How could this happen? Well I found out that it can and it will. Our commissions can be unilaterally compromised by any seller, not just a short sale lender when you least expect it.
A new referral client contacted me late January to look at homes with her fiancé. They are under a tight timeframe to purchase because they need to vacate their rental property no later than the end of March. Ok! Let's get started.
We look at several homes and find the one that is ideal for them on our second tour. I contacted the listing agent to verify that it is available. She answers the phone and almost acts as if she knew who I was as she was very kind, open and ready for an offer. Terrific.
I meet with my clients to write a full price offer with an allowance towards closing costs. Very clean offer but we need an answer sooner rather than later. The agent tells me to hold on with sending it over until I have all of the buyer's pre-approved financing information from their lender. So first thing Monday morning I receive the necessary documentation and confidently forward the offer to the agent who is acting on behalf of herself. She recently purchased the property in order to flip it.
Hey, a standard sale will work fine for my buyers as long as we don't have to deal with any chance of a prolonged escrow and for the right price, this will work. The MLS printout that I have states that the commission offered is 2.5% and there would be a $1,000 bonus if we could close by the end of February. I don't believe we will make the end of February bonus date, but it sounds as if the seller is willing to compensate fairly (enough) and ready to close quickly too.
The evening after I submitted our offer I get a response from the agent/owner. I receive a counter offer with an addendum along with a fully signed purchase agreement. She agrees to all of our terms with the exception of paying for the buyer's home warranty and section 1 termite. I call her to find out if she has a termite inspection report already since she just purchased the home herself. She does and immediately sends it over. There is approximately $800 of work to be performed and a $200 re-inspection fee.
I consult with my clients to determine what they would like to do. Their cash is very tight and a $1,000 could make the deal a bit uncomfortable for them. I tell them that the seller/owner recently increased the purchase price by nearly $4,000 right before we came into the picture and since we are giving her full price why not counter back asking her to pay for the section 1 termite. The worst she could do is say "no" and then the buyer would have to come up with the money themselves. Ah ha! Famous last words.
The following day we get a response to our counter offer. It comes in while I'm in the field on my Blackberry. I pull up the PDF copy on my tiny Blackberry screen, scroll down and see her signature of acceptance! Yes! This is great news. I wait to get back to my office to phone my clients with the good news.
At the office I pull up the full version of the signed contract and see something that I could not see on my tiny little Blackberry screen. The box was checked stating subject to attached counter offer. What? Oh man. So much for my eyesight. I scroll down to view the attachments. There is counter offer #3. It states that the buyer's agent agrees to accept 1.5% total commission. What???? Can this be truly happening? Can a compensation issue become a part of the negotiation between my clients and the agent/owner?
In order to gain final acceptance, I must have my buyer's signature on this counter offer. If I were to dispute this with the agent/owner by sending a 4th counter offer back reverting to the terms already agreed to in counter offer #1 it could cost my client's their ability to purchase the home they want. I have a fiduciary responsibility to my buyers as outlined in the Agency Disclosure to not allow my own personal interests interfere with my client's ability to obtain a home.
Attached to the counter offer is a CBC form or that I must sign agreeing to the commission reduction. Oh brother. If I don't sign then they do not get the house. How very special is this? I know that I have no ability to refuse to sign. My only option is to contact the agent/seller directly to discuss this matter further without jeopardizing my buyers. I instruct my buyers to sign the counter #3 as their final acceptance of the terms of the contract. Now it is up to me.
I contact the agent/seller. I ask her what we can do about this compensation issue. She answers me with "what compensation issue ?". I knew right then that I was going to fight an uphill battle. I suggested that I would pay for the section 1 termite in exchange for the originally offered 2.5% commission. That is what this is all about anyhow. She said no. I suggested that we revert to her original terms outlined in counter offer #1. She told me that we cannot move backward at this point. We must move forward. Ok, how can I earn the compensation offered in the MLS? She did not give me any answer. I told her that I it was my fiduciary responsibility to act in favor of my client's desire to purchase her home and the only way for me to do that is to unwillingly sign her CBC form and in doing so I will be pursuing arbitration once escrow closes. Was she clear about that? Yes, she was.
And that is where I'm at. Trying to behave as if I'm as thrilled with this home for my buyer's sake while feeling utterly disgusted with the whole thing on the inside. I believe that I will prevail in arbitration pursuant to CAR's Legal network. It will be a lot of time and effort however that could have been so easily avoided. What a shame and a shocker! Agents, please DO NOT do this to your fellow colleagues. Bilateral negotiations are one thing but a forced compromise is not in the essense of good business practice or fair dealing.
UPDATE from 2/27/2011:
I want to give you an update on my ongoing escrow. I did contact the CAR attorneys again on Tuesday. The attorney told me that my signature on the CBC authorization form could constitute my uncontested agreement to the reduction of my commission. However, I told the attorney that I had written below my signature that my signature was provided only as a means to facilitate the purchase on behalf of my buyer and that I will be seeking arbitration immediately after COE. He said that was a good thing to do in order to prevail in arbitration.
The owner/broker did not like it however. She will not communicate with me now. After 3 messages to the owner/broker reminding her that I was waiting on the seller’s disclosures for my buyer’s signature I finally received them via email. With the disclosures she included yet another addendum #2 for my buyer’s signature. The addendum reiterated that my commission was reduced to 1 ½% evidenced by the signed CBC agreement where I indicated my disapproval of by stating that I would seek arbitration upon close of escrow. Her verbiage in the addendum read very ambiguously. She states that the buyer shall take full responsibility for the selling agent’s commission and not seek any legal action against the seller now or after the close of escrow. She also stated that the buyer has accepted the make, model and installation of the appliances and the central A/C unit installed with no further recourse.
The owner/broker emailed this addendum to my buyer’s lender and to escrow without mutual signatures. The lender had a problem with this addendum due to its implication that the buyer could be responsible for my commission therefore throwing off their cash to close. I told him to disregard the addendum as the buyers are not in agreement with it. I returned the signed disclosures to the seller only. The buyers have performed their appraisal, physical inspection and are now ready to close.
I’m waiting for her next move. My buyers understand what is at stake and wish to continue with the purchase. I will keep you posted.
I'm back! Nearly 6 months later but I wanted to fill you in. I'm filing my requst for arbitration with my board of Realtors tonight. I only have 3 days left to file with nearly 180 days passed.
As you can expect from my intent to arbitrate, we closed escrow on this deal with the reduction in my commission from 2 1/2 % to 1 1/2%. So even though I must pay $300 to the board for the right to arbitrate this matter I feel it is important. It is important to fight for what is rightfully ours. We cannot allow this type of behavior to reign in our industry. I'm certain that she thought she got away with it since it has been all this time now and with the cost to file vs. the reward she won't think think that I would pursue such a petty matter.
Well it is not petty to me and it should not be petty to any of you either. Large or small we must stand up for each other and stop enethical treatment and behaviors met by unscrupulous individuals like the seller/broker in my situation. I realize that many of us cannot afford the necessary filing fees to get started when they may not be certain that they will prevail in the long run. Many don't pursue grievances like this one just because they cannot afford to. But who will if we don't?
I appreciate your profound support as represented in this post. It is all of YOU that have convinced me to move forward on this and stop other agents from being bottle necked into something that they are not happy with just because they are feeling bullied or without proper resources to move forward. I'll take one for the team! Wish me luck!