can always offer to locate another tenant for them at a reduced commission (or for free, depending on how strongly you feel about it), but you're certainly are not required to return the commission.
0 votes
Florida Citi…, Both Buyer And Seller, Tampa, FL
Wed Nov 24, 2010
That's like eating the salad and half the steak! The tenant is entitled to NOTHING? Your relationship with the property owner (landlord) is a different matter. If you spent the commission, the next tenant goes in free. Don't stick it to your referral base.
0 votes
Erinn Millar, , 94901
Tue Nov 23, 2010
It's true, we can't control tenants actions after they enter into an agreement. You did your job and earned your commission. However, it's very difficult for a landlord to trust real estate agents in general when the landlord feels they bear the entire burden. Many landlords are feeling the pain in this market (along with homeowners and those of us in the industry). Empathy and a token showing your understanding of the landlord's position might go a long way. Having been a landlord in a similar position, I respect my leasing agent's efforts to get a higher quality tenant at a reduced commission the 2nd and 3rd times. When the rental pool is flaky, is it fair to complain about your agent finding the cream of the flaky crop?
0 votes
Brendan Murp…, , Laramie, WY
Sat Jan 26, 2008
Tough call. I think I'd want to know more about why they moved out personally. If the reason if frivolous, I'd keep the commission. I figure, why should you take a loss because they are flaky? Further, ethically I think I have a duty to help them understand the meaning of a written contract :)

Brendan Murphy
Broker, CRS, GRI, ePro
Raving Real Estate
Laramie, WY 82070
0 votes
J R, , New York, NY
Sat Jan 26, 2008
I had this happen to me. But it happened the day before the tenant moved in. I did not return the commission. I had found the tenant a house, negotiated the rent, did the credit check with the landlord and had a signed rental contract. The tenant was supposed to move in 6 weeks later. A few days before, they decided they didn't want the place. The landlord returned the security deposit but only because the tenant threatened to actually move in and have to be evicted. This was the first time this person was being a landlord, so they didn't want trouble.
0 votes
Steve Ragghi…, Agent, San Rafael, CA
Sat Jan 26, 2008
Thanks for everyones response. To be more clear. I represented the tenant, not the landlord. I can also, tell you that I will never work with that tenant again.
0 votes
Realtor, ,
Fri Jan 25, 2008
Steve, unless it was written into the contract that the tenant must occupy the unit for x amount of days or months, the commission is yours. You did your job. You found a tenant. But that is a sticky situation and you didn't know that the tenant would bail out. Hopefully a lease was signed. Good luck
0 votes
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