Is a commission owed?

Question

In March a deal was presented to me by a broker.  If I were to accept the terms, and the deal closed, a commission was owed by me of 1.7% of the sale price.   This deal didn't make it.  6.5  months later I  get into contract with what I thought was a different buyer, but it turns out the same party as last time hiding behind a LLC.  The terms of the second deal are  significantly different and I took it because no broker was involved.  Now the original broker from  months ago wants a commission.  There was no formal listing agreement at any time, do I owe him?

Charles Seaman · Answer

@Roger R. Did you ever execute any agreement with the broker?

Kendal James · Answer

@Roger R. sounds like you don’t owe him anything. He presented a deal to you, which would have created a credit, but since it was never executed he doesn’t have a leg to stand on with you. (Assuming you never signed a listing agreement)

If the same buyers purchasing now, he may feel like he was the procuring cause. But the only time that means the Seller owes you is if the property is listed through an MLS and a commission was being offered to co-broker.

I truly understand the Brokers frustration but the party who he should be dealing with is the buyer. If he didn’t have an agreement with the buyer for payment, besides “acceptance of any commission offered by the seller”, then he’s probably out of luck.

Charlie MacPherson · Answer

@Roger R.  Here's a possible legal distinction.  Any corporation (S Corp, C Corp, LLC) is considered to be its own "person" in the eyes of the law.

It seems to me that you can argue that the first offer came from "John Doe" and the second came from "John Doe, LLC", which is an entirely different entity.

It also seems to me that you have clean hands in this transaction as long as you didn't know that it was the same person.  If you did know, things might get more complicated - except that there was no written listing contract.

Verbal agreements are binding, but difficult to enforce.  Shame on the Realtor for not getting a commission agreement signed with you.  And shame on him again for not having a buyer's broker agreement signed with the buyer.

This is a perfect example of why we need these contracts.  While I'd be happy to do business on a handshake, I have come across enough unethical buyers and sellers to know that's going to come back to bite me hard.In a case like this, and assuming he didn't want a formal listing, I'd have a contract covering my commission for 18 months for this one person or any entity working on his behalf.

So from an ethical perspective, he brought you the buyer and therefore deserves to be paid.  From a legal perspective, he's going to have a tough time collecting.

If there's still time to modify the deal, perhaps you can get the price bumped up to cover the commission.

Roger R. · Answer

There was a commission listed to be paid on the offer sheet  if sold  at a  particular price if I accepted the offer.  It's in contract to sell for 20% less than that price.

I specifically asked if the buyer if had seen this deal on behalf of the broker with a gripe today to which the buyers said no.  The reason one buyer was selected over the other buyer was the fact that it was presented as if there was no broker to pay and it netted more.

Russell Brazil · Answer

@Roger R.

You are stating rules for a listing agreement. It sounds like this agent was not the listing agent.

Was there a commission agreement in place? If so, what was the expiration date of said commission agreement?

Roger R. · Answer

@Russell Brazil standard practice is If an agent lists the property via a written agreement they have with the owner, they own the right to a commission on up to 15 people that viewed and made an offer on the property during the listing agreement for up to 180 days after it expires. The list of 15 people must be provided 15 days after the agreement ends.  Not only did the broker not have the listing, but he didn't come out with the required list and the contract was signed 197 days after the last offer came in.

Mike Cumbie · Answer

@Roger R. There was not an agreement for this broker to list my property - Any broker? Was it listed 6 months ago with a different broker? If so the buyers agent can take it up with them (and should have taken the offer to them in the first place). If he was trying to go around the original listing, tough on him. If it wasn't really for sale, but the agent brought in an offer from John Smith with a commission attached and it didn't work. If then 7 months later (with no advertising etc bringing them together) FunkyRabbit LLC is a separate legal entity. If the entity brought the offer, it is between them and the agent. If the agent brought the offer from the LLC..... It would get hazy.

So there is not really a clear cut answer here (and your contracts would clear it all up I am sure). How did "John Smith" know you wanted to sell? How did "FunkyRabbit LLC" know you would entertain an offer?

Russell Brazil · Answer

@Roger R.

Did you have a time frame of expiration on the agreement to pay if their buyer purchased the property?

Roger R. · Answer

@Russell Brazil   Nothing vague! There was not an agreement for this broker to list my property. He brought by one party almost 7 months earlier. The offer didn't pan out .  Now that the offer is significantly less, he feels he is owed something.  If you actually list with a broker in NYC and the place doesn't sell, the listing agent is supposed to provide a list of 15  people max that they brought by that if they bought your place within 6 months of the agreement ending; they are owed a commission. This would have to be done at time of signing the agreement.  This obviously wasn't done. Generally that is the process for situations like this in NYC .

Scott Anderson · Answer

Was the broker working for you or the buyer the first time around?

If for you, pay up/man up.

If for buyer, that’s between them.

Is a commission owed?

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