Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
We are talking to a real estate agent about selling our house. With what little we know, she seems like an excellent agent, but we are very concerned about the contract she has given us to sign. We are going for an open listing. The thing that concerns us is we would have to pay the realtor a 7% commission if we have an accepted offer then default on the sale. We fully expect to follow through on any sale of our house, but we also know anything can happen while waiting to close. We understand her wanting something if we default on the sale, but 7% seems really high to us. Is this a normal penalty?
We are talking to a real estate agent about selling our house. With what little we know, she seems like an excellent agent, but we are very concerned about the contract she has given us to sign. We are going for an open listing. The thing that concerns us is we would have to pay the realtor a 7% commission if we have an accepted offer then default on the sale. We fully expect to follow through on any sale of our house, but we also know anything can happen while waiting to close. We understand her wanting something if we default on the sale, but 7% seems really high to us. Is this a normal penalty?
Thanks
Without seeing the agreement, I assume:
1. You are paying a 7% sales commission.
2. The agreement is saying that if the listing agent meets all the criteria in the contract, and brings a buyer, or co-brokes with a buyers' agent who brings a buyer, and after all contingencies and negotiations are finalized you withdraw prior to closing without contractual justification; the listing agent has been deemed to have earned her sales commission. 7%.
This is not uncommon, although it is expressed in varying terms in different locales.
I don't consider it a true "penalty." It is the agreed upon compensation to the agent for doing what she was initially engaged to do.
We are talking to a real estate agent about selling our house. With what little we know, she seems like an excellent agent, but we are very concerned about the contract she has given us to sign. We are going for an open listing. The thing that concerns us is we would have to pay the realtor a 7% commission if we have an accepted offer then default on the sale. We fully expect to follow through on any sale of our house, but we also know anything can happen while waiting to close. We understand her wanting something if we default on the sale, but 7% seems really high to us. Is this a normal penalty?
Thanks
I think part of the issue here is that you are viewing the payment of the agreed upon commission as a penalty if you default after accepting an offer. The primary job of your listing agent is to bring you a ready, willing, and able buyer who makes you an acceptable offer. Your agent would apparently have done this if you sign an offer from a qualified buyer. Why should the agent be penalized for doing the job you contracted with them to do because you decide to default? That's not to say some agents wouldn't accept a lower commission depending on the circumstances but in that case they would be the one being penalized.
As usual MikeJ is spot on with his explanation. When you hire someone to do a job and they accomplish the task(s) that you requested of them, then you say "I changed my mind" is it wrong for them to expect to get paid?
It's happened to me, I've spent thousands marketing a property,many hours negotiating a contract favorable to the seller, only to have her suffer seller's remorse. I then spent many heated hours getting two brokers to waive their compensation because I truly believed her life circumstances had changed.
Our open listing contract with another agency doesn't have this wording in it and that's why the wording in this contract with a new agency had me concerned. I feel better now that you have explained to me that these may be normal or acceptable terms. That is what you're saying, isn't it - that these are normal terms??
I have another question about the contract. It pertains to the paragraph about the commission:
"The commission payable by Owner(s) to the Agent....shall be 7% of the price agreed to be paid by the Purchaser for the Property, including personal property transferred upon Completion plus disbursements."
It is the wording "plus disbursements" that has me confused. Could you please explain what this means?
Our open listing contract with another agency doesn't have this wording in it and that's why the wording in this contract with a new agency had me concerned. I feel better now that you have explained to me that these may be normal or acceptable terms. That is what you're saying, isn't it - that these are normal terms??
I have another question about the contract. It pertains to the paragraph about the commission:
"The commission payable by Owner(s) to the Agent....shall be 7% of the price agreed to be paid by the Purchaser for the Property, including personal property transferred upon Completion plus disbursements."
It is the wording "plus disbursements" that has me confused. Could you please explain what this means?
I'm surprised someone is offering you an open listing in this day and age. Are you sure that is what she's offering? Anyone can sell it? You can give another 'open' listing to additional agents and she has no 'claim' on it? You can sell it yourself and she has no claim on any commission?
I haven't seen one of those in YEARS.
Edit: Yes, I guess you are dealing with an open listing from your next post.
Additional costs would be advertising and other costs to promote the listing, which she would have to prove.
I'm surprised someone is offering you an open listing in this day and age. Are you sure that is what she's offering? Anyone can sell it? You can give another 'open' listing to additional agents and she has no 'claim' on it? You can sell it yourself and she has no claim on any commission?
I haven't seen one of those in YEARS.
Gailtoo - I'm not sure what the listing agreement is calling out with the statement - "including personal property transferred upon Completion plus disbursements."
My guess is that the listing broker is attempting to cover situations that are a bit outside the norm. For instance the property may convey furnished. The disbursements seems to imply additional funds due the seller after closing.... or payments not listed as part of the sales price. Our listing agreement calls out applicable taxes, even thought there is no applicable tax due at the current time. We also call out compensation on options that may be purchased.
My suggestion is to ask for an explanation of the language from the broker (in writing). I never feel comfortable signing an agreement without understanding what I'm agreeing to.
Thanks all for your replies. We are US citizens living outside of the US in an island territory. Here we are given the option by brokers to have an exclusive listing at 6% commission or an open listing at 7%. We decided to go open listing because we don't have MLS here like in the US. If we have an exclusive listing, we have to rely on the agency to personally notify other local agencies that our house is on the market. Some (maybe all) are known to hide the listings for as long as they can get away with it so they don't have to share commissions, so exclusive listing is not a good way to go here. We found that out the hard way. We were very fortunate to be able to get out of our exclusive contract with an agency that was hiding our listing because their agent had promised verbally, before we signed our contract, that she'd share it with the other local agencies here and put our house up on their website, etc., which she never did. Now maybe you'll understand why I'm so paranoid about the contract we're getting into with the new agency:-) Real estate sales operate differently here in some ways and not in others so it can be very deceiving to US expats and the real estate people know it and some take advantage of it. It is frightening, especially if you are as anxious to sell as we are.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
