Property Sale Through A Real Estate Agent
When a vendor puts his property for sale through a real estate agent, many questions arise.
Here are some frequently asked questions by a vendor who has put a property for sale through a Real Estate Agent.
When Does A Real Estate Agent Get Commission?
The agent is entitled to claim commission on completion of the sale. In many cases the agent is already holding the deposit. On completion the agent is authorised to release the deposit to the vendor less the amount of the agreed commission. This happens on the day of settlement.
What happens if there is more than one Real Estate Agent?
Occasionally a situation may arise where the property has been sold by an agent who is not the vendor’s agent. This may happen in a situation where a purchaser knows another agent and has asked the agent to look at that particular property. In a situation like this, the agents could agree to become conjunction agents and divide the commission between them. There is a provision on the front page of the standard 2005 edition of the Contract for Sale of Land to disclose the details of the conjunction agent. In that case there is no ambiguity.
How can a Real Estate Agent claim the commission if the Agency Agreement has been terminated?
What happens if a property has been on the market for too long and not sold and the vendor has decided to cancel the Agency Agreement to try and sell the property without the agent? There is nothing to prevent the vendor from doing this if the Agency Agreement has expired.
Let’s say that the Agency Agreement has expired and the vendor has decided at their own expense to put the property on the internet with photos and at a reduced price. Let’s also say that a purchaser has looked on the internet, found the property and noted the price. The purchaser could simply contact the vendor and say that they are interested, make an offer which may be accepted and then the solicitors can complete the contracts and finalise the conveyancing.
What would happen though if that purchaser had seen the property 6 months earlier and been introduced to it by the previous agent whose Agreement had been cancelled. That purchaser may have looked at other properties and decided that this was the best one after all, and now here it is on the internet being sold directly by the vendor “without the intervention of an agent” at a reduced price.
This is exactly where a vendor has to be very careful. The purchaser may not tell the vendor that they have previously seen the property with the original agent. It may never come to light. However, if it did, the agent may claim that they introduced the purchaser to the property and claim the commission from the vendor. The vendor may then find themselves in a situation where they have sold the property at a reduced price and had to pay the agents commission after all.
What is to be done in these situations?
The first thing would be to ask the purchaser if they had ever been introduced to the property by an agent, or if the agent is still current, was the purchaser introduced to the property by an agent other than the listed on the front page of the contract. If the purchaser confirms that they did in fact see the original agent some time ago, or had been put onto the property by another agent altogether, the vendor may have some commission issues.
Before entering into the contract the vendor must establish who, if anyone, is entitled to commission.
It is essential to establish this before exchange of contracts because after exchange it may be too late. If the vendor has now sold the property “without the intervention of an agent” and the purchaser later advises that in fact the original agent did show them the property some time ago, the vendor should contact that agent, advise the agent that an old purchaser has resurfaced and come to a written agreement in relation to the commission, prior to exchange of contract.
If the purchaser says that they were introduced to the property by an agent other than the agent employed by the vendor, then prior to exchange of contracts the agents should come to a written agreement between themselves as to the splitting of the commission. The last thing that the vendor needs is to be paying 2 lots of commission.
At Rankin Ellison we take great care when our vendors advise us that they have changed agents or taken the property off the market in order to market it themselves.
We put a condition in the contract asking the purchaser to warrant that he was not introduced to either the vendor or the property by any real estate agent except the agent (if any) listed on the contract. If the purchaser’s solicitor asks for that Clause to be struck out it usually means that there is another party involved. At that stage we make the necessary enquiries to ascertain who is entitled to commission and ensure that we have this in writing, so that when the matter is finalised there is no doubt.
Selling a property can often be a strain for other reasons. At Rankin Ellison Lawyers we try to minimise the strain by ensuring that there are no disputes relating to agent’s commission.