When does a real estate agent earn a commission?

When does a real estate agent earn a commission?

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By Linda M. Toga

The Facts: I recently listed my house for sale with a real estate agent and signed a brokerage agreement. Someone offered the full asking price for the house. My attorney forwarded a contract of sale to the potential buyer’s attorney.

Although the potential buyer had the assets needed to purchase my house, he insisted that costly repairs be made to the house and he did not want to close on the transaction for six months. Since I refused to do the repairs and to wait to close, the deal fell through. The agent is now claiming she is owed the commission since she found a buyer who offered to pay me the full asking price for my house.

The Question: Does a real estate agent earn a commission simply by bringing in a potential buyer who agrees to pay the asking price?

The Answer: Although it is impossible to definitely answer your question without reviewing the brokerage agreement you signed, it would be very unusual if a commission was earned based solely on a potential buyer agreeing to the purchase price. When it comes to residential real estate, commissions are generally earned only when the agent produces a buyer who is “ready, willing and able” to purchase the property.

This standard requires that the seller and the buyer not only agree on the price to be paid, but also on other terms such as the condition of the property, what personal property or fixtures may be included in the sale, financing and the date of possession. A buyer may be ready and willing to purchase but, if he lacks the resources, he won’t be able to make the purchase, precluding the agent from earning a commission.

Similarly, a buyer may have sufficient funds and be able to make the purchase but, if he is not willing to accept the house in its present condition, the sale will not proceed and the agent generally would not have earned a commission under most brokerage agreements.

Even if the buyer and the seller agree on all of the terms and a contract of sale is signed, an agent may not earn a commission if, for reasons beyond the seller’s control, the deal falls through.

In difficult real estate markets where there are many obstacles to closing, experienced real estate attorneys are often able to negotiate and find creative solutions to those obstacles that turn potential buyers into buyers who are ready, willing and able to close on a purchase. When that happens, both the seller and the buyer, as well as the broker, reap the benefits of the sale.

Linda M. Toga, Esq. provides legal services in the areas of litigation, estate planning and real estate from her East Setauket office. The opinions of columnists are their own. They do not speak for the paper.