If a contingent offer on a home expires, but at a later date the sale is consumated (possibly at a lower

Asked by Ellen, Atlanta, GA Fri May 2, 2008

price to the seller) what is owed to the buyers agent? The buyers have been living in the home under an early occupancy clause for 9 months and are not able to close due to their house not selling. If we do not extend the contract offer, but instead rent to them for some period of time, would we owe the buyers agent regardless of how long we rent to them? Our sellers agent has changed brokers and this house was released by her previous broker. We have not signed a new listing contract.

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Diane Wheatl…, Agent, Upland, CA
Fri May 2, 2008
Yes, I would have to agree with Li on this one. If the agent was the procuring cause in placing the buyer and seller in a fully executed purchase agreement and successful closing then that agent should be compensated pursuant to the original listing, purchase agreement and/or interim occupancy agreement. The commission, unless wholly stated in the purchase agreement as a flat fee, should be calculated using the recorded purchase price.

It doesn't matter if the agent has changed offices or brokerages. That person is entitled to a commission but only in the event of a recorded sale on the property. You do not owe a sale commission if you are only leasing the property. It would behoove the listing agent to follow this tenancy until such time as it either terminates or is finally sold to the same buyers stated in your scenario. If she loses touch with the transaction and it were to close without her knowledge then she would possibly need to seek legal action in order to collect any commission owed. Hopefully, the seller would recognize the appropriate agent due for compensation and pay accordingly.

Check your documentation to see if there may be a time statute stated in the contract and whether there is a specific timeframe in which the buyer must perform for the listing agent to be compensated. If it is specifically written that the buyer must close escrow within a certain timeframe or some other type of compensatory clause, then I would assume a commission is owed. Good luck.
2 votes
Keith Sorem, Agent, Glendale, CA
Sat May 3, 2008
I sugggest that you consider how you would feel if you were your Realtor. If the Realtor is the cause of the buyers coming to rent, then in our market (Atlanta may be different) typically a one year lease would pay the Realtor 5-10% of the gross lease amount as a commission. This arrangement would be in a formal written contract.

It sounds as though this is part of you had listing agent involved and an agent representing the buyer. If the buyers cannot sell their home, it sounds as though they may be long term renters until their home sells, is that correct? But the length of time it will take for their home to sell will exceed the length of the the current sales contract.

IMHO if the buyers are paying rent, and they end up not buying the property, then some form of compensation would be fair to both Realtors (meaning that you have decided to take your property off the market and rent it out).

I don't know your market, but if I were your Realtor and I had buyers occupying a property on a rental agreement, with an offer contingent on the buyer's home selling, I would have suggested in a counter offer that the buyer's property listingn price be reduced 5% per week until the property sells (or something like that). Most markets in the US are seeing declining home values, so if the buyers were serious about selling, then the property, properly priced , will sell.

So the bigger question, aside from commission, is that if property values are declining, the buyer's home will sell, but at a lower price than they want, and if they decide to buy your home, it will sell for less. Most listing agreements have a protections clause which states that if the listing agent was the reason the buyers purchased the home, and do so within a certain time frame (the length varies, normally three to six months), then the agent is owed a commission. Once the period expires, techincally the agent would not be owed a commission. In your case, if the buyers are living there because of the Realtor's marketing efforts, then morally I would think that you would owe both agents commission (and of course they need to perform the transaction when the buyer's finally buy).

The bigger question is what is the buyer's Realtor doing to get their home sold if home values are declining? Just based on your post is sounds as though all parties would be better served if the buyers get their home sold and purchase yours
1 vote
Lee Taylor, Agent, Decatur, GA
Sat May 3, 2008
Wow. You certainly have a frustrating purchase and sale process.

Just like the agreement that you have with your Listing/Lease Purchase agent, does the renter / buyer have a brokerage agreement with their agent which specifically states how much they owe their agent during a specific time period? If so, then they owe their agent a commission - whatever was agreed. Most of the time, that agent is paid by a portion of the Listing Agent's commission.

Did the agents fill out an "Instructions to Closing Attorney" form that details the payment of commissions from Seller proceeds at closing and sign it? If so, then the Listing agent has a duty to pay the Buyer's agent as a "commission split."

You have a Listing / rental Agreement with a time limit, and your agent procured a buyer/lease purchaser - unless there is a time limit, you owe them the agreed upon commission.

Your agent owes the other agent a portion of their commision - whatever was advertised.

If the two agents are not detail oriented and circumspect, then they may not have an Instructions to Closing Attorney agreement - who gets hurt the most without one of these? The Buyer's agent. It makes the $$$ official.

As for you, don't be cheap and stingy - cheap and stingy is so distasteful- deploy good karma in all of your real estate pursuits.
Web Reference:  http://intowninsider.com/
1 vote
Linda New, , Acworth, GA
Sun May 4, 2008
So if I understand this situation the contract has expired, buyers could not close because their house hasn't closed. Listing agent is now with new company. So there is no contract. How bad do you want these buyers, is the question? If I were this Seller, I would want representation also. Just so that all areas were covered in the rental contract, if they wanted tobuy the home later. In the long run, you are better off having Realtors involved so everything is covered.

Linda New, Broker
Crye-Leike Realtors
0 votes
Joshua Jarvis, Agent, Duluth, GA
Sat May 3, 2008

The full commission is what is owed, but legally speaking you might have an out. You'll need to look carefully at the contract. There's likely a clause in there that speaks directly to the amount of time that passes. There is also a part in the contract that says the seller will not try to go around the agent and if the buyer signed a buyer brokerage agreement, there is an clause in there as well.

So no matter what, if the agent was the procuring cause then someone is liable for the commission. After all no transaction at all would take place without them.
Web Reference:  http://www.gahomesdigest.com
0 votes
Jackie Campb…, Agent, Newnan, GA
Sat May 3, 2008
You should seek the advice of an attorney, but it is likely that you will owe one or BOTH agents--your former listing agent and the buyers agent. The listing contract is not between you and the agent--it is between you and the BROKER, and unless the previous broker released the contract AND the listing, you may be obligated to pay them both. The listing contract has a clause included that it is automatically extended by the number of days the home is under contract. The agents earned their commission when you accepted the original offer, and although it seems as though the delay should offer some mitigating circumstances--at least on the surface, it really does not. The fact that you have agreed to delay it and are receiving compensation in the form of rent only reinforces the probability that you will owe the agents commission.
0 votes
Cynthia McKe…, Agent, Hauppauge, NY
Fri May 2, 2008
Ellen: I don't know the laws in your state, but do you have something written in the contract or the lease that you will pay a commission for these people should they purchase the home? In this situation, I always have it written in the lease agreement or the prepossession agreement, or whatever paperwork was used to let the people move in the home. Is there a clause in the agreement that would void the commission due should they not be able to hold up their end of the purchase in the timeframe that was allowed the proposed purchaser? I feel it would only be fair to pay the agents that placed the two parties together to get paid for the work that they did.
0 votes
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