Agent wants 2% for not selling a house

Real Estate Agent

Agent wants 2% for not selling a house

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

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.

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Ned CareyPro Member

Moderator

Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes

The red flag is that he "demanded" 2%. Knowing he had nothing to do with the sale, and asking if you could throw him a bone, I wouldn't hold against him. The fact he asked in a way that implies he is absolutely entitled to it would concern me.

I would have been tempted to give him something (perhaps the $1200 you suggested) even if he didn't ask. Now I would be tempted to say, "I was going to give this to you any way but since you don't appreciate it I am taking my business elsewhere." That is known as the Takeaway in negotiating. If he apologizes you can continue and grow you relationship. If he acts like a jerk then you know you made the right decision.

As far as him telling other agents I would not be the least concerned as long as you have been fair to him. If he is a true jerk no one will listen to him anyway. If you do things right and honorably then others will see that over time.

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Ophelia Nicholson
Involved In Real Estate · Hyattsville , MD · Member since 2011 · 298 posts · 256 votes
12y
I agree with @J Scott The relationship is over at this point- If you pay $1200 in his mind he is being screwed because its not 2%. If the relationship is over no need to try to smooth it over- Let it go- Maybe his time to work with you and help you has reached its end. Respect that not everyone in this business will move forward as the business does- You will lose some realtors, some contractors etc.
You already said you have a license and have the access to the same deals he does as well as the fact that your goal is to expand into an area that he does not work. I wouldn't pay him but that's just me - P.S. I do have a license as well as being an investor.
I think someone else said it earlier- I don't remember who at the moment but he isn't supposed to be collecting anything without going thru his broker. How does he justify getting paid on a deal that he has no type of signed agreement to sell?
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Kathryn C.
Real Estate Investor · Atlanta, GA · Member since 2013 · 42 posts · 23 votes
12y
I agree with most of what you said @J Scott but was just looking at it from a different perspective. I took it as the property was at the stage it was ready to be marketed. I will say it seems a bit odd that an investor would just randomly show up to a house with an offer and POF in hand. In addition we are only getting one side of the story here and in my experience there's usually more to it. Maybe the agent took a cut in commission on the sale side to make the deal up with the promise to list on the back end to make it up... It's really all just speculation here and I'm just giving a few possibilities.
To say whether or not the relationship is over at this point I could not say. Sometimes miscommunications can be worked through just by talking it out. I will say again though as an investor it is in the best interest of the OP to try to repair the relationship. If you have someone bringing you deals consistently one good deal missed could mean more more times the disputed amount in lost profits.
1 Reply
John Cimino
Investor · Newark, DE · Member since 2014 · 68 posts · 24 votes
12y
Personally I wouldn't want to use this agent anymore just because he is an extortionist. He has no legal right to the money, but wants to use is influence to strong arm you into paying. Don't give in to it, he will be the real loser in the end.
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Greg H.Pro Member
Moderator
Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
12y
I see this as a classic example of an agent trying to win the battle while ultimately losing the war. Fighting for a commission not earned ends up costing you more in the long run .
The OP also didn't indicate is he is making a profit or loss but we are all assuming he is making a profit. What if he is taking a loss due to unforeseen circumstances ? Would those of you who think he is due a commission feel good about the OP asking the agent help make up the loss ?
As a broker myself, I would have congratulated him of the sale and hit the pavement looking for the OP next deal.....and maybe ask if he is looking for 2 deals this time !
2 Reply
Darrell Shepherd
Rehabber · Smyrna, GA · Member since 2013 · 864 posts · 510 votes
12y
I didn't read this whole string, but thought Id chip in... My deal with any agent is that they get to list anything they bring me when I finish the rehab. BUT, if I sell it first, then Ill give them $500 for whatever time they put in. I also run Craigslist ads and put out my own flyers while it's listed- same deal. Most agents just stick it in the MLS and hope for the best. I'm pretty aggressive (when I have the time, anyway) My main agent kicks some ***, but I do do a lot of her work. I find my own deals (I have MLS access) and call her up to make the offers and will deal direct with other agents and sellers pretty regularly. Anyway, bottom line is this guy is like any other tradesman that's used to being overpaid. I have plumbers ask for $650 for 2 hours worth of work. I go "huh?" And tell them what I'm willing to pay. Sometimes we do biz, sometimes we don't. You gotta decide if the value of his service is worth what he wants to get paid. Big thing is to line out something fair for moving forward. Disappointment is the difference between expectation and realization as they say. Clearly he thought his deal was that he got the selling commission on anything he brings you to buy. It's your job to set the expectations right on the buy. Saying all that, I can't imagine a scenario where I'd pay an agent in this situation. The agent is rarely more important than the investor if you're buying listed properties. If he's got an in to an REO rep that feeds him, pay his $3600 (and buy him and his wife a steak dinner). If he's pulling these things out of MLS then there's plenty of people to replace him with.
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Marc Pfleger
OP
Real Estate Investor · Saint Petersburg, FL · Member since 2013 · 56 posts · 13 votes
12y
I spoke with the agent and all is well. The deal has not closed yet, his "commission" will be reflected on the HUD. The buyer is an end user, and the only remaining work needed was to install the appliances and punch out list. This will be my most profitable deal to date. I feel the relationship is not damaged as we are going to look at a property that is owned by a friend of his grandmother's whose spouse is ill and needs out ASAP. Going forward I will have to have everything spelled out in writing so everyone knows what to expect if this situation arises again. The responses have been very educational and I truly appreciate everyone's perspective.
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Sean Brooks
Bear, DE · Member since 2014 · 178 posts · 65 votes
12y
Marc,
I'm happy for you guys always remember the agent is on your side. We do a lot on behalf of our clients. May you guys do many more deals
@Michael
My position on any business dealings is that business is not about money but more about a relationship and with any relationship is it worth ripping up for $3600? Yes not agreement was signed that told me he/she trusted the relationship.
@Greg
That's another way to look at it but what we don't know like in any store what happen. One side of the story is told and obviously the agent thought something. We're not sure if he spent any money to market the property. You know what it's like to spend and then the person changes their mind. Your out money, time, and effort.
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Jeff S.
Specialist · Portland, OR · Member since 2010 · 3k+ posts · 1k+ votes
12y
Been there as an agent many times over the years. As a commission only agent with no other source of income for 10 years it would have never even occurred to me that I would get a bonus like that.
In this situation I always offered to do the paperwork and set-up escrow for $500. That was a long-time ago so with inflation probably a $1,000 equivalent.
This is a case of the tail trying to wag the dog. Cut him loose if he won't work for his money.
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Mark Whittlesey
Real Estate Investor · Encinitas, CA · Member since 2013 · 225 posts · 91 votes
12y
Originally posted by @Teal Lambert:

yes he deserves something because he help you purchase property in the first place. Maybe not the full 2%. I know that if I located a property and helped you swing the deal I would expect some monetary compensation after you closed a deal with it.
Yes, the agent found him the property. And he got PAID for finding it. He earned AND received the commission when the investor closes on the purchase of the property.
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Ben Wuollet
Rental Property Investor · Phoenix, AZ · Member since 2014 · 71 posts · 20 votes
12y
Tough situation. If the agent is in fact being greedy, I would explain why you were going to throw him a bone, and now you are not. If he is in fact that type of person, I would not worry about your reputation, as others may have experienced the same with that person.
However, do what makes you feel like you are doing the right and honorable thing. Follow your gut on this one.
Only you truly understands your situation.
1 Reply
Kent Verge
Investor · Bentonville, AR · Member since 2014 · 114 posts · 40 votes
12y
Although not exactly the same, my bank tried to add some BS fees for preapproval letters I needed for HUD offers. We had already used them for three loans with more coming down the road. When I met with them, I said that I was hoping to build a long-term business relationship with them, and it wasn't going to work, no matter the benefit, if they pulled this type of stuff. We ended out working out a process that worked for both if us.
It sounds like you came to the same type of agreement.
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Corby GoadeBusiness Member
Investor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
12y
That is a tough one. On one hand, I do agree that the agent is being greedy and his behavior is obviously damaging your perception of him. On the other hand, your behavior is damaging his perception of you. A good agent would say "good for you! Let's go find two more," and continue earning your trust and business. However, if this agent is well connected in your area, he could hurt your reputation. I don't really have any advice, but I do not think this agent is respecting your relationship or the sway that your business holds.
Maybe turn the tables a bit- surely he doesn't want to lose all future commissions with you, either- let him know that his actions are damaging your relationship and that you'd like to be able to work together in the future too- maybe you can shake hands, agree to disagree and move on to the next deal together.
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Marina Sud
Investor · Louisville, KY · Member since 2013 · 37 posts · 9 votes
12y
I'm writing this as an agent and investor/wholesaler. It's worth paying if you're utilizing him/her, getting calls 2 x week. Because at the end of the day you will be loosing out, not the agent. Listings are very important for agents. It's a chance for a decent commission (vs. the commission made on 20k houses) and listings help further our careers. Yes it is a career lol. There's a BP article on working with agents which says "you want to keep your agent happy". This is very true. I worked with a particular investor. I did tons of work, found all kinds of homes, did non stop repair estimates in not such great areas and wrote tons of offers (not complaining because I understand that's what it takes to work with real estate investors). We closed on several properties. Then we had a little "squabble" over a few hundred dollars. Also, this individual didn't want me to list a house I helped to find and closed on. Guess what? When I find good deal this individual is not at the top of my list, a list that keeps growing weekly it seems. Believe me it's not worth it. Maybe try to negotiate the fee with the agent? I don't know. Also, the heading of "agent wants 2% for not selling a house" to get paid for not selling a house" is, frankly speaking, offensive. That's not what's going on here. It's about building trusting, ongoing relationships, not someone just being "greedy".
2 Reply
Nick Wing
Real Estate Broker · Los Angeles, CA · Member since 2014 · 97 posts · 30 votes
12y
If he is actively bringing you deals you must be crazy not to pay him, especially if you have a previous agreement that he will be listing the properties he brings. In California, that in fact is creating an "agency relationship" which if he could prove it, should hold up in court. Besides the legalities of it, do you want to sacrifice your deal flow and reputation?
If we say an agent will re-list, they will get the opportunity. If we find the buyer, they still get paid. The only way they don't get paid is if they do not sell it within a certain amount of time, then we make a switch to another agent.
Step back and look at who is really being greedy. You should be making more than him on every deal. What if he began to start flipping houses, you will never see another deal from him again. Keep him on your team, everything always runs smoother when everyone get a share of the pie. Maybe negotiate the 2% down, but make sure you do not kill a relationship.
1 Reply
J ScottPro Member
Moderator
Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
12y
Originally posted by @Nick Wing:

If he is actively bringing you deals you must be crazy not to pay him, especially if you have a previous agreement that he will be listing the properties he brings. In California, that in fact is creating an "agency relationship" which if he could prove it, should hold up in court. Besides the legalities of it, do you want to sacrifice your deal flow and reputation?
That didn't sound right to me, so I did some research (I'm not an attorney, and this isn't comprehensive research, btw)...
Based on reading the link below (and doing a bunch of follow-up research), this appears to very much NOT be the case in California (and likely every other state based on the Statute of Frauds). In almost all circumstances, an agency relationship must be "actual" (in writing) as opposed to implied (oral or otherwise) in order for an agent to recover commission. It's been challenged all the way up to the Supreme Court, which has previously ruled that there is no breach of contract for agency without a written agency agreement.
The text references a Supreme Court case where an agent was awarded commission based on the buyer/seller conspiring against the agent, but given that the OP didn't appear to have any agreement (written, oral or otherwise) on this particular property, I don't see how that could be argued. And the SC specifically stated in that case that there was no breach of contract on the seller's part, even with an oral agency agreement.
As to your other points, I mostly agree -- you don't kill the goose that lays the golden eggs. But, this agent has already indicated that money is more important than the relationship (yes, you can argue that the OP indicated the same thing), which leads me to believe there wasn't a good long-term relationship here anyway.
This is from the CA Dept of Real Estate:
http://www.bre.ca.gov/files/pdf/refbook/ref10.pdf
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Manuel Paniagua
Redlands, CA · Member since 2014 · 27 posts · 2 votes
12y
Wow! That is so kind that you would give him something. Old saying is never burn bridges. The agent is making a bad decision, Reading some of these answers Im surprised. Doesnt the agent work for the customer. He didnt list the house. He didnt sell the house by bringing the buyer. So if I find out one of my clients sold a home I sold them without me Im suppose to ask them for a commission because they told me when their ready to sell they would go through me. Uh how bout no. Really! I can't believe this agent. Service has gone out the window, The agent has certain duties he is to abide by to be honest, fair etc.
1 Reply
Dawn BrenengenBusiness Member
Moderator
Real Estate Broker · Raleigh, NC · Member since 2014 · 2k+ posts · 1k+ votes
12y
I'll chime in as an agent and say that in no way does he deserve a commission. You would be kind to give him something, but I wouldn't do it at this point unless I felt like he was the gatekeeper to some secret information that was not readily available to all other agents. He seems greedy to me, and that's a huge turn off in any relationship.
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Adam Moehn
Investor · Cedar Rapids, IA · Member since 2009 · 143 posts · 29 votes
12y
Doesn't seem right for the realtor to expect a commission on a sale he wasn't involved in, just because he thought he would be. I thought I was going to get paid for doing work in the future at my old job. But then the company went bankrupt, and I didn't. So goes life. Is it worth paying to save the relationship? Maybe, but I'd have a hard time convincing myself it is if it was me.
I'd make sure to be clear in the future that IF you list the house with a realtor you plan to use him, but it isn't a guarantee that you will.
1 Reply
James Schroeder
Real Estate Investor · Tucson, AZ · Member since 2013 · 23 posts · 7 votes
12y
I have learned that a lot of problems stem from poor communication, and this problem might mend itself if both of you understood each other. We get some good incite as to what you are thinking but lack incite as to what the agent was thinking.
Is the agent being greedy by asking for the 2% commission? Maybe he is plan greedy but maybe he is not. Maybe your agents thoughts go something like this, "I've been bending over backward for this guy (you) helping him out going the extra mile for him..... I thought we were unofficial business partners and even though I didn't help with this deal I've help him with everything else and I thought....
Bottom line, I think this might be best if you take the guy out for lunch and let him know exactly what you think and where your thoughts are coming from. You will then get an opportunity to hear what his thoughts where and where they were coming from. From this point you can probably make an informed decision as to whether you will pay him.
Last note, I say make sure the talk is productive and you get the answers you are looking for before you leave so you know whether you two will remain partners from this point forward. Nonetheless, I truly hope you are able to resolve this matter and feel good about whatever decision you make.
1 Reply
Nick Wing
Real Estate Broker · Los Angeles, CA · Member since 2014 · 97 posts · 30 votes
12y
Originally posted by @J Scott:

Originally posted by @Nick Wing:
If he is actively bringing you deals you must be crazy not to pay him, especially if you have a previous agreement that he will be listing the properties he brings. In California, that in fact is creating an "agency relationship" which if he could prove it, should hold up in court. Besides the legalities of it, do you want to sacrifice your deal flow and reputation?
That didn't sound right to me, so I did some research (I'm not an attorney, and this isn't comprehensive research, btw)...
Based on reading the link below (and doing a bunch of follow-up research), this appears to very much NOT be the case in California (and likely every other state based on the Statute of Frauds). In almost all circumstances, an agency relationship must be "actual" (in writing) as opposed to implied (oral or otherwise) in order for an agent to recover commission. It's been challenged all the way up to the Supreme Court, which has previously ruled that there is no breach of contract for agency without a written agency agreement.
The text references a Supreme Court case where an agent was awarded commission based on the buyer/seller conspiring against the agent, but given that the OP didn't appear to have any agreement (written, oral or otherwise) on this particular property, I don't see how that could be argued. And the SC specifically stated in that case that there was no breach of contract on the seller's part, even with an oral agency agreement.
As to your other points, I mostly agree -- you don't kill the goose that lays the golden eggs. But, this agent has already indicated that money is more important than the relationship (yes, you can argue that the OP indicated the same thing), which leads me to believe there wasn't a good long-term relationship here anyway.
This is from the CA Dept of Real Estate:
http://www.bre.ca.gov/files/pdf/refbook/ref10.pdf
Well they did create an IMPLIED agency relationship. However let me rephrase the "if he could prove it" sentence. Since they do have an IMPLIED relationship, if the agent could prove a discussion about COMMISSION in writing, then seller/investor would be responsible to pay the commission. So yes as you said, in order to legally be able to recover the commission, it would have to be in writing. An email, text message, or something that simple may be sufficient.
But again, as you agree, it all boils down to how the relationship was structured, and if it is worth the money.
1 Reply
Mike Izquierdo
Real Estate Investor · South Pasadena, CA · Member since 2010 · 35 posts · 5 votes
12y
Option 1) ethical
Pay the agent his commission if you promised him the listing. regardless of how much he worked for the buyer. A deal is a deal verbal or written. He doesn't get paid more when he makes you more profit on yours sales. Keep your partnership a partnership. And more importantly keep your agent (employee ) happy.
Option 2) screw him out of his commission because you are greedy over a minimal amount compared to what your profit is.... and have the agent hate you. He will probably eventually still send you deals, but now know what kind of investor you truly are.
I have investors that fall into each category. I have been screwed out of lots of commissions verbally promised. I lose all trust in them afterwards and they do hit a "black list" of mine. Life is short, most agents are smart enough to do business with those investors that are loyal, honest, and fair.
After an investor pulls this type of move on me ( promising a listing then pulling it back and trying to close it himself ) he goes to the bottom of my list. As an investor you calculated your profit based on giving him the listing... don't take it away simply because you think you can put the deal together without him.
lastly and more importantly, never take the negotiation away from the agent. that is a sure way to kill your negotiation power and the deal....Ive had several sellers try and take over negotiations and cut my commission or take it away completely and end up killing the deal.
Let your agent sell your home, and investors stick to being a investor. This is how we can all live in harmony together :)
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J ScottPro Member
Moderator
Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
12y
Originally posted by @Mike Izquierdo:

Option 1) ethical
Pay the agent his commission if you promised him the listing. regardless of how much he worked for the buyer. A deal is a deal verbal or written. He doesn't get paid more when he makes you more profit on yours sales. Keep your partnership a partnership. And more importantly keep your agent (employee ) happy.
Option 2) screw him out of his commission because you are greedy over a minimal amount compared to what your profit is.... and have the agent hate you. He will probably eventually still send you deals, but now know what kind of investor you truly are.
First, I'm pretty sure the agent DOES get paid more when he makes the investor a greater profit -- higher sales prices generate more profit for the investor and higher commissions for the agent.
Regardless, I disagree with your assessment that the agent is warranted the commission just because he was "promised the listing." What if the investor promised the agent the listing and then rented out the house -- would the agent be entitled to a commission? What if the investor promised the agent the listing and then decided to move into the property himself -- would the agent be entitled to a commission?
In both those situations, I'd suggest the answer is NO.
Promising the listing to the agent simply means that should the property be listed (now or ever), the investor should allow the agent to list it. But, that doesn't mean that the agent is entitled to a commission if the property is never listed and if the agent does NOTHING to facilitate the sale.
I'll say it again -- if it were me, I'd pay the agent the commission. But, I see absolutely nothing unethical about not paying a commission on a property that is never listed and where the agent plays absolutely no role in procuring a buyer (or helping close the deal).
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1 Reply
Account Closed
Residential Real Estate Broker · Austin, TX · Member since 2014 · 146 posts · 21 votes
12y
I know this has been resolved but I will chime in anyway...its a great discussion.
You have a business relationship with this guy and have have made a verbal agreement with him. In hindsite not puting this in writing is a mistake. Obviously this verbal agreement isn't really not an enforcable contract...but you did have an ongoing agreement. It depends on what he's doing to for you to find these deals for you on the mls and how much value he's providing. I agree with @Marina Sud that if he's working hard for you doing things outside the scope of what a normal non-investment-friendly agent would do, such as: analyzing numbers, previewing houses, doing repair estimates, making multiple/multiple/multiple offers, etc, then he deserves to be paid. If this is the case then he's working with you for the long-term relationship and and is ok working very hard up front for probably very small commissions on the buy side and much more work per deal. But him getting the listing on these properties makes it worthwhile for him.
If he provides this kind of value he deserves to be paid, and he will continue to bring you deals and make you money.
This is a good example of why all of these important details should be put in writing in advance. I do think that an "open-type" listing where you have an option to find a buyer and pay him a reduced fee in that circumstance is reasonable though.
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Christopher Winkler
Specialist · Dallas, TX · Member since 2014 · 900 posts · 392 votes
12y
While I am not a real estate agent, though I do play one on tv, unless you had a exclusive-right-to-sell listing, you are not obligated to pay him anything, and if some stranger comes up to you wanting to buy it, you don't owe him anything.
I believe this agent could be violating his licensing agreement expecting compensation? Unless you live in a one agent town, to be extorted like that by an agent might be a code of ethics violation. I would tell him he had nothing to do with it, and if you want to cut off your nose to spite your face, then that's your problem...
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Lawrence Monyei
MARIETTA, GA · Member since 2014 · 38 posts · 6 votes
11y
Just like in life, sometimes we ran into situations like this in business, where a term or agreement was not written nor negotiated, or where an occurrence was not very clear. since you now have your RE license, my advise is to pay him $1,200.00, if he decline this for that 2%, pay him this 2% and cut him off before he cuts you off.
You are an investor with a RE license, it should be very easy for you to cut him off you, and get another agent if you wants to or if it is very important, so you can concentrate more on your investing/rehabbing deals than spending the time selling the properties by yourself.
Good luck.
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