Expert: Dick Dennis - 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
Since I do not know what your contract with IB/A says, I cannot address that, but ordinarily the contract should have said that upon a certain event happening you must pay X amount of funds into escrow----not to him! When the escrow closes, then he gets paid.

However, he may require a deposit from you in advance of finding you a property and it is kept and maintained in his or his broker's trust account. It is also credited against whatever commission you are supposed to pay for the successful purchase of a property. This is stated in the contract.

As long as he has cancelled the contract, you may sign up with another agent and have that agent make the transaction. He will get paid for putting the transaction together AND IB/A WILL NOT no matter what it says in his contract. You do not have to pay him as long as another agent is getting paid for what he should have been able to do. IB/A may have advised the listing agents of properties he showed you, but it doesn't mean a hill of beans if ANOTHER agent gets paid for getting you the property you want. He is banking on your ignorance of the ways of buying real estate.

I do not suggest you talking with the listing agent to accomplish your purchase. You should have an agent or a real estate attorney handle your side of the transaction. It is obvious you are not familiar with how things are handled in real estate, so you need someone who is knowledgeable.

In this market there are always new listings coming on the market and you will undoubtedly come across agents you know nothing about IB/A and his antics. Business is so bad that they would be willing to work with you. Buyers are hard to find in this market. And YOU ARE ONE.

I wish you well.

Dick Dennis              dixiedee13@aol.com