Buyer representation agreement (Dallas, West: 2013, foreclosure, broker)

[danny2013]

Hi,

I am looking to buy a residential property and I started to work with a residential estate agent which whom I haven't yet signed any document. Days ago I was close to make an offer on a property and she sent the offer to sign + a BUYER REPRESENTATION AGREEMENT. She initially told me the seller will take care of her fees not me, but then in this contract it's stated:

Source of Commission Payment: Broker will seek to obtain payment of the commission specified in Paragraph XXX first from the seller, landlord, or their agents. If such persons refuse or fail to pay Broker the amount specified, Client will pay Broker the amount specified less any amounts Broker receives from such persons.

It means I am taking responsibility to pay her fees (and we are talking about $15K) if the seller refuses to pay. Is this a standard clause in Dallas market? Do you know if every realtor has this restriction in their contract? I am not willing to accept it and in fact I ended up not making an offer (there were also other reasons related to the property itself).

Thank you for your advice
Dan

[numbersguy100]

Personal opinion? I wouldn’t sign it. The only realistic way a realtor would fail to get paid by the seller would be if they’d written the contract incorrectly. In that case I would have no interest in paying the fee out of pocket. Written correctly, a contract should guarantee payment to both agents for the seller to get their proceeds, which is ultimately their only goal.

[Rakin]

No it means that if you select a property where the Seller does not pay a Commission like a FSBO and you wanted to still use the Agent you would be responsible for the fees.

In reality that almost never happens. I've been in the RE business 20 years and the Buyer has never paid my fees. It is spelled out in our MLS what commission the Listing Broker is sharing with the Buyers Broker.

I would encourage you to sign the agreement. It means the agent is working for you and owes you a fiduciary duty.

The agent should have sat down and had a conversation with you about all of this in more detail.

[mSooner]

We're one of those weird situations--the home we bought was a foreclosure and for whatever reason only 2.75% was being offered to the buyer's agent. We were on the hook for the .25% (which wasn't a huge amount in the grand scheme of things). That and FDBO are the sort of things this clause is covering.

[danny2013]

Originally Posted by Rakin

No it means that if you select a property where the Seller does not pay a Commission like a FSBO and you wanted to still use the Agent you would be responsible for the fees.

In reality that almost never happens. I've been in the RE business 20 years and the Buyer has never paid my fees. It is spelled out in our MLS what commission the Listing Broker is sharing with the Buyers Broker.

I would encourage you to sign the agreement. It means the agent is working for you and owes you a fiduciary duty.

The agent should have sat down and had a conversation with you about all of this in more detail.

Thank you for your message, you seem to understand a lot in this field. Still the way the sentence is formulated doesn't seem be to be fully aligned with what you say: "If such persons refuse or fail to pay Broker the amount specified, Client will pay Broker the amount specified less ...." . It sounds like that if the seller or, for instance, their listing agent refuses or fails to pay, then I (as a buyer/client) take responsibility to pay my agent.

Now, what happens in most cases is one thing, while the ranges of cases this clause covers it is another. For sure it covers the FSBO case which is fine, but it also spans to cases where my agents has trouble getting paid and I then have to take responsibility for it.

[FalconheadWest]

Originally Posted by danny2013

Thank you for your message, you seem to understand a lot in this field. Still the way the sentence is formulated doesn't seem be to be fully aligned with what you say: "If such persons refuse or fail to pay Broker the amount specified, Client will pay Broker the amount specified less ...." . It sounds like that if the seller or, for instance, their listing agent refuses or fails to pay, then I (as a buyer/client) take responsibility to pay my agent.

Now, what happens in most cases is one thing, while the ranges of cases this clause covers it is another. For sure it covers the FSBO case which is fine, but it also spans to cases where my agents has trouble getting paid and I then have to take responsibility for it.

What you aren't understanding is that the MLS is a contract for compensation. If a listing is in the MLS, there has to be a cooperation to pay a commission. The buyer's agent knows up front how much commission is being earned. For any property within the MLS, neither the seller nor the listing agent can turn around and then refuse to pay the commission. MLS is a contract, period. Whatever is listed there is guaranteed to the agent.

FSBO are not listed in the MLS. There is no agreement for compensation. Your agent will first seek to ask the seller to pay her fee, and then come to you if it's denied. It's written in clear English if your agent had explained to you the MLS agreement.

Also, if the MLS states a commission lower than what you have signed in the agreement, your agent then has to ask you if you're willing to make up the difference as to what you agreed as her fee. If you don't want to make it up, you must tell her to move on, or that you don't want to view anything that doesn't fully compensate. You might also miss out on many houses over 0.5% here or there.

As for "is this standard in Dallas", it's a TEXAS form, not just a Dallas form.

[Rakin]

Originally Posted by danny2013

Now, what happens in most cases is one thing, while the ranges of cases this clause covers it is another. For sure it covers the FSBO case which is fine, but it also spans to cases where my agents has trouble getting paid and I then have to take responsibility for it.

The funds are taken from the Seller by the Title Company at closing so the Agents do not have trouble getting paid. It's all part of the closing process.

Also, at least with my company (and most legitimate) we would never go after the Buyer if we had trouble collecting the money. You don't sue your client.

[danny2013]

Originally Posted by FalconheadWest

What you aren't understanding is that the MLS is a contract for compensation. If a listing is in the MLS, there has to be a cooperation to pay a commission. The buyer's agent knows up front how much commission is being earned. For any property within the MLS, neither the seller nor the listing agent can turn around and then refuse to pay the commission. MLS is a contract, period. Whatever is listed there is guaranteed to the agent.

FSBO are not listed in the MLS. There is no agreement for compensation. Your agent will first seek to ask the seller to pay her fee, and then come to you if it's denied. It's written in clear English if your agent had explained to you the MLS agreement.

Also, if the MLS states a commission lower than what you have signed in the agreement, your agent then has to ask you if you're willing to make up the difference as to what you agreed as her fee. If you don't want to make it up, you must tell her to move on, or that you don't want to view anything that doesn't fully compensate. You might also miss out on many houses over 0.5% here or there.

As for "is this standard in Dallas", it's a TEXAS form, not just a Dallas form.

Thank you for your reply. So, if I understand, when buying a property listed in MLS, the commission will be paid by the seller and there is no way out. What I have to possibly check, is that the commission stated in the MLS is not lower than what I would sign in the document with my agent (in this case, 3% of closing cost) to avoid paying the difference.
I don't know if I can have visibility of the commission stated in the MLS though.

I don't doubt the fact the contract is in plain English, I moved here from Europe couple years ago, so English is not my first language that's also why I have hard time understanding everything in the contracts, for sure till the conditions are not fully clear to me I won't be able to sign anything. But, with due diligence, I'll hopefully get there.

[Rakin]

Originally Posted by danny2013

Thank you for your reply. So, if I understand, when buying a property listed in MLS, the commission will be paid by the seller and there is no way out. What I have to possibly check, is that the commission stated in the MLS is not lower than what I would sign in the document with my agent (in this case, 3% of closing cost) to avoid paying the difference.
I don't know if I can have visibility of the commission stated in the MLS though.

Just talk to your agent and ask them what happens if the commission is less than the 3%. Is he going to accept that amount or come to you for the balance.

You can then tell him to only show you 3% listings (which are 99% of the homes) or you can find another agent.

It's not that hard.

If you have a rookie agent who can't explain all of this, then you probably need to find another agent anyway.

[WorldKlas]

I bought many properties in the DFW area. This is standard language. Your actual property purchase contract will clearly spell out that the seller pays the agent commission. The title company that performs the closing documentation will withhold sellers’ funds for the commission and will directly pay all agents per the purchase agreement. If there is deviance from the standard practice, it will be disclosed at the time you all execute the purchase agreement and you will have a chance to leave the deal if the terms are unacceptable to you.