Real Estate Agent Contract - Is this normal?

Question

So I’m making an offer on a place in Pittsburgh, PA  and my realtor sent over the purchase agreement and agent contract. I’ve never seen a contract like this (my other property is in OH and my friends have purchased in CA)

It seems like I’m being asked to pay $595 whether or not my offer is  accepted. Also, since 3% of the sales price is less than $2000 I will  have to pay the difference. Is this normal!?

The contract lays out the following stipulation in regard to the fees:

Broker’s Fee, paid by Buyer to Broker, is as follows

• (a) In a purchase transaction with a seller represented by a real estate broker the fee is 3% of the sales price OR $2000, whichever is greater, AND
• (b) In a purchase transaction with a seller who is not represented by a real estate broker the fee is 3% of the sales price OR $2000
• If the amount received from the listing broker is less than the amount in above, Buyer will pay Broker the difference, unless seller agrees to pay the difference as a term in the agreement of sale.
• $595 of Broker’s Fee is earned and due (non-refundable) at signing of this Buyer Agency Contract.

Eddy Dumire · Answer

What Sharon describes is fairly standard.  I haven't seen a "greater of 3% or $2000" arrangement before though.  I definitely wouldn't pay $595 up front before I decide to buy anything.

I suggest you find a new agent.  A better question is why do you think you need an agent?  If the seller has one and you don't then the listing agent will just keep all the commission so there's no advantage to not having one.  But if the seller doesn't have an agent, then having one may cost you 3% directly out of your own pocket if the seller refuses to pay.  If neither one of you have agents, then you can use this as additional leverage for a discounted sales price.

Did the agent show you this property?  Have they been working with you for a while showing you lots of properties?  If so, then they've already earned compensation from you and you need to come to some agreement.  Remember that everything is negotiable though.  If you do need to compensate this agent, I would push back on anything you don't believe to be fair.

Reading between the lines, it sounds like your realtor has been working with you for a while and just didn't put the agency contract in front of you until now.  If so, shame on them.  My first agent did the same to me a long time ago.

Disclaimer:  I'm not an agent... yet.  I've taken the class and I'm studying for my test.

Sam Garner · Answer

Wonder if it's $595 so it doesn't have to be on a 1099...?

Sharon Tzib · Answer

In TX, real estate agents are not allowed to give advice or opinions to non-clients (i.e. customers). The way for them to become a client is by signing a Buyer Representation Agreement (or a Listing Agreement if they are a seller). It states that my commission will be paid by the seller, landlord or their agents, but if they fail or refuse to pay, the client will pay. Since rarely is a seller in control of paying out commissions (unless it is some off-market situation), the title company will make sure the realtor gets paid and the buyer has no risk of doing so.

I can't imagine asking my clients for a flat-fee if an offer isn't accepted. Is this something s/he expects for every offer you make? If I don't perform (i.e. find them a suitable property), then I don't get paid. That's the nature of the business. I know some listing agents put a clause like that in to get reimbursed for marketing in case the house doesn't sell, but never heard of a buyer's agent doing that. I'd find a new realtor if I were you.

Vlad K. · Answer

Thanks, I thought it seemed crazy!

Can anyone from Pittsburgh weigh in? Maybe this is some regional thing?

Wayne Brooks · Answer

A minimum commission is understandable, but this should have been discussed early on.  But, $595 up front, no matter what?  Never seen that.

Vlad K. · Answer

I got them to lower it to 485 and change it to be due only on closing.

Ian Hoover · Answer

The $2000 is a minimum commission, most good agents have a minimum. You would pay the difference between the 3% and the 2k.

The $595 is allowed but I don't know of any agents that charge it.

If you are submitting a low ball offer maybe that is what he is charging for what he feels is a waste of time?

Hope this helps.

Jennifer Lee · Answer

hi

im an investor friendly agent in Pittsburgh. I work with out of state clients ;)

the a and b is standard agency wording. its if seller doesn't pay commission.

as for additional. that is agent own nego. not standard.

we as agent have to pay additional fee. and depending on the company the charges is different.  I charge an additional fee but will not collect unless we close.  All fees are negotiable. meaning all my deals are different. but I'm with Kw now. so more flexible on what I can do to get things closed or done!

and since I'm also foreclosure and shortsale specialist.... I nego with my brokerage over min commission when I was with Coldwell. with Kw there is no minimum commission :)

Eddy Dumire · Answer

Found this interesting tidbit:

Is A Written Commission Agreement Required?

A written commission agreement although preferable is not required.  In this regard it is noted that General Obligations Law section 5-701 (10) specifically exempts licensed real estate brokers and salespersons from the requirements that such agreement be in writing.

The contract of employment may be established by facts showing, in the absence of an express agreement, a conscious appropriation of the labors of the broker, and in some cases by the mere acceptance of the labors of the broker. Even if there is no agreement, express or implied, between the principal and broker, if the principal receives a benefit from the real estate broker's services under circumstances which, in justice, preclude him from denying an obligation to pay them, the broker is entitled to some relief.

It cannot be assumed that a broker works gratuitously, and the lessor and lessee are held to such knowledge when they accept the result of the broker's services. When the lessor has accepted the lessee brought to him by a broker, and when the lessor and lessee have agreed upon terms and execute a lease agreement, the broker's work is done and he has earned a commission.

Further, where a contract of sale or lease agreement admits the broker's performance of services and includes an express promise by the seller to pay the broker's commission, the broker is entitled to summary judgment on its claim for a commission as a third-party beneficiary of the contract or lease.

from:

http://www.garywachtel.com/PracticeAreas/Real-Estate-Brokerage-Commissions.html

(New York Attorney)

Real Estate Agent Contract - Is this normal?

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