Expert: Ray Beggs - 6/13/2006

Question
Unethical, Dishonest Broker Coerces Us into a No Win Situation

The real estate problem that I’ve discussed with you previously has taken a turn for the worse.  Can you suggest a solution to our dilemma?

A brief background: My wife and I had been looking at condos for the last year, since we were looking to downsize.

Recently we saw a few condos that we liked.  At one of the condos the listing agent for the seller approached me to be my buyer’s agent.  The deal that he made in writing was that when we purchased a condo, he would share whatever commission he receives – 2/3 to us and 1/3 to him.  His argument was that since the buyer pays all the commissions anyway, he was only doing what’s fair in terms of charging a reasonable fee for his time. He also indicated that he was building his practice on this type of arrangement through referrals, and if he did well for us he would ask us to provide referrals.  Checking with a few brokers I determined that this was a legal arrangement, so we signed up with him.  He is an Independent Broker Agent with no employees (I’ll refer to him as IB/A).

About 3 weeks into the process, after we made a few bids, out of the blue he demanded that we pay him $1,500 upfront towards his commission, or he would not submit any more bids for us.  He felt that he spent sufficient time with us (about 10 hours in total over a few weeks) and not only demanded the payment, but also said if we don’t close on a condo in two weeks he wants an additional $100/hour; and if we do not end up buying one of the condos, he will keep all monies received.

Since we were in “the 12th hour” of negotiations, we were extremely upset at the situation at refused to submit to his coercion and manipulation, and also told him that because of his behavior we are canceling our contract.  Interestingly, I have kept copies of all our e-mail correspondence.  However, in his emails he ignores what I write and responds as if he is a wonderful agent (he says that of himself) and will do anything that we need to satisfy our needs.  Over the phone he is quite abusive and threatening.

Subsequently, he told me by email that he is canceling the contract at our request.  He also said that payment of his commission has nothing to do with whether or not we have a contract, but that the listing agents are obliged to pay him regardless as the cooperating agent – which I unfortunately verified with the listing agents.  He also sent each of the listing agents an email stating what was due him when we make a purchase.  I only see a few options, and all of them are not good for us.

Option 1 – use another agent to help us make the purchase.  Since we are ethically obligated to disclose the situation with IB/A, no agent would work with us under those circumstances unless we offered to pay him the commission out of our pocket if the listing broker compensates IB/A.

Option 2 – give IB/A the $1,500 so he will continue to submit our counter offers.  If we give him the money, given his track record there is no guarantee that he will honor his commitment.

Option 3 – explain the situation to the listing broker and hope he will work with us.  I’ve spoken with one of them and their position is that since the buyer’s agent commission is in contention, they would have to hold it in escrow until the situation is resolved.

Option 4 – submit the bids ourselves.  We would have to use the list broker’s agents, and even if that were possible, we would not receive any rebate.

Option 5 – get a lawyer.  This would just have us incur more expense.  Preliminary discussions with a lawyer were not positive.

Option 6 – not buy one of the condos he showed us.  This is a bad solution as well as it’s taken a lot of time to find what we want, and really want to purchase one of them but don’t want IB/A to financially benefit from the transaction.

Any suggestions?  

Answer
Hi Steven,

Thanks for the question. Did you sign a buyers agreement with him? If you did, then he will get his commission from any seller that you were shown by him. The buyers contract usually has a time limit in it such as, the agent gets a commission for any home that you're shown for 90 days. That means, if you're shown a home by the agent and you purchase that home within 90 days with or without the agent, he/she is paid a commission by the seller. Now, if you didn't sign anything with the agent, then you can buy anything you want without him or use any agent you want.

If you did sign the buyers agreement and you want to buy something that agent has shown you then you probably should work with the agent who showed you the property, since he'll get paid anyway. Another avenue to take and the one that I would probably consider would be to put in writing to the agent that you are going to cancel the agreement with him and then I would look at all new homes. This way, you'll be able to work out whatever deal you can with anyone and not have to involve the agent that is giving you trouble. I know that this may block out a few homes that you have already seen, but you'll find many more that will work for you if you keep looking...probably even nicer then what you have already seen.

Good luck and I hope this helps.

Ray