Agent's commission - Posted by John Knowles

Posted by dewCO on December 19, 2000 at 08:41:38:

I’ve learned about the bar being raised by taking eithics classes at my board or realtors and seeing the list of 40 or so potential questions that an ethics panel is supposed to sort through to determine procuring cause. And then sitting on those panels trying those disputes.

You don’t have to be sarcastic, especially when you aren’t correct, but I don’t believe the test for procuring cause EVER was that just because you put a sign out and advertised that you are the procuring cause. You can count on that if YOU want to, but I believe you will lose if the issue ever gets tried.

Agent’s commission - Posted by John Knowles

Posted by John Knowles on December 18, 2000 at 04:58:29:

I have rented a house through an agent for the past 12 years. The owner has recently decided to sell and has given the same agent sole mandate for three months. I should like to discuss a lease option arrangement with the owner, whereby I exercise the option in 12 months. How can I do this without the agent being able to claim a commission on the sale?

Re: Agent’s commission - Posted by Kevin (TX)

Posted by Kevin (TX) on December 20, 2000 at 06:03:35:

2 things that are unclear but seem likely from your post are that the agent has been the property manager and that he has an “exclusive right to sell” for 90 days. It also seems you have issues with the agent which is common with tenant/landlord relationships. You are much more interested/emotional/involved with the property than the agent. The agent was hired by the owner to look after his interests, not yours and the “systems” of property management can seem cold to tenants. I’m a property manager and want to give the other agent the benefit of the doubt. :slight_smile:

If the property manager is on the ball, he has a management agreement with the owner, in writing, stating he is entitled to a commission should a tenant in the property buy the property. The standard Texas management agreement even has a paragraph specifically addressing it.

If the agent didn’t have such a clause in his management agreement, his “exclusive right to sell” agreement (seperate agreement) should still cover him if you make a deal with the owner within those 90 days - unless the owner has listed you as an exclusion in either agreeement. Chances are good the owner couldn’t care less/didn’t think about excluding you and just wants the agent to sell the house.

As stated in other posts, it comes down to what is in the contract between the agent and owner as to whether the agent gets paid or not. Procuring cause is between the seller and the agents involved. If the seller feels the agent was not procurring cause, it’s for him to work out with the agent.

Procurring cause is not an issue with this deal unless another agent gets involved. If another agent got involved, the two agents would have to work it out between them.

In Texas, procurring cause is considered to be the action that sets into motion a series of events that ends at “closing.” That action is not as simple as putting a sign in the yard. If that were the case, any time someone called to get info from a sign, they would be locked into working with that agent with that property.
So you’ve been in the property? I’ve been in my neighbor’s house and if she lists with another agent and I decide to buy it, I will collect my end of the commission.
Procurring cause here, as I see it, and I’m not an attornery, without a prior written agreement between you and the owner, or your exclusion from the agreements between the agent and seller, would be when you open communications and negotiations. If you go through the listing agent to make the offer, he is procurring cause. If you open communications/negotiations through another agent, that agent is procurring cause. If you go directly to the owner, who’s procurring cause? The listing agent is because of the sign/phone call, if it is an “exclusive right to sell” agreement without any special conditions. You would not have opened those lines of communication/negotiation with the owner, now, and the owner wouldn’t have your offer, if it hadn’t been for that agents’ actions.

I understand you not wanting to pay any more than you have to for the property and feel if you don’t pay a commission, you can get the property for less. I’m sure you also realize the #1 reason people sell their homes without an agent is because they don’t want to pay a commission either and think they can put more money in their pocket. They’re not discounting the sales price for the buyer.

I think you will find the seller not interested in accepting a creative offer until the listing agreement has expired. I say that based on the assumption that the agent is a property manager. Most of the properties I manage that come up for sell only hit the market if the seller wants full price, can get it and can wait for it. Most property managers have databases full of investors and are active investors themselves.

If everything is in order between the agent and seller, you will not be able to go around the agent and “cheat” him out of his commission.
If you really hate this agent, don’t want him to make both sides of the commission or want to be represented in the transaction, you could go to another agent to make the offer. The other agent would participate in the commission, diminishing the commission of the listing agent, but you would have someone representing you in the deal.

You have 2 options, as I see it. Make your offer now and not risk losing the house to another buyer(either through the agent, another agent or directly to the seller - doesn’t matter, commission being paid), or wait until the 90 days are up and go directly to the seller POSSIBLY avoiding the commission.
The owner may feel a sense of loyalty to the agent, want him to handle the transaction and refer it back to him anyway.
Remember the management agreement? The agent may still be entitled to a commission.
With no commission, the owner may not discount the price and, in a sense, you haven’t gained anything but the possibility of losing the house to another buyer.

Making an offer directly to the owner and trying to circumvent the agent, durring the 90 day listing period should not be an option. It would depend on the seller not telling the agent and the agent not finding out about it, which is unlikely. Not to mention it’s just down right unethical.

Another consideration is that if the house doesn’t sell in 90 days, the agent may get an extension for another 90 days.

If you are in a strong market and want the house, I wold make the offer. Who knows, the agent may not be a bad person, may have overlooked you as a potential buyer and may discount his commission to make the deal work.

Good luck.

Re: Agent’s commission - Posted by John Knowles

Posted by John Knowles on December 19, 2000 at 01:24:52:

Thanks for the replies. I tried to keep my original question short and straightforward - a simple, ‘What can be legally done?’ There is much detail that could have been added regarding the history and ethics of the agent, but that would not have changed what is legal and what is not. I did say that I have occupied the house for the past twelve years, so the agent did not ‘find’ me. What I did not say was that the owner gave me first option, which I turned down. The property was then given to the agent to sell. If one considers simply the legalities of the matter, and not ‘assuming facts not in evidence’:
The agent had no hand in my finding the house.
The sale takes place 12 months after the sole mandate. Is the agent therefore entitled to the commission?

By the way, to say that the owner pays the commission is not really true, because this commission is included in the price, which the buyer pays.

My proposal to the owner includes a clause that if after I purchaed the property, the agent claimed his commission and his claim was legally justified, I, the buyer would pay the commission. So, the agent will not be cheated - the question is simply, is he entitled (legally)?

Re: Agent’s commission - Posted by dewCO

Posted by dewCO on December 18, 2000 at 17:10:04:

Disagree with Andrew’s definition of procuring cause, but, how do you know the seller even wants to consider a lease option. Better check that out first with the seller and then as the other 2 said, let the seller work it out with their selling agent.

Re: Agent’s commission - Posted by AndrewC

Posted by AndrewC on December 18, 2000 at 17:01:42:

John,
It sounds like the agent has worked with the seller for the last 12 years as a property manager.
I presume that you found out that the house was for sale by way of either the agent or his signs?
If so then the agent is the procuring reason that the seller would find you , the buyer.
That being the case, most brokers have in the listing agreement that anyone that was procured by way of them for a certain period of time, the seller stills owes them a commission regardless of any side deal you may
do wih him.
And , I agree with Ed, are you that dishonest that you would steal money out of the pocket of an agent , who needs to feed their family just like investors do, just so you can “do a better deal” ???

Maybe if investors would stop trying to pick agents pockets and work with us , we wouldnt have a bad image of investors.
By the way, I am an Investor/Agent. I make my money both ways.

Re: Agent’s commission - Posted by Ron (MD)

Posted by Ron (MD) on December 18, 2000 at 15:27:13:

John,

I think you have three choices.

You can work through the agent and let him handle the negotiations with your landlord (and collect his full commission per his listing agreement with the owner), or

You can work directly with the owner and let him try to cut a reduced commission (or listing buy-out) with the agent since he (the owner) found a buyer himself, or

You can talk to the seller and tell him you have an interest in buying the house and you would like him to discuss it with you after the 90 day listing agreement expires. This might make sense because the owner will probably prefer to sell it to a traditional buyer who will settle sooner, rather than waiting a year while you decide if you, in fact, will buy his house. If he hasn’t sold it within 90 days, he will be more interested in your creative deal.

Ron Guy

Re: Agent’s commission - Posted by Ed Copp (OH)

Posted by Ed Copp (OH) on December 18, 2000 at 11:00:31:

John,

What you refer to as “sole mandate for three months” sounds like an exclusive right to sell listing, which is common in the marketplace. The owner overlooked the most likely buyer (you) and listed the property.

Your last sentance confuses me. Why would you want the agnet to be cheated out of the commission that the owner has already agreed to pay? Are you dishonest?

To answer your question about talking with the seller, just do it. The commission arrangement is between the seller ant the agent (not you). Or you could let the agent do his job and talk to them directly. Good luck.

Re: Agent’s commission - Posted by dewCO

Posted by dewCO on December 19, 2000 at 08:37:24:

Not sure what your agreement is, nor are you explaining “sole mandate” very well. IS this an exclusives listing contract? And does your agreement speak to you having turned down the offer to buy? Why the heck would you volunteer to pay the agent’s commission? Probably doesn’t matter when the “sale takes place” it’s when it goes under contract as to whether or not the agent is entitled to get paid. This is a really strange deal as it’s so far explained. Do you KNOW that the seller has in fact excluded you out of the listing with the agent? (In other words, do you know if the seller and agent have agreed, that if you purchase the seller does not pay the fee and you do?

Re: Agent’s commission - Posted by dewCO

Posted by dewCO on December 18, 2000 at 17:07:05:

I disagree with your definition of procuring cause. It’s not based SOLELY on putting up a sign. There has to typically be an uniterrupted series of events that lead to an agent being the procuring cause. The bar has been rasied in the last several years.

Re: Agent’s commission - Posted by AndrewC

Posted by AndrewC on December 18, 2000 at 20:50:13:

Your absolutely right dew. I guess by not putting up a sign , tons more people will find out that the house is up for sale. And I guess when there is no sign up , people will simply stop by and say. Hi I noticed your
house, would you like to sell it?.
As soon as the sign goes up, people notice it. And as soon as people notice it, then thats because of some effort, be it little, from the agent.
Of course, the original post didnt say how he found out about the sale. My guess, probably from some effort from the agent. Whether by telling the tenant he has dealt with for 12 YRS that he may have to move or from a sign being put up in front of the house, again by effort of the agent.

And if you could, please enlighten me as to where I can learn more about the “bar being raised in the last several years” . That would be helpful.

Thanks