Broker holding out on paying agent&#x27;s commission

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8 Reply

Russell BrazilBusiness Member

Moderator

Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes

8y

You get paid when the deal closes not before. He gives you that money, and be ready for that buyer and seller to sue both of you, and believe me your legal costs will be more than your commission.

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Tom GimerBusiness Member

DMV · Member since 2017 · 3k+ posts · 3k+ votes

8y

@Russell Brazil Hey correct me if I'm wrong but the listing agreement language isn't even relevant here.

The relevant contract for payment of commissions is the employment or IC agreement between the broker and agent... and I'd be willing to bet anything that contract says you get paid only if the broker gets paid. What if the house burns to the ground? What if a large judgment or lien suddenly comes into play? I can think of many things that would make this deal go poof.

The language OP references is designed to make sure a seller pays the listing broker even if they refuse to or cannot close and it has nothing to do with the agent's commission.

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Vitaliy VolpovPro Member

Investor · Albany, NY · Member since 2015 · 134 posts · 132 votes

8y

@Amar G. As the other two commenters already said, you are in the wrong here. Payments from brokers to their agents are governed by the independent contractor agreement between the broker and the agent, not the listing agreement between the broker and the seller. No broker is going to or should pay you a commission before the deal closes, because the good faith deposit from which you want the broker to pay does NOT belong to the broker. The deposit belongs to the buyer and is held in trust by the broker until the deal closes. If the deal falls apart, the deposit may be owed to the seller or it may be owed back to the buyer, depending on the terms of the deal and on whether and which one of them breached the contract. It would be very unusual for the broker to retain the deposit in the event the deal fell apart.

Theoretically, your independent contractor agreement with your broker could say that your broker will pay you a commission in advance of a sale closing. But, it certainly wouldn’t be typical. And if your particular agreement does not say that, the broker has no obligation to pay any commission to you at this stage in the transaction.

All of our agreements with our agents expressly state that no commission is due and earned by the agent unless the deal closes. It wouldn’t make sense to do business any other way.

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Russell BrazilBusiness Member

Moderator

Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes

8y

Originally posted by @Tom Gimer:

@Russell Brazil Hey correct me if I'm wrong but the listing agreement language isn't even relevant here.

The relevant contract for payment of commissions is the employment or IC agreement between the broker and agent... and I'd be willing to bet anything that contract says you get paid only if the broker gets paid. What if the house burns to the ground? What if a large judgment or lien suddenly comes into play? I can think of many things that would make this deal go poof.

The language OP references is designed to make sure a seller pays the listing broker even if they refuse to or cannot close and it has nothing to do with the agent's commission.

Yeah listing agreement has no bearing on those funds collected. Those are escrow funds until the deal closes. That money does not belong to the broker. As you and I know, quickest way to lose your license is to screw with escrow funds.

And you are spot on, how the sales person is paid will be in their independent contractor agreement. A salesperson does not actually enter into a listing agreement, nor a buyer agency agreement. The broker enters into that agreement with the client.

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Nathan GesnerBusiness Member

Moderator

Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes

8y

As a Responsible Broker, I would tell you to get with the program or take a hike. You get paid when the deal closes and not before. If you can't handle waiting for the money to be earned, you're in the wrong profession.

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David Hines

Property Manager · Allen, TX · Member since 2015 · 190 posts · 160 votes

8y

I agree with everyone above. I think it is also worth pointing out that the OP is wrong when they say the buyer is ready, willing and able. If there is a requirement from the title company that the buyer can’t satisfy by the closing date, then they may be ready and willing, but probably wouldn’t be considered able. That being the case, no commission has been earned.

Angie Williams

Flipper/Rehabber · Bronx, NY · Member since 2016 · 168 posts · 168 votes

8y

Only during/after the closing does the agent and broker get paid. I was a NYS RE agent years ago and I have never yet to see anything different. Now as an investor I rarely use agents, but when I have to it’s been the same, all checks get cut at closing table. I could be wrong, just my experience.

Amar G.

OP

New York City, NY · Member since 2018 · 7 posts · 0 votes

8y

My listing agreement says, (quote), "Said commission being due and owing by Seller upon the successful sale of the Property or when Broker produces a ready, willing and able purchaser of the property regardless of when closing occurs [...] Said commission will be remitted [...] in no event later than the time of closing [...] Seller authorizes Broker to hold any and all deposits made as part of the purchase price in Broker’s escrow account until closing of title. Seller further agrees that the Broker shall apply and pay any deposits or earnest money received as part of the purchase price toward the Broker's commission due under this Agreement. Should the Purchaser default for any reason, Broker shall retain all payments made as liquidated damages up to the amount of commission." (end quote)

So based on that listing agreement, it doesn't matter what happens at closing nor when closing occurs. If the buyer performs, I get paid. If the buyer defaults, I get paid.

Now, here's what the purchase ontract says, (quote) "If Seller shall have performed or tendered performance of his or her obligations under this Agreement and Buyer shall have defaulted hereunder with any Terms of this Agreement by the time set forth for compliance then, Seller, at his or her option, may: (a) Retain the Earnest Money Deposit as liquidated and agreed upon damages," (end quote).

I'm sure the department of state will agree with me that based on this language alone, no matter what happens at closing, the broker is obligated to pay me. The only language my IC agreement with the broker has is that he will pay within 3 days after closing. To me, that means after the closing date, not "if it actually closes and title transfers".

I'm going to make that phone call Monday morning to the Department of State for clarification, but I really don't like this. As a broker, your job is not to produce a title transfer or any other miscellaneous closing requirement. Your job is to produce a buyer. And I don't believe the law requires you to make my commission contingent upon anything else, other than that. And just because my payment is governed by IC agreement with the broker, doesn't mean that every term in that agreement is enforceable (contract law 101). What if the agreeement says, "I will not pay you!" and I signed that. Don't you suppose that would conflict with laws governing payment of agents. Bottom line, you HAVE to pay your agents, regardless if you fear law suit or not. If you can't pay because your business is too bottomless to deal with risks common to all real estate transactions, then its you who are in the wrong business, not me.

Amar G.

OP

New York City, NY · Member since 2018 · 7 posts · 0 votes

8y

By the way.... on April 4th, when the title came back, I sent the seller's attorney a commission invoice (it was addressed to the seller but I sent it to the seller's attorney) for the 6% along with a copy of the listing agreement. On the invoice, I stamped in big red letters the word "Paid" indicating that I considered the commission paid at that time. Then at the bottom of the invoice, I referenced the payment terms from the listing agreement (which I posted above). There was no protest from the seller's attorney such as, "Hold on! Wait a second!!! What is this? What do you mean by 'Paid?' What do you think you're doing". Instead, the seller's attorney replied back, "Thank you." I know I'm right on this issue, because I learned this from an attorney when I was took my 75 hours. I can and should have been paid on March 20, because the buyer and seller was locked in on that day with no way of getting out nor getting the money back from escrow unless stipulated by a judge. But like I said earlier, there's no feasible chance of that happening here because it's only a small holdup delaying the buyer. The seller's attorney is likely to postpone the closing, as a favor to the buyer, rather than hold the buyer in default.

Angie Williams

Flipper/Rehabber · Bronx, NY · Member since 2016 · 168 posts · 168 votes

8y

Amar with all due respect, I’m not sure if you quite understand how you are representing yourself as a professional RE agent in a professional environment. This not only goes for your fellow colleagues, but your broker especially. I’m sure your broker is not the happiest broker when one of his agents on a very rare occasion is more concerned about their immediate request for their commission rather then getting deals done and multiple ones at that. Perhaps, some concern and appreciation for the family moving into their new home. Better yet, instead of concentrating on this commission perhaps spend more energy working on your next sale or existing ones. I personally think you are worrying to much about getting paid and unfortunately letting other opportunities to make more money just pass you buy. You will 100% get paid, it doesn’t happen over night. I remember waiting 3-4 months to get a check, but never stopped me once to keep going and getting more leads. There is no need to stress you will get your commission, I’m just afraid your intentions are a little bit misconstrued here. Work, work, work then the money will always come even if it’s a month or two later then expected, be grateful you are making a commission at all, it’s not easy, it’s cut throat and competing against other agents and getting sales should be your main concern. Also, just show some patients. Just some friendly advice you are coming off to strong and some what aggressive to your broker and the office, cause everyone knows the office finds out everything. Just chill, calm down and you will get what’s rightfully yours. This is the game of monopoly, no one said it would be this simple or you will collect $200 for passing go that easy. Yes it maybe in writing but let the ink dry and you will earn. But your broker “the jailer” I’m sure isn’t in his glory with all of this talk about commission when you and everybody should be concentrating on selling, producing, networking and yes of course making a valid commission. Please don’t take offense to This, but greed only gets you so far, and yes I understand it’s in writing but again let the ink dry on the Agreement before demanding commission on a home that hasn’t even closed yet. Hope al works out for you.

3 Reply

Amar G.

OP

New York City, NY · Member since 2018 · 7 posts · 0 votes

8y

What really is getting to me, is not so much that he's withholding my money, but because he won't give me a reason. If he just gave me a reason, any reason, then I might be more empathetic. I understand the guy is low-budget and not really established, so I realize he can't afford an attorney "if something happens". But is that really my problem? No it isn't. But I'm the type of guy that I would still support him and say, "Look, I get it. No worries. Just pay me when you can". Just be straight up and give me a reason. He admitted that he has no intention to return the deposit. Ok, so then if he's not going to return the deposit, then what is the reason for the delay and why can't he just say, "I'll pay you Monday". If he values his license, he will put a check in my hand by 5pm Monday. If not, it will be his undoing.

Phil G.

Real Estate Broker · MA · Member since 2013 · 361 posts · 297 votes

8y

There's not a brokerage in the city (or state) that pays commissions to agents before settlement. Doesn't happen. Unless your broker chooses to advance you some money as a loan against your commission.

The Dept of State (Licensing Division) cares not about disputes between agents and brokers like this. It is neither a consumer issue nor a licensing issue. If you have an issue with your broker about compensation, your recourse is to bring legal action against your broker. As for the MLS, what do they have to do with any of this?

Even with your incorrect interpretation of the IC agreement, your broker would have until the 19th to pay you. Threats to call the state and the MLS just make you look ignorant of your trade and like a blowhard. Are you going to tell your broker that you also know karate?

If you think you made a mistake joining the brokerage, I'm sure its dwarfed by the remorse felt by your broker. If you want a career in real estate, you need to chill out, get the facts right and act professionally, because no broker is going to take this crap from you.

7 Reply

Mike CumbieBusiness Member

REALTOR® · Brockport, NY · Member since 2015 · 3k+ posts · 4k+ votes

8y

You are able to feel however you want. I have never once been paid until a deal closes. I have also never heard of an agent being paid before closing. Our agents get paid the same day the check comes in.

Ready, sure, willing, sounds like it.. Able? We shall see wont we. Until the title transfers "able" is not established.

Not to be overly blunt, but with your demands and attitude, your license would have been released from esccessny and you would be looking for a new place to hang your shingle if you were in my office.

Wayne Brooks

Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes

8y

Amat, you simply do not have s clue what you are talking about and I fully expect your broker to terminate your employment as soon as this deal is over. The EM deposit does Not belong to your broker at this point. “Producing a ready able and willing buyer” does not trigger a commissions due on the day you “produce” the buyer.....at the earliest, thus clause would kick in after the buyer fails to perform and has been found to be in default, usually by arbitration, a court proceeding or mutual agreement between the buyer and seller.

5 Reply

Max T.

Investor · Philadelphia, PA · Member since 2015 · 3k+ posts · 3k+ votes

8y

This was a fun one guys!

Tom GimerBusiness Member

DMV · Member since 2017 · 3k+ posts · 3k+ votes

8y

Originally posted by @Amar G.:

My listing agreement says, (quote), "Said commission being due and owing by Seller upon the successful sale of the Property or when Broker produces a ready, willing and able purchaser of the property regardless of when closing occurs [...] Said commission will be remitted [...] in no event later than the time of closing [...] Seller authorizes Broker to hold any and all deposits made as part of the purchase price in Broker’s escrow account until closing of title. Seller further agrees that the Broker shall apply and pay any deposits or earnest money received as part of the purchase price toward the Broker's commission due under this Agreement. Should the Purchaser default for any reason, Broker shall retain all payments made as liquidated damages up to the amount of commission." (end quote)

So based on that listing agreement, it doesn't matter what happens at closing nor when closing occurs. If the buyer performs, I get paid. If the buyer defaults, I get paid.

Now, here's what the purchase ontract says, (quote) "If Seller shall have performed or tendered performance of his or her obligations under this Agreement and Buyer shall have defaulted hereunder with any Terms of this Agreement by the time set forth for compliance then, Seller, at his or her option, may: (a) Retain the Earnest Money Deposit as liquidated and agreed upon damages," (end quote).

I'm sure the department of state will agree with me that based on this language alone, no matter what happens at closing, the broker is obligated to pay me. The only language my IC agreement with the broker has is that he will pay within 3 days after closing. To me, that means after the closing date, not "if it actually closes and title transfers".

I'm going to make that phone call Monday morning to the Department of State for clarification, but I really don't like this. As a broker, your job is not to produce a title transfer or any other miscellaneous closing requirement. Your job is to produce a buyer. And I don't believe the law requires you to make my commission contingent upon anything else, other than that. And just because my payment is governed by IC agreement with the broker, doesn't mean that every term in that agreement is enforceable (contract law 101). What if the agreeement says, "I will not pay you!" and I signed that. Don't you suppose that would conflict with laws governing payment of agents. Bottom line, you HAVE to pay your agents, regardless if you fear law suit or not. If you can't pay because your business is too bottomless to deal with risks common to all real estate transactions, then its you who are in the wrong business, not me.

You don't know what "tender" means. Wasn't that on the exam?

It's also not "your" listing agreement... it's your broker's. lol

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Nick C.

Investor · Tampa, FL · Member since 2011 · 2k+ posts · 3k+ votes

8y

@Amar G. In your very first post you stated your listing agreement says commission is due ... no later than the time of closing. Which makes sense to every agent on the planet except... you I guess? I've never heard of any broker in any state paying commissions before a deal closes.

If I were you I'd be looking for somewhere else to hang my license as this broker is most likely going to terminate you as soon as this fiasco is over, don't make threats to the next person, and focus on selling more deals.

After you read all the feedback from this community, if you still feel you are in the right, I'll have to assume you're trolling and this isn't a real situation. You're that wrong.

Vitaliy VolpovPro Member

Investor · Albany, NY · Member since 2015 · 134 posts · 132 votes

8y

Amar, as a lawyer and a real estate broker, I can confidently tell you that you are 100% wrong in your interpretation of everything you quoted. Please read and internalize what everyone else has said on this thread and focus on closing more deals, rather than battling your broker for a commission you have no entitlement to.

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Russell BrazilBusiness Member

Moderator

Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes

8y

As has already been stated, the listing agreement is between the seller and the broker. It does not detail how the sales persson is paid. It is not an agreement between you or anyone, even if you think it is. Even if it did state something about the salesperson being paid, the LAW supercedes the agreement. The money being help are ESRCOW funds. They do not belong to the broker until the property CLOSES. You are 100% WRONG. If that broker releases that money you should both LOSE your licenses.

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Sam Shueh

Real Estate Agent · Cupertino, CA · Member since 2016 · 4k+ posts · 1k+ votes

8y

I am unaware in CA any franchise brokerages operate the way your contract says. The commission after closing goes to the broker and some brokers will drag their feet. What happens there is a mishap that buyers walk away or lender not funding no fault of buyer or agent?

Ask your coworkers how it is done there.

James Wise

Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes

8y

Originally posted by @Amar G.:

I'm a licenced new york real estate salesperson. My broker and I signed a listing agreement for 6% with a seller on 11/22/17. I found a buyer who entered into contract with the seller on 3/4/18. I made the buyer submit proof of funds and a deposit of 6% to my broker's escrow. This way we collect our commission upfront.

The buyer had an inspection contingency which ended on 3/19/18. On 3/20/18, buyer indicated in writing that he was satisfied with the inspection and willing to proceed with closing. On 4/4/18 title came back clear however, the title company is requesting an affidavit from the publication company that published the buyer's LLC in the newspaper. This can take weeks or months.

The purchase contract stipulates that closing is scheduled for 4/16/18 with "Time of the Essence", but there's a chance that the buyer may not close on time due to the request being made by the title company

The listing agreement says commission is due when the broker produces a ready, willing and able buyer, and no later than the time of closing. So am I correct that my commission was due and payable on 3/20/18 when I produced a ready, willing, and able buyer? My broker wants to hold out on paying me until the title actually transfers, which I don't feel is right. I feel that my commission was rightfully earned on March 20. When I asked for payment on March 20th, my broker declined. When title came back on April 4th, again I asked for payment and my broker declined.

Since then I have been waiting patiently for 4/16/18 to arrive so that I can get paid, but now my broker is telling me he wants to "wait and see what happens". Apparently he's worried about the deal falling through and the buyer suing for his money back, even though no such scenario is forseeable because the buyer has given every indication verbally AND in writing that he intends to close. But even still, like I told him, "If the buyer doesn't perform, then what are you going to do, send him his deposit back?!" He said, "No." Then I said, "What if the title transfers, and 6 months later the buyer sues for his money back? Are you going to ask me for my commission back?" He said, "No." So then I sand, "Then what are you withholding my payment for?!!??!?" He couldn't give me a straight answer, which is very unsettling. So I told him, "Look, I understand that you don't want anything to happen, but my earnings are NOT contingent on your inability to accept the risks of doing business".

And actually the attorneys took care of all the closing paperwork last week and they're just waiting for the title company to release the title which will happen as soon as they get the affidavit from the publication company. I really don't understand what my broker is so concerned about.

I joined this broker in October of 2017 but I feel like I made a huge mistake. I sent him a notice today via email demanding payment no later than 5:00pm 4/16/18 and I threatened to notify the MLS board and the department of state if he doesn't pay me. This is very unsettling. What recourse do I have to get paid if the buyer doesn't perform and close on the day stipulated in the contract?

You are demanding your Broker pay you before the deal has closed & your Broker himself is paid? As you are a licensed agent I'm truly shocked at your level of confusion on how this industry works. Honestly as a fellow licensee you are actually an embarrassment to the industry. I'd also venture to guess that your independent contractor agreement stipulates when you are paid out by your Broker. I'd imagine it's pretty clearly outlined that it's X amount of time AFTER the Broker himself is paid. Lastly your listing agreement is not between you & your Broker. Your listing agreement is the agreement between the seller & your Broker. If anything you should be demanding payment from your seller to your Broker..... If I was your Broker I would just fire you & be done with this nonsense before your association begins to harm my firm's image.

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Joel OwensBusiness Member

Moderator

Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes

8y

This is why I do not currently have agents at my commercial firm. Armchair agent attorneys, mistakes agents make and don't tell you about in a transaction until the last second or after the fact, notices from real estate commissions about (agent non-compliance for continuing education, back child support owed, student loan delinquencies, IRS tax levy request notices to broker on agents part of commission payout on a transaction,non-payment for agent license renewal fees, etc.)

It goes on and on and on the drama. Some brokers think they will set up shop and do this minimal transaction fee crap and make money off of volume of agents. Little do they know the horror that awaits them with entitled agents that think they are the gift to the industry. Most do not close anything but create tons of paperwork for a brokerage.

I am talking in generalities and not about this specific forum topic.

If I have a legal question I go to an attorney whether I believe I know the answer or not for verification. Some brokerages have retainers for an attorney on call.

Brokers talk in the business and some agents causing big waves and headaches they give a heads up through back door channels to stay away from them and not add to their firm.

No legal advice given.

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James Wise

Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes

8y

Originally posted by @Joel Owens:

This is why I do not currently have agents at my commercial firm. Armchair agent attorneys, mistakes agents make and don't tell you about in a transaction until the last second or after the fact, notices from real estate commissions about (agent non-compliance for continuing education, back child support owed, student loan delinquencies, IRS tax levy request notices to broker on agents part of commission payout on a transaction,non-payment for agent license renewal fees, etc.)

It goes on and on and on the drama. Some brokers think they will set up shop and do this minimal transaction fee crap and make money off of volume of agents. Little do they know the horror that awaits them with entitled agents that think they are the gift to the industry. Most do not close anything but create tons of paperwork for a brokerage.

I am talking in generalities and not about this specific forum topic.

If I have a legal question I go to an attorney whether I believe I know the answer or not for verification. Some brokerages have retainers for an attorney on call.

Brokers talk in the business and some agents causing big waves and headaches they give a heads up through back door channels to stay away from them and not add to their firm.

No legal advice given.

The more knucklehead agents who have come through my door the closer I get to going the route you've gone. I don't think i'd ever go zero agents but I have drastically slowed down our hiring of agents (especially new ones) over the last year due to a lot of what you described.

Brian Varmuza

Real Estate Investor · Tampa, FL · Member since 2016 · 53 posts · 29 votes

8y

Amar, please let us know how it turns out. I'll go out on a limb here and say you'll get paid after the deal closes but the broker will wish you luck and send you on your way. As ALL have mentioned that listing agreement isn't between you and the seller, its between your broker and seller. No one gets paid until closing, your arrogance will catch up to you in this industry and with a bad reputation you won't make it very far. Best of luck.