Realtor Perspective of The $37,000 Commission Case

Friday Sep 22nd, 2017

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A Toronto-family is being held accountable to pay a commission of $36,753 after walking away from a deal.  Who is right and wrong in this sticky situation?  Please understand that I write this from a perspective that is purely objective.  This is a learning experience for all.  Let's continue!


Background
The family's original plan was to sell their home and purchase a new one.  The family's agent told them their current home would be worth about $1 million.  With that information, the family decided to make an offer on another home for $1.3 million.  Pretty standard up to this point.  Where things begin to go sour is when the family decided to walk away from the deal.


Turning Point
The family decide to walk away from the deal of their new home purchase before closing.  Notice how I said they walked away.  The deal didn't fall through due to some unfulfilled condition.

 

The market was cooling down weeks after the agreement was signed.  Prices dropped.  The family realizes it's worth it to forfeit their non-refundable deposit paid upon signing.  They'll save more money long term if they wait to buy in a cooled-down market instead.  #buyersremorse


Buyer Versus Agent
Buyers do not pay the real estate commissions... typically.  It depends on what commission is on the listing for the co-coperating brokerage.  Buyers have the right to know this.  If your contract with your agent has a commission % more than what's on the listing, then you (the buyer) can be held accountable for the difference.  

 

Understand the repercussions of any actions taken before walking away from a firm deal.  Doing this might save you a some big bucks, but this is also at the expense of the time of real estate agents, mortgage brokers, sellers and lawyers.

 

An agent will should thoroughly explain the contract, but obviously not all of them do this well.  Not all buyers read the fine print either since it's easier to say "where do I sign?"  If you're unsure about something, just ask.  Make sure each party does their due diligence.  Any good agent and lawyer would have advised the buyers of their legal responsibilities outside of just losing their deposit.

 

This is an image of part of Page 2 on the Buyer Representation Agreement.  The agent likely pursued his clients (or maybe ex-clients now) in reference to this clause.

 

 

 

Did the Toronto family understand what is owed to the agent if they reneged on the deal?  Did the agent explain what would happen?  The answers to both questions is probably "no".

 



Happy Ending
I wonder how often these situations arise.  Purchasing a home can be stressful, but it shouldn't be!  It's a happy time for families.  

The case will be taken to court.  It's wonderful knowing that the agent will be donating to charity any commissions recovered from this case.  It shows that this isn't about the money, but the principle of the situation and how it was handled.


In Summary

  • Read the Buyer Representation Agreement before signing.  The form provided by the Toronto Real Estate Board is a 3-page document.
  • Get financing approved.  This is a common clause added into or removed from Schedule A in an offer.  To protect yourself, keep it there.
  • Get the house appraised by your mortgage lender in advance. What they appraise the property at can be loweer than what you're ready to purchase the home for.  This can impact financing qualifications.  Some appraisers use software rather than physically sending someone out.
  • If an appraisal comes back for less than what is expected, your agent can contact the appraisal comapny to fight for you and argue why it is worth at least what the offer is going to be for.

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