From the Wall Street Journal, via today's REALTOR(R) Magazine Daily News...
Daily Real Estate News | January 30, 2008Builder Sues for Return of Commissions
A builder of luxury condominiums in Florida has sued real estate practitioners, seeking to force them to return the 3 percent commissions paid to them for selling 24 condos on which the deals never closed. In most cases, buyers walked away from their purchase contracts after the value of the condos fell.
Observers predict that this could be a trend. "We're definitely going to see more cases like this," says Austin MacMullan, a partner at Real Estate Research Corp., which studies housing trends. "This is just one of the side effects of the glut that I don't think anyone could have anticipated."
In the suit, Related Group of Florida says that sales practitioners are implicitly obligated in the sales agreement to pay back the advance.
But defendants in the case contend that the developer is to blame and it’s unfair for them to have to take the hit for sales that fell apart. It had become standard practice in the overheated Florida market for salespeople to be paid advance commissions.
Ed Roberts, the owner of Beachfront Realty Inc., says the contracts don't specify what would happen if the purchase fell apart. "We didn't think that if a buyer defaulted we would be asked to give back our commission," he says. What's more, Roberts says, much of the money went to individual broker-agents who left their companies long ago.
So, the agents and brokers involved expect to keep commissions from sales that didn't actually happen? Give me a break.
I don't care if the builder (seller) pre-paid the commissions, and I don't care if the commissions weren't covered in the contract... they shouldn't have to be. To anyone that isn't a moron it should be implicitly obvious that the commission was for SELLING the condos, not getting a contract that falls through. When the heck did real estate agents start getting paid for almost selling a property?
The media outlets in FL should print the names of these idiots, and then their competitors should just mention that these people didn't think their job actually included selling the property, just bringing contracts that failed to close.
Does that mean that if I have someone bring a contract on a property I list that I have earned the commission... even if they don't close? I don't think so. It makes NO difference if the commission was advanced... That has no bearing on whether the job was done.
I get so annoyed when real estate professionals do STUPID things and tarnish the whole profession. How can we expect the public to see us as ethical and honest when these bozos don't lose their license in addition to being required to pay back the cash they effectively stole.
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Hi Lane, you have to admire stupidity. I would have to ask...what did they think would happen if the sale fell through? Why would a broker pay out a commission on a closing that didn't happen? Your last sentence might not apply...they might not be professional in real estate....a license doesn't make anyone a professional. Nice post Lane it does make you wonder.