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If a bank denies a lender a mortgage in underwriting (after pre-qualification) due to the lender's credit or finances, does the real estate agent still receive the commission they would have gotten had the sale gone through? This would be in the week or so leading to closing.
What language in the contract would imply that the home buyer would still be obligated to pay the fee to the real estate agent? Is this a common occurrence, or will most real estate agents waive this fee if they continue house hunting for a different house that the bank would deem appropriate?
No. The sales contract must be full executed, and then closing must occur. The sales contract should have language nullifying it for lack of financing. Read the contract, and make sure the financing contingency is included. I don't know of a state approved real estate contract that does not have this.
Isn't this highly unfair to the buyer's real estate agent, assuming they've done all the work (minus closing) and the buyer is denied last minute? Do buyer agents just assume this risk when engaging in house hunting?
Be careful with all this. Our latest contract has a clause that may well terminate the buyer's financing contingency before the contract closes. This can led at least to the loss of earnest money and could, at least theoretically, led to other legal actions against the buyer.
No. The sales contract must be full executed, and then closing must occur. The sales contract should have language nullifying it for lack of financing. Read the contract, and make sure the financing contingency is included. I don't know of a state approved real estate contract that does not have this.
Not necessarily true. I've seen plenty of listing contracts that specify that the sale doesn't have to be completed for the agent to receive a commission. Always and I mean always read and understand any contract before signing. The contract rules over all (except the law of course ).
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Originally Posted by doomjah
Isn't this highly unfair to the buyer's real estate agent, assuming they've done all the work (minus closing) and the buyer is denied last minute? Do buyer agents just assume this risk when engaging in house hunting?
There are tons of posts on here about how unfair the current commission system is to buyers/sellers. However, there are a lot of things about it that are unfair to the agents. Like working your keyster off for a client and then not getting paid a single dime. We just don't complain as much on the internet I guess.
Isn't this highly unfair to the buyer's real estate agent, assuming they've done all the work (minus closing) and the buyer is denied last minute? Do buyer agents just assume this risk when engaging in house hunting?
That's the way how it work for real estate agents. Also, that's part of the reason why not everyone can be a real estate agent or broke. If the house does sell, the commission could be 10,000+ just for selling a house.
I sure hope your agent hasn't claimed that you owe them a commission because your loan was denied. They should be sad, but accepting of the fact that you will indeed buy your house using their services.
On your end, you should have had a better idea from the lender (or 2nd opinions) as to what you WOULD be approved for before seeing homes/submitting offers.
The realtor often puts as much time and effort into a potential sale or non-sale - as a sale. This is one reason a higher RE fee is justified when, for example, a house is quickly listed and closed. I'm not advocating higher RE fees, but, simply pointing-out that there is often more to selling real estate than putting a sign in the yard.
Isn't this highly unfair to the buyer's real estate agent, assuming they've done all the work (minus closing) and the buyer is denied last minute? Do buyer agents just assume this risk when engaging in house hunting?
Yes, we assume that risk and it is all part of the package.
If you got a bad preapproval, it hurts, and you could hardly be expected to pony up.
If you have a job change, unemployment, financial issues you could not predict or plan for, you should hardly be penalized.
But, if you do something sneaky to trash out the financing because you have a change of heart, buyers' remorse, etc, you probably should pay.
Our NCAR Buyers' Agency Agreement notes that you WILL do those things required of a lender once under contract. That is just good faith operating.
But, only an idiot agent will chase commission from a grifter. It is smarter business to kick the poop off the boots and move on to someone else.
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