First off, Laugh! take a deep breath and relax. The advice below seems to be substantial with lots of good varied feedback from my fellow agents.
It seems to me that you understand that you have no contractual obligations to the sellers agent, his agreement lies with the sellers. And your agreement lies with your buyers agent.
If you have a buyers agent they can simply address the issue with their broker. The brokers on both sides of the deal can contact each other then come to terms. Let them deal with the headaches and figure out the best path.
Should nothing come from the " broker meeting of the minds", in my mind there are three options:
1. Call the agents bluff. If they already have sooo much time invested in the short sale, some pay to sellers agent is better than none and having to start the whole process all over again. tell them you are out of money.
2. Pay the $1200, get the house you want and then file a complaint afterwards. The reason I advise pay first, is because you do love the home, you still want the home. I know this because you are here asking us other agents for advice.
If the agent is already playing foul, If you complain first there is a chance you could lose the home if they choose to blow the deal, in addition you have lost your inspection fees and any additional costs you already have invested and you have to start all over again. Trust me after all this no home with ever compare to this one.
Yes it stinks because it is $1200. But if it were me in this situation it would be more important to secure a deal and attempt to recoup my $1200 once the home was already mine than to give up and start back over looking for a new home.
3. Consider contacting an attorney to advise you further. Keep in mind this is time consuming and can be costly which is why #1 or #2 may be a more sensible answer. Make sure you have documentation of the threats made to you by the sellers agent.
I hope this helps you sort things out. Whatever your decision we know it will be a wise one.
We are always here to help should you have more questions.
In my experience, short sale listings are generally subject to a possible commission adjustment by the seller's lender(s), and our MLS co-operative compensation field serves notice to buyers agents as well...that the commission offered might end up having to be reduced. Agents have the right to choose if they want to list short sales, because they may/may not be paid in full (or even paid at all).
If you are using an attorney, I'd suggest getting a light shined on the agent's actions - and again, as suggested, if the agent isn't the owner/managing broker of the listing office, I'd suggest your agent/agent's broker and/or your attorney reach out and let them know what's going on, too.
By threatening to push his own client into foreclosure, IMO he's also assuredly acting in a manner to cause harm to his clients. That certainly could be a license violation and/or Realtor Code of Ethics breach, too and could open his brokerage up to a lawsuit by the sellers.
The listing contract controls commission (as stated), and what is in the MLS is an agreement to cooperate between brokers for an established amount.
Agents MUST represent their clients' interests before their own. I hope this turns into an ethics/grievance and/or licensing issue. Please keep us posted.
Good luck and I hope you get your home.
As a Realtor, I wont even list Short Sales for this very reason. It is not your "duty" to pay the agent BUT if you "love" the house and are emtionally involved then YOU need to decide. I mean, you would not really make the decision based on what someone else would do on a forums board would you? It is an opinion, and you have yours. If you must have it, consider it the cost of getting the house you always wanted.
Best of luck.
Tierra Antigua Realty