Buying or Selling a Home/Agent compensation
Dear Diann Tonnensen, Thank you very much for volunteering on this site!
Background: We are selling a house in Louisiana as a FSBO. (We are doing FSBO mostly due to major financial challenges we are about to face).
We have paid an agent $400 to give our home an MLS number for 6 months. As part of the listing, we have agreed to compensate a buyer’s agent some amount. And sure enough, whenever we are contacted by an agent, one of the first things they wish to reconfirm, is if we are indeed willing to pay them a (usually specified amount of) commission.
We just recently received an offer from an agent. (She has the same last name as the buyer and we learned, she is the ex-wife of the buyer).
In conversations with the agent there has not been any mention of compensation for her, nor is there anything in the contract. We are a bit puzzled about this. If it is not in the contract, would she have any legal basis for asking us for anything later?
The offer stipulated – among other things – the following: the buyer wants to rent my house from June 1 till September 1 and then buying it. Buyer doesn’t have a house to sell but we learned he is the Air National Guard and will deploy sometimes in September. (We wonder if maybe the increased pay then is factored in and is the reason, or if he doesn’t want to break his apt lease).
Should I be concerned about the terms of this contract?
How could I make sure the buyer will be able to buy after two months of already living in my house?
What should I put in the contract to protect my interest?
I am thinking about proposing a rental agreement for $40/day – starting on 1 June - until the closing.
But while hoping for the best, would like to prepare for the worst and would like to also propose them an agreement that would state that if by 1 September the buyer cannot buy the home then the agreement will convert to a conventional rental of $1900/month w/ a $5000 security deposit?
Also, should I be concerned that the buyer's agent – as of yet - has not asked for any compensation from me? Could this come up later if it is not in the contract?
Once again, thank you VERY MUCH in advance.
PS: We hope to have the opportunity to buy a small house in Las Vegas one of these days. And if that should happen, we'd be looking for you!
Let's address the compensation portion first: A listing contract is between the seller and the real estate brokerage firm. When you signed your listing contract to put your home in the MLS, a specified compensation to a buyer's agent was probably part of that agreement. The listing agent then adds this information as part of the listing on the MLS, telling a buyer's agent how much they will be paid.
Purchase contracts, on the other hand, are between buyer and seller, so commissions are never part of a purchase contract. In most states it is actually a serious violation to put a commission in a purchase contract. So the buyer's agent would not address a commission in the purchase contract as she has already been offered a commission through the MLS listing contract. So you should expect to pay whatever you agreed to in the listing at the close of escrow.
As far as the purchase and lease, did the agent present you with a preapproval from the buyer's lender along with the purchase contract? We require those here before we will even entertain an offer. The lender's preapproval is not a total guarantee that the buyer will qualify, but at least you know the income, assets and credit have been checked.
This is how I would handle your situation in Nevada. I would have two sets of contracts drawn up. One would be a straight lease agreement with a specified monthly rent and security deposit commencing on June 1st. An addendum to the lease agreement would be that if the buyer purchases your house on or before September 1st, you would agree to place the full amount of the security deposit into escrow on his behalf and to have that credited towards his down payment. That way if the buyer does not purchase the property, the lease agreement is already in place and nothing more needs to be done.
The second contract would be the purchase agreement for September 1st referencing the fact that you would be depositing the $5k into escrow at closing towards his down payment from the security deposit.
These are, of course, just general guidelines that make common sense in any real estate market. For anything more specific, you would have to retain an agent locally that is licensed in the area, because every region of the country has different rules! Even with all my experience, whenever I buy something in another state, I always hire my own local agent.
Perhaps you could retain the agent that listed the home for you to look over the contracts for a flat fee and make suggestions? (We actually cannot do retainers here in Nevada. We have to have full representation or our errors and ommissions insurance does not cover us. But they CAN do it in Arizona. So you would have to find out from your local agent whether or not they can.)
Sure hope this helps! Good luck to you, Pablo. And I will be looking forward to seeing you here in Vegas in the future. :)