From the Wall Street Journal, via today's REALTOR(R) Magazine Daily News...
Daily Real Estate News | January 30, 2008 | Builder Sues for Return of Commissions
A builder of luxury condominiums in Florida has sued real estate practitioners, seeking to force them to return the 3 percent commissions paid to them for selling 24 condos on which the deals never closed. In most cases, buyers walked away from their purchase contracts after the value of the condos fell.
Observers predict that this could be a trend. "We're definitely going to see more cases like this," says Austin MacMullan, a partner at Real Estate Research Corp., which studies housing trends. "This is just one of the side effects of the glut that I don't think anyone could have anticipated."
In the suit, Related Group of Florida says that sales practitioners are implicitly obligated in the sales agreement to pay back the advance.
But defendants in the case contend that the developer is to blame and it’s unfair for them to have to take the hit for sales that fell apart. It had become standard practice in the overheated Florida market for salespeople to be paid advance commissions.
Ed Roberts, the owner of Beachfront Realty Inc., says the contracts don't specify what would happen if the purchase fell apart. "We didn't think that if a buyer defaulted we would be asked to give back our commission," he says. What's more, Roberts says, much of the money went to individual broker-agents who left their companies long ago.
So, the agents and brokers involved expect to keep commissions from sales that didn't actually happen? Give me a break.
I don't care if the builder (seller) pre-paid the commissions, and I don't care if the commissions weren't covered in the contract... they shouldn't have to be. To anyone that isn't a moron it should be implicitly obvious that the commission was for SELLING the condos, not getting a contract that falls through. When the heck did real estate agents start getting paid for almost selling a property?
The media outlets in FL should print the names of these idiots, and then their competitors should just mention that these people didn't think their job actually included selling the property, just bringing contracts that failed to close.
Does that mean that if I have someone bring a contract on a property I list that I have earned the commission... even if they don't close? I don't think so. It makes NO difference if the commission was advanced... That has no bearing on whether the job was done.
I get so annoyed when real estate professionals do STUPID things and tarnish the whole profession. How can we expect the public to see us as ethical and honest when these bozos don't lose their license in addition to being required to pay back the cash they effectively stole.
Unless otherwise noted, all content of this blog is the property of Lane Bailey, ©2012 Lane Bailey.
I'd love to hear from you...
Does the sale falling through undo the work done by the agents? I rather like the idea of getting paid for the work/hours I put in...rather than a contingency basis.
I think it would be great to get paid that way... to bad it wouldn't happen in my market.
Gary - I may marvel at stupidity, but I can't admire it. The lack of ethics of these people reflects poorly on all of us. Thanks for the compliment.
Monika - The builder/seller put in their hours, too... But, think for a minute how people could abuse the system if we were paid without the sale closing. Now, had the sale failed because the builder/seller didn't deliver on the product, then he would rightly owe the commission. However, the sales fell through because the buyers no longer wanted to pay the price they agreed to pay.
Hank - I'd love to get paid on the front... but I would know that if the sale didn't complete, I'd be on the hook.
Nancy - I think it depends on the conditions and people involved. the problem here is that the agents/brokers think that because they produced a non-performing contract that they "earned" the money. They didn't earn the commission for selling the property because they didn't actually sell the property...
Hey Lane - just going back through some of your posts (cause I love your blog!) and wondered why you got the big X on this one! Maybe one of those agents in FL found your blog! There's good and bad to that thought... hmmm??
When are we going to do lunch?
Patty Keller, AnotherME
Melina - I want to be surprised. I would love to think that all practitioners would be ethical. I know it isn't true. Just like people try to game the points system here, can you imagine what sort of stuff would happen if it were cash instead of bragging points?
Latonia - If all of us would just do our best to run an ethical business, it would go a long way towards changing the public perception.