unconditional house sale may fall through. Agent keeps commission?

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kingdragonfly

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#271822 28-May-2020 10:58

I was made an unconditional offer on my home, which I accepted.

The buyer indicated they had cash, but in reality they need financing. They asked for an extension, but since they were the low offer, by $18,000, I declined. The settlement date is tomorrow, so this may be hypothetical

Harcourt Johnsonville sent through a Commission Tax invoice.

So I asked the property lawyer that they recommended this question?

So if it falls through, they get a second commission on the second sale?

She responded

Yes, legally that is correct.

The sale is unconditional so the deposit is collected by them at that point and then their commission is deducted prior to vendor being paid the balance.

Technically, even though settlement hasn’t occurred, the property is ‘sold’. If the purchaser failed to settle, the deposit is forfeited, so Harcourts get to keep their commission and you get to keep the balance.

Harcourt Johnsonville
Commission calculated on sale price of $610,000.00
Base commission of $500.00
plus 3.10% of $610,000.00

Deposits Held in Trust

Particulars
Deposit on address removed

Date 21/05/2020 The settlement date is in the future 29/05
Amount $61,000.00

Total Deposits $61,000.00

Gross Commission $19,410.00
Advertising Fee $1,141.45
GST @ 15.00% $3,082.72

Total $23,634.17

Balance Herewith $37,365.83

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1294 posts

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#2493466 28-May-2020 11:01

So your almost purchaser loses 61k?

Tough experience ! Shame they didn't have pre-approved financing like a sensible purchaser.

kingdragonfly

4507 posts

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#2493515 28-May-2020 11:06

My understanding is if they miss the settlement date, they have 12 days before the whole deposit is lost.

They get charged about $210/day they are late.

Then they lose the whole deposit.

A bit of bravado on the purchaser.

elpenguino

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#2493517 28-May-2020 11:08

Small bonus for you while your agent chases your other two bidders....

tigercorp

642 posts

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#2493523 28-May-2020 11:23

If you're asking for thoughts on the agent keeping the commission with the sale falling through, then I say it's absolutely fair. They did work to get the unconditional offer so they should get paid.

I'd suggest that the value of the work they (and estate agents in general) did however, should be up for debate :)

wellygary

4684 posts

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#2493524 28-May-2020 11:24

elpenguino:

Small bonus for you while your agent chases your other two bidders....

And then gets to clip the ticket as it goes round the second time..

To be honest, I hope your first offer comes through, and the $61K deposit is a pretty big incentive for them to do so...

...but with COVID turning the economy upside down they may have had a change in economic circumstances impacting their ability to borrow...

elpenguino

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#2493532 28-May-2020 11:32

wellygary:

elpenguino:

Small bonus for you while your agent chases your other two bidders....

And then gets to clip the ticket as it goes round the second time..

To be honest, I hope your first offer comes through, and the $61K deposit is a pretty big incentive for them to do so...

...but with COVID turning the economy upside down they may have had a change in economic circumstances impacting their ability to borrow...

Agreed and agreed.

Also remembering, the difference between owning and renting for most people is the deposit so the failed purchasers will be set back in their life plan hugely if they can't complete.

If it's (only) 18k hopefully there's a solution for them somewhere.

Stu

Hammered
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#2493537 28-May-2020 11:37

Declined the extension? Surely, as this offer is well in play, 'A bird in the hand...' comes to mind. We were in a similar situation last year, and for the sake of a week or two delay (can't remember off hand) we accepted the request, on the condition we would be able to extend dates for our new house, which we were.

Keep calm, and carry on posting.

sen8or

961 posts

Ultimate Geek

#2493540 28-May-2020 11:43

wow, tough to lose $60k.

In my opinion, the right thing to do would be -

Agent gets to keep their commission and remarket the house. They should also get commission on the 2nd sale, afterall, they have sold it twice. Not different than a house flip where a property is sold quickly from the date of its original sale, they still did x2 work.

From the balance of the deposit, if you sell the house for less than the $610k sold earlier (as market conditions may have changed) then you should keep the difference between what the original sale value was and the new sale value and refund the original purchasers the difference. Legally required, probably not, morally / ethically the right thing to do though.

MikeAqua

5751 posts

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#2493582 28-May-2020 11:50

Look at it this way .. if you have to sell again you could use a different agent (assuming sole agency expires when the sale goes unconditional). If you did that, your new agent would expect a commission.

If your agent has to sell your house twice, why shouldn't they get two commissions? You want them working hard the second time, approaching it a s new listing almost, because if they juts go back to under bidders, your price expectations would be lower.

I would be negotiating for free marketing 2nd time round.

Mike

dejadeadnz

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#2493610 28-May-2020 12:24

sen8or:

From the balance of the deposit, if you sell the house for less than the $610k sold earlier (as market conditions may have changed) then you should keep the difference between what the original sale value was and the new sale value and refund the original purchasers the difference. Legally required, probably not, morally / ethically the right thing to do though.

Legally definitely not required. Ethically I also think you're taking a farcical unfair position insofar as the OP is concerned. I don't know when was the last time you sold a house but dealing with your own solicitors costs time (and the OP will need to incur a second set of fees), negotiating conditions like building inspection report/arranging for and allowing final inspection takes time (the next offer may be conditional). Why should the OP suffer all that detriment for nothing? I think ethically assuming the house sells for the same price, it would be brutal for the OP to keep all the deposit. But he or she is absolutely morally entitled to deduct a significant amount for the inconvenience suffered.

And it's time some people who buy (presumably) first homes do a bit of growing up before they sign on the dotted line. The standard form agreement is easy to read and understand and no one should sign unconditional contracts with having rock solid finance arranged. In all but very edge cases, such people deserve at best very limited sympathy.

sen8or

961 posts

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#2493615 28-May-2020 12:41

I was probably a bit lite on what they could morally keep, but in current circumstances, unless I was out of pocket actual $ expenses, I'd struggle to justify my own time to be compensated.I would expect my own lawyer costs which would come out of the amount refunded and other such similar expenses. Bought / sold in the last 6 months, yes, it takes time and effort but life in general takes time and effort with many activities.

What hasn't been advised if there is any knock on effect by the OP not agreeing to the extension. They don't have to provide a reason for not granting the extension, its their prerogative, but if its an arbitrary date that has no impact to their daily lives, whats the harm. Chances are they may have a settlement pending and any delay will cause them issues maintaining their obligations, all of which would equally be reimbursable from the deposit.

kingdragonfly

4507 posts

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#2493625 28-May-2020 12:56

So my opinion, which might be wrong, is the Wellington market has topped out, and any delay could mean the selling price would drop.

As far the the work the real estate agent did for $19,410, I moved out on a Monday

I paid for, out of my pocket

The house was cleaned on Tuesday.
The house was photographed on Wednesday
A builder inspector was also on Wednsday
a Trademe advertisement on Friday

We had one open house Saturday, for 45 minutes. 13 people came through.

I got three offers Monday.

The low offer was unconditional, and the buyer said he had cash.

I might be a little unsympathetic to the buyer since he's, well, not a Kiwi. I wouldn't expect any sympathy from him if the situation was reversed.

Nate001

288 posts

Ultimate Geek

#2493629 28-May-2020 13:11

kingdragonfly: So my opinion, which might be wrong, is the Wellington market has topped out, and any delay could mean the selling price would drop.

As far the the work the real estate agent did for $19,410, I moved out on a Monday

I paid for, out of my pocket

The house was cleaned on Tuesday.
The house was photographed on Wednesday
A builder inspector was also on Wednsday
a Trademe advertisement on Friday
We had one open house Saturday, for 45 minutes. 13 people came through.

I got three offers Monday.

The low offer was unconditional, and the buyer said he had cash.

I might be a little unsympathetic to the buyer since he's, well, not a Kiwi. I wouldn't expect any sympathy from him if the situation was reversed.

If your using that to justify your decision I feel sorry for you. Sounds like he made a silly decision on his own part but that shouldn't be part of it.

Why don't you give him the extension and guarantee you sale price of $610? If you think the market has topped out, do you think you will get >$570 in the pocket? If not you're worse off...

kingdragonfly

4507 posts

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#2493650 28-May-2020 13:32

I rejected a higher offer, which was conditional on financing, for his unconditional offer.

He misrepresented his finances, so not sympathetic to a potential out-of-country investor.

1101

2151 posts

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#2493651 28-May-2020 13:34

BUSH Lawyer Skills (pay me in beers)

Buyer wont likely just walk away from $60k deposit , especially if theres a chance buyer can get some of that deposit back.
Expect lawyers to get involved, especially since deposit will be held in a trust a/c, extra legal fees will cost the seller more money (so more losses to deduct from deposit ?)

Could be wrong, but I wouldnt expect buyer to AUTOMATICALLY forfeit ALL his deposit .
He can only keep enough to cover his losses , incl if he has to now sell at a lower price.
It will also depend on wording of the contract .
Will be legal precedents around this , so will depend on previous Court cases .

Also , check the contract to show when Agent is entitled to commission.
Im sure they covered their arse in the contract you signed . Agent would have made their contract to favor them, not you. :-)

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