Who pays Realtor commission on family buy out?

Asked by Yformel, Chicago, IL Thu Mar 21, 2013

Sister & I inherited our deceased parent's house. No mortgage on it - paid off. I offered to buy my sister out. She is the Executor of my parent's will and wanted to get as much money as possible so she listed it with a Realtor. I had no say since she's the Executor but was given the right to refusal should she receive an offer. I exercised my right once she got an offer & am going to buy my sister out. Now she wants me to pay half of the Realtor's commission. The total commission is $16K. I don't think I should have to pay any commission to a Realtor who didn't sell me my own house that I already own 50% of. I never saw the agreement between the Realtor & my sister but seriously doubt there was any exception in the contract regarding me. As the seller, shouldn't my sister pay $100 commission out of her proceeds?

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15
Edith Karoli…, Agent, Winnetka, IL
Thu Mar 21, 2013
You got a long a detailed description and explanation below, nothing for me to add, except that instead
of asking you to pay any commission, your sister may be able to negotiate with her listing agent....
She should have had a special agreement with that listing agent from the start, knowing that you are
interested in buying the property, and that you may refuse an offer brought in by the other Realtor...

Too bad, I hope you can come to an arrangement that works for both sides including the listing agent, it
just all depends what the terms of the listing agreement say, and if a situation when you buy your sister out is included in that agreement.

Good Luck to you

Sincerely yours,
Edith YourRealtor4Life & Chicago, North Shore & Northern Illinois Expert
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Investors alike....And always with a SMILE :)

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1 vote
Don Pasek, , Chicago, IL
Thu Mar 21, 2013
Hi, Yformel:

Sorry to hear that you and your sister can't come to agreement. It's really a shame that the broker your sister hired didn't gauge your interest in the property at the start, since you could have settled the commission matter at that time.

In any case, I'm guessing that the property you're buying is in Chicago. In our city, the custom is that the seller pays the brokerage commission, and the buyer's broker (if there is one) usually gets paid by the seller's broker under a "co-operative commission agreement." Under normal circumstances, the seller's broker would indicate the amount of the buyer-broker's commission in a Multiple Listing Service information sheet or other document.

Most seller's brokers work under an "Exclusive Right-to-Sell" agreement, which gives them sole authority to market and sell the property. I'm guessing that your sister hired the broker under such an agreement, which guarantees the broker a commission, even if the seller finds the successful purchaser for the property.

You don't say it explicitly, however, it seems likely that your sister also hired a broker who is engaging in "Dual Agency," meaning that the broker is handling both the selling and buying sides of the transaction. Under this circumstance, the selling broker keeps the entire agreed commission and does not split it with another broker. The seller pays this commission from the proceeds at closing.

So, if indeed these are the circumstances, that a single broker handled both sides of the transaction, in my opinion, you and your sister need not pay each other anything. She, as executor of the estate, hired the broker to sell the property. The broker marketed the property and found a ready, willing, and able buyer, you said. You then exercised your right of first refusal and purchased the property. The broker still collects the agreed commission, since the broker fulfilled the terms of the agreement by finding a buyer, who you rejected, and by assisting in organizing your purchase.

Under the alternative circumstance, if the broker had sold the property to the outside party, the broker would have collected the agreed commission from the seller (the estate), and you and your sister would divide the proceeds remaining. In the current circumstance, the broker is selling the property to you, and the broker will collect the agreed commission from the estate. You and your sister will divide the remaining proceeds after the commission, which probably are the same amount, unless the brokerage agreement states otherwise.

If you think your circumstance is different than the one outlined above, contact an attorney to sort things out. I do hope this is not necessary, since the attorney's fees could in a short time far outweigh the amount in dispute.

Regards,

Don Pasek, CIPS, TRC, ADPR
Omniterra Real Properties
Chicago
1 vote
Sally English, Agent, Atlanta, GA
Fri Mar 22, 2013
In a similar situation in Atlanta Georgia, I agreed to allow the estate pay my marketing expenses (around $500) and I released the estate from paying a commission. It felt like the right thing to do. Much depends on what the executor told the listing agent when the deal was struck. In my case, the executor asked me to consider the situation and "do my best".
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0 votes
Manuel Brown, Agent, Chicago, IL
Fri Mar 22, 2013
Yformal,

Don and Edith gave you great answers. Family disagreeing on how estates are resolved is very emotional I have been in this situation myself. The important thing to I feel each of you ask yourselves is this the last memories you want of your parents, arguing over an estate.

Wants you drive the wedge in your family over money it hard to overcome. Hiring attorneys in my opinion no one wins but the attorneys.

Best of Luck
0 votes
Scott Godzyk, Agent, Manchester, NH
Fri Mar 22, 2013
First thing is the seller pays the commission when they list a home. Second when you negotiated your first right you should have had your sister exclude you from paying any commission or at best reduce teh commission to half. That is poor negitiations.... now you may have to utilize a laywer to work things out. Your sister should not charge you half for what she signed but if you want family peace and unity, you may want to pay it.
0 votes
I did not negotiate my first right - that was done in the court. I have an attorney, and I agree with you. It should have been handled up front by my attorney. I was not even aware I was expected to pay commission until I noticed the Realtor was still involved in the transaction of the buy out. The reason I have even solicited this groups feedback is my attorney seems to be at a loss what to do......
Flag Fri Mar 22, 2013
Dympna Fay-H…, Agent, Chicago, IL
Fri Mar 22, 2013
Unfortunately, the Executor has the muscle to make those decisions. I deal with these circumstances a few times each year, however, you are correct- you should have been an exclusion to the listing agreement at the time it was signed.

Good Luck~
Dympna
0 votes
Joe Schiller, Agent, Chicago, IL
Thu Mar 21, 2013
the agent who sells your house gets 1/2 and the agent who lists it for sale get s1/2
0 votes
Evelyn S. Fr…, Agent, Chicago, IL
Thu Mar 21, 2013
Hello,

A couple of questions and thought come to mind...

Who signed the listing agreement? That should be the person responsible but more importantly this is something for an attorney to decipher.

Secondly, if you are benefiting from the executors actions, why are you not willing to share the costs? After all, there probably would not have been a buyer had the Realtor not listed and who knows what price you would have received had a Realtor not been involved.

Good luck!
0 votes
JIM Michaels, Agent, Chicago, IL
Thu Mar 21, 2013
How much did you pay for your 50% of the house before you inherited it is the question
0 votes
Santiago Ken…, Agent, Chicago, IL
Thu Mar 21, 2013
You should talk with an attorney to avoid future problems
0 votes
Sari Levy, Agent, Addison, IL
Thu Mar 21, 2013
Whoever signed the listing agreement is the one responsible for paying the broker commission. It seems fair to me that the person receiving the proceeds of the sale is the one to pay the commission..

If the property had sold to another party, the commission would have been paid out of the proceeds.

Same difference Of course, this is at surface and is my opinion on the matter and you should of course consult with an attorney on the matter.


Sari
Managing Broker, ABR, SFR, CNC.
Lucid Realty http://www.lucidrealty.com
0 votes
Philip Sencer, Agent, Chicago, IL
Thu Mar 21, 2013
That really is a legal question. You need to show the attorney the Listing Agreement to see what it says. A sale is a sale and I bet there was no exception with regards to the situation that you describe so a commission is probably owed.
You might be able to cancel the listing by cancelling the contract beteen the two of you. If the other offer you got was not full price with no contingencies then you might not owe the commission. Keep it on the market for the duration of the listing term and just do not agree to any other offer you get. Then when the listing expires, sign up another Broker and have an exception or reduction in the commission on the Agreement. Then buy it,but you probably should discuss this with an attorney.
0 votes
Bill J Delig…, Agent, Naperville, IL
Thu Mar 21, 2013
If a rightful owner of the home signed a Listing Agreement with a Realtor, then that Money is owed to the Realtor. Unless there is an exception in the contract, you and your sister need to figure that out amongst yourselves. There may be a creative solution available as you separate out your parent's estate. If no resolution, seek the assistance of an attorney.
0 votes
Geoff Ommen, Agent, Barrington, IL
Thu Mar 21, 2013
That is messy. I would contact the Managing Broker of the office along with a real estate attorney to figure out what is ethical and necessary. The buyout clause should have been in the real estate sale contract all along. Not sure what can be done if you have entered into a contract to purchase at this point.
0 votes
Matt Laricy, Agent, Chicago, IL
Thu Mar 21, 2013
If she had a signed agreement with them, then when a sale occurs, the money is due. Someone will have to pay the agent. I would have your attorney look into the issue though asap.
0 votes
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