Agent wants 2% for not selling a house

Marc Pfleger · 2014-09-15T14:25:23-07:00

I have a rehab property that was close to completion when a cash buyer walked up to the property with offer and a bank statement in hand showing he had the funds to purchase. My business partner and I decided to accept his offer. I informed the agent that helped me purchase the property and he was understandably upset and wants 2% which roughly equals $3600. I have worked with this agent in the past on several other deals and there was a general understanding that we would use him to list all properties that he helped us buy. My business partner and I prepared all the paperwork and went through the negotiations ourselves. There is no written agreement between us and the agent for this property. If I do not hand over the 2%, the agent inferred that I would be off of his "list", at the moment he calls me at least twice week to look at houses. My partner and I would like to live up to our word and pay the agent something. The buyer brought in an agent to help him with the paperwork and the buyer paid the agent $1,200. I thought paying $1,200 to my agent would be more than fair. He did get paid on the acquisition and told me he maybe spent 4 hours on this property. My agent does do some research and previews properties for me without me telling him to do so, he feels that I am devaluing him by cutting him out of the deal. I feel that it is a little ridiculous for him to feel that he deserves 2% for selling a property that he did not sell. I have a sneaking suspicion that even if we do pay him the $1,200, the effect would be the same as if we did not pay him at all, that effect being he won't be calling and looking for properties on my behalf. I hate to lose his local knowledge and maybe I am being too loyal, as this agent has been with me since the beginning (approx. 13 months) when most agents would not even give me the time of day. I recently earned my license so I have access to the same inventory he does. I have reached out to other brokers I have dealt with before and explained the situation and the general consensus seems to be that I am crazy for even considering giving him anything. Any and all input welcome! Thanks.

J ScottPro Member

Moderator

Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes

12y

Originally posted by @Wayne Brooks:

It all depends, and we don't know, how much effort he put into finding the property(s) in the first place. I know it's not worth a lot of extra work scouring around for $100k houses or less, unless there's also a commission on the back end. That's the bait all the flippers use to get an agent to do a lot of extra work, for the small commission on the front end of the flip.

I would agree with this IF he hadn't used the agent for multiple transactions. If the agent found him one low-priced deal and didn't get the relisting, I can see how that would suck. But, if the agent found him 5 low-priced deals and got the relisting on the other 4, then the agent needs to suck it up and accept that he's not always going to get paid.

All that said, I would have paid the agent his full 3% (without a discussion) UP UNTIL the time he started demanding money. I'm a proponent of treating people well (over and above), but the minute someone takes the attititude that they DESERVE to be treated over and above, I would walk away.

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4 Reply

Dean Letfus

Specialist · Memphis, TN · Member since 2012 · 1k+ posts · 1k+ votes

12y

If he is a part of your team pay him what he wants. It is nothing in return for getting him to still call you twice a week. Consider it an entertainment and marketing expense. Pay your team well all the time, keep the relationship. This is a relationship business.

It is NOT true at all that there are plenty of other agents out there to replace him. A good agent is like gold. Very few really undestand investors and even fewer are loyal so if you have one liek that look after them. I personally would say something like:

" I think you are being a prick on this deal but I value you as a part of my team so here is your check. You owe me one. Now buy me lunch"

And then put it behind you

3 Reply

Bill Gulley

Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes

12y

Be nice, tell him you can't just cut a check, tell him there is no contractual basis for a property that sold, so ask him to put his justification in a letter to you and you'll take it to your partner saying the last thing we want is any backlash. But you need a letter as a billing and explaining why as you can't, at this point, assign costs of settlement to that property and you need it for accounting.

After you get the letter, turn a copy over to his broker and the Board of Realtors, you'll cover your tail as to any backlash or bad mouthing which is another ethics violation.

If he doesn't want to do business with you, as others mentioned, other broker/agents will.

I think the agent knows better and is having a bad quarter.

If you really want to keep him (don't know why) get the letter, then negotiate to make him happy enough.

If he ditches you, you have the letter to bring to the surface with his broker and more than likely, the broker will appoint a better agent to represent you, the broker understands you have grounds for a more serious complaint.

When folks don't act right, get them to take another step in the wrong direction with proof of what they are doing, then you got'em. He won't be saying anything, as you can cause him more grief than he can cause you. Besides, other agents have been stiffed before, they know what the issue is and it's his fault for not contracting in that manner in the first place. :)

2 Reply

Larry Turowski

Flipper/Rehabber · Rochester, NY · Member since 2014 · 1k+ posts · 1k+ votes

12y

The problem is, even if you paid him you wouldn't be able to totally trust him now. And he probably wouldn't quite trust you. I'd plan on moving on.

Also, he has shown that he can be a bit of a loose cannon. And that won't change even if you make amends over this particular incident. Or I should say if you mollify him, because you've done nothing wrong. As others have said, he made a commission when you purchased. And your understanding was that you would list with him when the time came but it never came with this property.

Move on.

1 Reply

Marc Pfleger

OP

Real Estate Investor · Saint Petersburg, FL · Member since 2013 · 56 posts · 13 votes

12y

I appreciate all the responses. I do think he provides value to my business and definitely want to keep him in my tool belt. There have been properties where I wanted to make an offer that he did not think would be money makers and he would talk me off the ledge and assure me that there is a better deal out there. I want to believe he does have my best interest at heart. Perhaps I chose my words incorrectly in the heat of the moment but he never used the word demand or deserve. I am going to pay him the $1,200 as I believe this is the morally right thing to do as I did indicate that he would receive something on the back end, however vague that agreement may have been. So, only time will tell if I am still on his "list". Going forward everything will be on paper. At least my conscious will be clear. Another factor in this decision is that I intend to farm a completely different area than the area that this agent works to cast a wider net. However, I will have to wait and see if he calls me to look at other properties if he doesn't that is OK too I will just have a little more work to do.

4 Reply

Louis Leone

Real Estate Investor · New York City, NY · Member since 2014 · 121 posts · 47 votes

12y

From a purely legal point, since there is no written agreement, the agent isn't owned anything, but you did say in your question that there was a "general understanding that we would use him to list all properties that he helped us buy".

If he is working hard to bring you deals and he is under the impression that he will get the buy and sell side, then it makes sense that he is upset. It comes down to what you have both discussed and what the expectation was.

0 Reply

Sean Brooks

Bear, DE · Member since 2014 · 178 posts · 65 votes

12y

Marc,

My question to you is this: Did you have a good relationship with the agent? It sound like you did because he did not have you sign a listing agreement. Myself I would never do that, it's not personal it's business so I ask all client's to sign the listing agreement or we can't do business. That agreement insures I will receive my commission for my work/cost involved in marketing this property. MLS fees are not FREE.

It also gives you the assurance that I'll do my best to get the property sold.

My other question. Has this agent been in your corner and helped you with previous projects? See the investor that walked up most likely saw the listing and went around the process. That agent went around it too but if you didn't have an agreement I could see why. Is the $3600 worth it or could you do a lot more business?

What so many do not understand is that when an agent get a listing it's work, time, and cost involved.

The strange part too this, is that the buyer paid his own agent. During any real estate transaction normally the fee is paid by the seller. That commission is split between agent and broker and in this cause the buyers agent would get a cut too.

So that $1200 you want to pay is split. Some brokerages will not allow agents to take a listing with such a small commission because you end up spending more than what you will receive. We and the office has cost, it's a business.

Flip the situation, place yourself in the agent shoes --- if you worked to get the property sold and someone went around the process wouldn't you want the 2%? So many people do not want to pay, business is about paying and charging.

@Michael Camaglia the agent is suppose to get paid from any transaction that an agent assisted with the selling. Just like the title company, lawyer, etc. Just like you expect to get paid we do too!

The commission when you buy is not paid by the buyer, it's paid by the seller. When you sell and we assist through the listing, a commission is paid.

If you start to work with other Realtor's, they will ask for that agreement!

0 Reply

Westin Hudnall

Investor and Real Estate Agent · Maize, KS · Member since 2014 · 270 posts · 53 votes

12y

don't pay him a penny. That's a joke.

My day job is managing a rental car vendor and if I rent to a customer once a month for 6 months ; then make a reservation for him for month 7 but he cancels due to a screaming good deal he gets from another vendor I don't deserve compensation for that month.

Sounds ridiculous huh ? That's how ridiculous it sounds for

1. The agent to ask for anything

2. You to consider anything

Every city has an abundance of agents so saying it will be hard for you to find someone else who will look for properties for you simply isn't true. Tell the agent not only will you not compensate him but just for treating you this way ; your deducting 1 % from your next transaction with him and will find another agent if he doesn't change his stance .

0 Reply

Michael Camaglia

Chagrin Falls, OH · Member since 2014 · 17 posts · 23 votes

12y

Originally posted by @Sean Brooks: