Hi folks. Have you ever worked with builders that offered to pay your commission, or a portion of it, at time of contract? I have. In fact quite a few builders were offering that during the boom and still are. My policy was always NOT to accept it until the deal closed.
My main reason for doing this was, that if I was working with the buyer, I didn’t feel it was fair to get paid until I had completed my job, which was to get them to closing on their new home.
My second reason was because in the fine print, the commission agreement, most likely states that the commission is not due until closing and if the transaction didn’t close you would actually have to give the commission back. Well I don’t know about you but my commissions don’t normally just sit around in my bank account. I spend those suckas!!!
If a deal didn’t close I would have hated to have to cut the builder a check for money that I had already spent. As a Broker, I would also make it a policy, not to pay my agent even if the commission was paid in advance by the builder. Could you imagine how difficult it would be to take a commission back from one of your agents?
Well, I guess this is now happening in South Florida. According to this article Related Group sues realty firms, developers are suing Brokers to recoup commissions on deals where the Buyers didn’t close. Can’t say I blame them. Many Buyers in South Florida and other areas are walking away from deals.
According to the article the Brokers are fighting this on the grounds that the builder kept the deposits so they shouldn’t have to return the commissions.
Now folks, I’m not an Attorney but I don’t see how in the heck they think this argument will hold up in a court of law. The real estate commission has nothing to do with the deposit. The Builder may very well be entitled to the deposit if the Buyer decided not to close. But whether they are entitled or not it certainly doesn’t change the fact that the commissions were paid, albeit in advance, based on the transaction closing.
Anyway, it should be interesting to see how this plays out. Think about this the next time a Builder offers to pay you in advance. It might make sense to make sure the commission does not have to be refunded. Make sure the builder agrees you are getting paid for providing a Buyer NOT for getting it closed. If they don’t agree, well…….best wait to get that check after the deal closes. I know I will. Will you?
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