Texas Realtor Commission Dispute -"Ready, Willing and Able" Buyer

Lenna Groudan · 2016-01-05T07:28:04-08:00

We have had a house listed with a realtor. We started at $254 looking for an owner financed deal but ended up getting the house under contract at $227 with traditional financing. The buyer has not been able to secure financing. We extended the sales contract once but when the buyer asked us to extend a 2nd time, we chose to not agree to extend and also to not extend the listing agreement with our realtor. We will pursue a new buyer either directly or with a different Realtor.The original realtor is now coming back and saying we owe them the full 6% commission because they acquired a "ready, willing and able" buyer. We disagree and feel if the buyer was "able" they would have closed on time. We understand the lender may be the issue but there is no guarantee that if we keep extending the buyer will close. We also have lost confidence in the realtor, even before they tried to claim their commission. Is there a black and white ruling on whether this buyer meets the hurdle of a "Ready, Willing and Able" buyer given they have missed both closing dates? Do we owe the original realtor a commission even if:- The buyer missed two contractual closing dates?- We, the seller, would not extend the contract further?

Wayne Brooks

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

10y

Absolutely not. The buyer was not "able" under the contract terms. You have absolutely no obligation to extend any contracts. Unbelievable an agent is even trying this. Is this coming directly from the agent (who has no legal standing as your listing agreement is with the Brokerage, not the agent), or is this coming from the Broker too? This agent is not going to last long.

5 Reply

Mike CumbieBusiness Member

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

10y

In your case no,

Had there been a sales contract and after 3 weeks you decided you didn't want to sell any longer. Asked the buyer to please let you out and then gave them their EMD and $500 for expenses back. They said "Ah well good luck".... Then I could see the agents point and you should pay. But when the buyer cannot secure the financing I would be hard pressed to say the agent did their full job.

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Stephen Hundley

Realtor · Lafayette, LA · Member since 2011 · 297 posts · 175 votes

10y

the agents broker is feeding them bad info bc the buyer was not able to perform on time. If you elected to back out before the closing date and the buyer had CTC then it's a different story. Get a different realtor.

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Matt Lefebvre

Real Estate Broker · Manchester, NH · Member since 2014 · 630 posts · 420 votes

10y

Hi @Lenna Groudan,

I would definitely say that agent did NOT find you a ready, willing, and able buyer. Not meeting a deadline and ending up without financing is definitely not a sign of "able" or "ready". Your previous agent has not grounds to demand a commission from you.

I would recommend calling that agent's broker directly and explaining the situation. They should put a stop to the agent bugging you about being paid a commission and hopefully giving them a slap on the wrist so they don't do it again.

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Account Closed

Investor · Princeton, TX · Member since 2014 · 1k+ posts · 1k+ votes

10y

I have been a Texas agent. You are correct. The "able" does require they were able to get financing.

My question is what about your listing agreement? Has it also expired?

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Lenna Groudan

OP

Rental Property Investor · Houston, TX · Member since 2015 · 38 posts · 4 votes

10y

Originally posted by @Wayne Brooks:

Absolutely not. The buyer was not "able" under the contract terms. You have absolutely no obligation to extend any contracts. Unbelievable an agent is even trying this. Is this coming directly from the agent (who has no legal standing as your listing agreement is with the Brokerage, not the agent), or is this coming from the Broker too? This agent is not going to last long.

Thanks Wayne for your fast response!

It is coming from the agent, at least as far as I can tell. I think they believe that if we extended again that the buyer would be able to close. It probably is the lenders fault and we feel bad for the buyer but we have to protect ourselives. We immediately refunded their earnest money.

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Jarod Clayton

Stratham, NH · Member since 2015 · 22 posts · 4 votes

10y

I almost wonder if there is something we are missing because it seems so crazy the realtor would do such a thing based on the above info.

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Account Closed

Lender · Dallas, TX · Member since 2015 · 283 posts · 128 votes

10y

Simple, your agent is not allowed to claim a commission on the basis of willing and able. Call the Texas Real Estate Commission. they will set you straight and have a talk with the agent about "additional training"

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Lenna Groudan

OP

Rental Property Investor · Houston, TX · Member since 2015 · 38 posts · 4 votes

10y

Originally posted by @Account Closed:

I have been a Texas agent. You are correct. The "able" does require they were able to get financing.

My question is what about your listing agreement? Has it also expired?

Hi Michael. Yes - it expired yesterday.

The timing was:

- Original Contract had a closing date of 12/23/15

- We signed an amendment to move closing date to 12/31/15

- Listing agreement expired 1/4/16

We did not get the notification from the realtor that they wanted their commission until AFTER we said we would not extend our listing agreement with them. They knew on 12/31 that we were not going to extend the contract and we were going to return the earnest money.

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Mike CumbieBusiness Member

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

10y

Hi @Lenna Groudan,

Why did you return the EMD?

If you did it just to be nice that is fine, there wasn't a reason you had to return it was there?

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Lenna Groudan

OP

Rental Property Investor · Houston, TX · Member since 2015 · 38 posts · 4 votes

10y

Originally posted by @Jarod Clayton:

I almost wonder if there is something we are missing because it seems so crazy the realtor would do such a thing based on the above info.

The only other "color" is that we actually had identified a better exit strategy for the property a few weeks after we signed the initial contract. However, we signed a valid contract and were prepared to honor it. We even extended it once for 8 days (that is what they asked for). I think the realtor feels like we should have kept extending and it would have ultimately closed. Maybe it would and maybe it would not - it was not clear to us. Honestly, that is the full disclosure.

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Lenna Groudan

OP

Rental Property Investor · Houston, TX · Member since 2015 · 38 posts · 4 votes

10y

Originally posted by @Mike Cumbie:

Hi @Lenna Groudan,

Why did you return the EMD?

If you did it just to be nice that is fine, there wasn't a reason you had to return it was there?

Just to be nice - we had no desire to harm the buyer for an issue caused by their lender

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Greg H.Pro Member

Moderator

Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes

10y

The agent is absolutely not due a commission. In fact, agents are not entitled to collect a commission, only the Broker is. Every agent in Texas works under a Broker and your listing agreement was with the Broker(Brokerage) and not the agent. Has the Broker been involved in this ? A simple call or email to the Broker should put an end to this as the Broker should know better !

2 Reply

Russell BrazilBusiness Member

Moderator

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

10y

I generally agree with what @Wayne Brooks is saying....but with the caveat that we do not know how long these extensions have been. Are we talking about extensions of two months, or a week or two. Short delays are just part of the real estate process, especially with some lenders now having issue with the new TRID regulations. Courts have often ruled that small delays do not cause material harm, and thus uphold a contract even when it is past the expiration date of that contract.

Edit: Now I see that the extension was just about a week. In this case you should still sell to that buyer if they can close, and you should pay the agent their commission. Things like this most of the time do not end up in court, but see my statement above about short delays not causing material harm.

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Greg H.Pro Member

Moderator

Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes

10y

@Russell Brazil

This is a listing agreement dispute and not a buyer- seller dispute. TRID Regulations would not apply

@Lenna Groudan

Was there a selling agent involved or did the brokerage procure the buyer as well ?

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Russell BrazilBusiness Member

Moderator

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

10y

Originally posted by @Greg H.:

@Russell Brazil

This is a listing agreement dispute and not a buyer- seller dispute. TRID Regulations would not apply

@Lenna Groudan

Was there a selling agent involved or did the brokerage procure the buyer as well ?

If the delay in the sales contract was caused by TRID, then that carries over to the listing agreement. Was the agent able to secure a buyer..yes it seems so, but the seller was unwilling to bend to realistic market forces in the sales process (Im conjecturing). An agent can bring a dozen buyers to a property, but if the seller is unwilling to sell to one of them, has he done the job in which he was hired to do? And how a court rules on this often (obviously not always) does not have to do with the language in the contract, as Ive said before, short delays even in excess of a contractual date do not cause material harm.

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Greg H.Pro Member

Moderator

Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes

10y

@Russell Brazil

A TREC contract was executed by both the buyer and seller. Either party can present the Amendment form to the contract to which either party can elect not to agree to the amendment thus leaving the original agreement in effect to which the terms were not met.

The buyer was in default per the TREC contract and the Third Party financing condition addendum for not securing financing within XXXX days

A good agent should have been able to maneuver through this and get the deal closed but the seller is within their rights to terminate

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Lenna Groudan

OP

Rental Property Investor · Houston, TX · Member since 2015 · 38 posts · 4 votes

10y

Originally posted by @Greg H.:

@Russell Brazil

This is a listing agreement dispute and not a buyer- seller dispute. TRID Regulations would not apply

@Lenna Groudan

Was there a selling agent involved or did the brokerage procure the buyer as well ?

We are working with a small 2 person broker/agent real estate firm. They found the buyer via their MLS listing. The buyers had their own agent.

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Lenna Groudan

OP

Rental Property Investor · Houston, TX · Member since 2015 · 38 posts · 4 votes

10y

Originally posted by @Russell Brazil:

I generally agree with what @Wayne Brooks is saying....but with the caveat that we do not know how long these extensions have been. Are we talking about extensions of two months, or a week or two. Short delays are just part of the real estate process, especially with some lenders now having issue with the new TRID regulations. Courts have often ruled that small delays do not cause material harm, and thus uphold a contract even when it is past the expiration date of that contract.

Edit: Now I see that the extension was just about a week. In this case you should still sell to that buyer if they can close, and you should pay the agent their commission. Things like this most of the time do not end up in court, but see my statement above about short delays not causing material harm.

Thanks Russell - completely fair. I guess one of the problems is how to know whether they can or will close. How long is enough, etc...

Thanks for the direct feedback - we want truth not just what we want to hear! We are not trying to rip anyone off and were ready to honor the contract but we are also trying to do what is best for us financially.

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Mike CumbieBusiness Member

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

10y

The better exit strategy you found does not include that buyer (or any buyer the agent brought) in any way shape form or faction does it? IE.. they are now going to pay more and do seller financing with you. They are going to buy it all cash through an LLC and hard money and need the 6% to make things work out. Someone who looked at it 2 weeks earlier through the agent put in an offer and just didn't get an offer in on time. Now that the deal is dead they are going to go forward

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Charlie Fitzgerald

Lender · Las Vegas, NV · Member since 2015 · 2k+ posts · 1k+ votes

10y

You owe the agent nothing. Additionally, delays in closing are ALWAYS blamed on the lender/loan officer and in reality rarely ever are the fault of either. The vast majority of the time, the lender is waiting for additional required and requested conditions to be able to close and fund the loan. It's the delay in getting the information that extends the process.

1 Reply

Lenna Groudan

OP

Rental Property Investor · Houston, TX · Member since 2015 · 38 posts · 4 votes

10y

Originally posted by @Mike Cumbie:

The better exit strategy you found does not include that buyer (or any buyer the agent brought) in any way shape form or faction does it? IE.. they are now going to pay more and do seller financing with you. They are going to buy it all cash through an LLC and hard money and need the 6% to make things work out. Someone who looked at it 2 weeks earlier through the agent put in an offer and just didn't get an offer in on time. Now that the deal is dead they are going to go forward

Absolutely not! we do not have an new buyer lined up and we understand our commitment to the existing realtor. If someone they brought to us ends up buying the house we would owe them, and happily pay them, the commission.

1 Reply

Account Closed

Lender · Dallas, TX · Member since 2015 · 283 posts · 128 votes

10y

Guys, the reason problems like this arise is because people fail to follow the Contracts (ie. paragraph 2, section a, line 4 says.....). You are 100% correct to not extend the contract if the buyer failed to perform. If the buyer real wanted the property and believed that he could close, he/they can file a suit for specific performance and follow up to close. Or better yet, they could have offered to put up more earnest money or flat out bought and extended period.

The issue here is the commission, the buyer failed to prove that they could close and as such the "able" part of that listing "CONTRACT" was not met. This clause is primarily oriented to the seller in the event the seller decides not to sell after the agent/broker has spent time and effort to sell the property.

One word of caution, most listing agreements do state that any buyer that presents themselves during the listing agreement time frame constitutes a willing and able buyer regardless if that buyer submits a contract or is the result of the agent's efforts. Most listing agreement have survivor clauses regarding such potential buyers so that selling to someone who became aware of the property for sale during the listing agreement timeframe may trigger a commission due to the agent. I would get the agent to give you a list of all the prospective buyers he/she is aware of so that you and/or your new agent will be aware of any potential conflicts.

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Mindy JensenPro Member

BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes

10y

As I read this, @Lenna Groudan, you do not owe the agent a commission. This case does not appear to be a TRID issue, but rather an issue of the buyer not being able to secure financing at all.

@Greg H. gave the best advice, contact the agent's broker and ask them to clarify this situation.

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Joel OwensBusiness Member

Moderator

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

10y

It sounds like it was mentioned this was a small firm of one agent and one broker. For residential you need to look at the size of the brokerage and commission structure.

If it's one of those 100% commission to the agent with a flat fee type thing or a 90/10 split most brokerages will tell the agent to forget it. It's the brokers commission anyways but if the check is 4,000 or 10,000 and the brokerage only gets 500 they are not going to spend time and legal going after a seller. It can also give the brokerage bad press in the residential space.

If this was 25,000 to the brokerage that is a different conversation. You need to look at the listing agreement and see if the contract has a holdover period. This is where the brokerage is protected and owed a commission for whatever time it says 1,3,6 months from the time of termination of the agreement if their buyer or a contact showed while it was listed buys the property. This is used to prevent sellers for doing back door deals where they terminate an agreement and then try to FSBO and circumvent a commission due to the brokerage.

Generally there is additional language that if another brokerage re-listed the property and a buyer or contact purchases that was not a contact from when it was initially listed then the first brokerage is not due a commission.

Sometimes in these cases the brokerages will argue back and forth over who was procuring cause to affect a sale. The real estate commissions generally look at a "chain of events " and if the chain is broken at any point in time the ruling is usually against a commission being owed by the seller.

I would want language that "commission by the brokerage isn't earned and due UNTIL closing occurs based on the sellers acceptance of terms and price". For the brokerage if you accept those terms you want language that says "Brokerage to be paid at closing, as a condition of the closing from the seller XX percent of the total sales price".

Some sellers can play games and even if a commission is due it doesn't say at closing. Title closes the sale and then tells the brokerage they will have to pursue the seller for payment.

You have to have an air tight contract. I do especially on 3 to 10 million dollar deals. I make it impossible for sellers to close on a transaction without my commission being paid. Title will not do it as they do not want a lawsuit for negligence.

No legal advice given.

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Texas Realtor Commission Dispute -"Ready, Willing and Able" Buyer

Texas Realtor Commission Dispute -"Ready, Willing and Able" Buyer

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