Help...Commission Payment on Lease to Purchase...AR Please Come to Our Rescue

Real Estate Agent with Dockside Realty VA 0225142975

If any of you have had or know any agents that have received full or partial payment of a commission on a Lease to Purchase prior to the actual transfer of title please let me know.

Lease to Purchase Agreements are becoming more and more prevalent in some markets.  We are seeing them even at Lake Anna. 

A seller I am working with is considering one right now and I am trying to figure out if there is any legal way we can include at least a partial commission in the terms.

Last August one of my listings had a Lease to Purchase Agreement accepted by my seller.  At that time we had the house listed for sale and also as a Lease to Purchase.  I received a payment equal to one month's rent on that transaction at the time the lease began.  I am still confident this house will be going to settlement, August 2009, and our brokerage will receive the commission at that time.  However, we have no guarantee.

The waterfront home I have listed now is in the MLS as a sale only priced at $698,000.  We had a client from another company go to the seller's home days ago and propose a Lease to Purchase.  At this point we are all trying to work out possible terms.   (We are also trying hard to not offend the possible purchaser by asking him to work through the agents.)

My concern is the delay in the commission payment.  Purchaser/Lessee would like a 2-3 year lease.  I discouraged my client on the three year lease because of how it would affect her ownership of the house.  If it did not settlement prior to three years of a lease she would have capital gains reprecussions as she will not have lived in the house for two out of the last five.

I understand the need to consider the sellers needs above my own and that is fine.  However, I am wondering if there is a legitimate way we (the two brokers) can receive some compensation for all the work we have to do in order to make this happen.

What happened to time is of the essence (for the REALTORS®)?

The seller will be receiving an upfront payment plus monthly payments.  The purchaser will be receiving the use of the house.  And the agents??????????????????????????? 

Are any of you experiencing this situation?  How are you handling it? 

If any of you have any knowledge of how this can be done or suggetions I would appreciate it very much.

I would like to thank ActiveRain and my fellow Rainers in advance.




If you or someone you know is thinking of buying or selling property at or near Lake Anna, Virginia please contact Kathleen "Kate" Elim.  Kate lives at Lake Anna, knows Lake Anna, loves Lake Anna, and specializes in Lake Anna area real estate. 

Call Kate at 540-226-1964 or by e-mail at Be sure to check Kate's Web sites  and blog at or


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Brian Block
RE/MAX Allegiance, Managing Broker/Branch Vice President - McLean, VA
Northern Virginia & D.C. Real Estate

Kate, I got your note to come over and read this post and I honestly have to say that I have zero experience whatsoever in this arena.  Good luck finding an answer.

Jun 28, 2008 08:00 AM #12
Deb Brooks
Brooks Prime Properties Wichita Falls Texas - Wichita Falls, TX

P.S. see, I really do sell real estate!


Jun 28, 2008 09:15 AM #13
Mary Jo Schaffer
Sweetheart Realty - Bandera, TX
Bandera Texas Real Estate

Kathleen,   I have done these before. In Texas we must use two contracts, one is an ordinary lease for a determined amount of time, second is a contract for purchase with earnest money and an agreed upon date of closing 1-2- or 3 years down the road.  You can receive a commission for the rental and a commission at closing of the sale.  There is no refund on money paid during the rental period if the buyer does not purchase the home.  Sometimes the buyer will pay more than the rent that will accumulate and be used as their down payment, but this is not always the case.  Hope I haven't confused things for you.

Jun 28, 2008 09:36 AM #14
Cindy Jones
Integrity Real Estate Group - Woodbridge, VA
Pentagon, Fort Belvoir & Quantico Real Estate News

I haven't seen a lease purchase where commission or partial commission is paid up front but that doesn't mean you can't structure one that does.  I would suggest as Gary says that an attorney might be the best one to put together an air tight agreement.  A three year process is WAY TO LONG for a lease purchase agreement.  With the market as is is, though you are a bit more insulated, doesn't mean that after 18 months it would be in your sellers favor.

Jun 28, 2008 09:37 AM #15
Deb Brooks
Brooks Prime Properties Wichita Falls Texas - Wichita Falls, TX

Kat, a recent implementation of HB??? (I forget) changed it so we can't use the dual contract anymore for the "lease to own". They actually put a stop to it because of the "deal makers" out there like kyosaki and other "teachers".

Scott and I were investing the same way...with the two with a lease and one with a purchase agreement. It was outlawed in Texas.

Now, if it is still legal there then go for it but I strongly recommend a lawyer's advice!

Later in the rain~Deb

Jun 28, 2008 11:02 AM #16
Jim Lee
RE/MAX Shoreline - Portsmouth, NH
Portsmouth NH Realtor, Portsmouth, NH

I'm involved in 2 lease purchase deals so far this year. Both of set to close in 09 and I will get my full commission then assuming they close.

Unless you get a substantial, non-refundable down payment up front or your seller has some cash laying around, there is nowhere for our fees to come from.

I also do lease purchase for investment properies I buy and they're always sold and closed, just not always with the original lease purchase group.

Jun 28, 2008 12:58 PM #17
Ron Parise - Cape Coral, FL

There are 3 things happening here, 1) the lease, 2) the option and 3) a possible future sale.

The listing agreement I use in Florida has, in the compensation section, a spot for each of these. ie, a percentage of the annual rental (or a dollar amount) to be paid when a lease is executed; a percentage of the option payment (or a dollar amount) to be paid when an option agreement is signed; and a percentage of the purchase price (or a dollar amount) to be paid at the time of  a sale, 

Your problem here (and at would be mine too) is that you didnt anticipate a lease or an option or a lease/option agreement when the listing agreement was signed. My suggestion is to write up a commission agreement for the owner to sign (right now!) that specifies the commission to pe paid for a lease and/or an option.

You cannot collect on the sale for two reasons, the obvious one is that the sale hasn't happened yet, and two there isn't even a purchase and sale contract. As you described it this is a lease/option not a lease/purchase agreement.  An option is a one-sidded contract. Only the seller has any obligations (within the life of the agreement he must sell at the stipulated price) the potential buyer has rights, but no obligations. 

Good catch by the way on the three year lease and capital gains implications..I bet most of us would have missed this

And thanks for the post. I will now be anticipating a lease or an  option or both at every listing appointment I go on.

Jun 28, 2008 02:35 PM #18
Emily Lowe
The Lipman Group | Sotheby's International Realty - Nashville, TN
Nashville TN Realtor

These have been good comments.  I always understood it to be paid when the sale actually happens.  I like Ron's idea of putting it in the listing agreement.  Only thing is, what about the buyer's agent?

Jun 28, 2008 02:55 PM #19
Roland Woodworth
Q Realty - Clarksville, TN
Q Realty - Power In Real Estate

Kathleen.... collect it up front... as one of the terms. I will park and see what others have to say.

Jun 28, 2008 03:15 PM #20
LaNita Cates
REMAX of Joliet - Joliet, IL

I might be working with one of these very soon! I would be surprised if a seller is willing to pay commission until the lease closes because the buyer might walk. I think before I showed a lease to own, I would tell the agent, I'm bringing someone and want to know your commission terms.

Jun 28, 2008 03:22 PM #21
Wayne B. Pruner
Oregon First - Tigard, OR
Tigard Oregon Homes for Sale, Realtor, GRI

This is a good thread you started here Kate. In my experience around here we get one months rent for the lease and a full commission on the sale. But that certainly is not the only way to structure it.

Jun 28, 2008 03:24 PM #22
Jay Badru
Keller Williams Realty Cityside - Atlanta Naval Air Station, GA
Certified REO/Short Sale/Foreclosure Specialialist

A lease purshase is not a sale, is a possibility that the buyer will buy in the near future. Therefore, no commissoin is due, unless the future buying can put  more funds into the transaction to cover agent' partial commission.

If you're working with a seller, the seller need comes first. He/She is the one taking theiir home off the market for future sale. Seller's Agent must clearly states their seller'r terms on MLS for serious offer's.

IF any selling agents want to collect commission upfront, it must come from buyer's funds after meeting seller's requirement. That is if a seller want $5k down, Upfront commission's of any amount must be amount above seller requirement.

Finally, all parties must agreed that all funds are non-refundable

Jun 28, 2008 06:54 PM #23
Russ Ravary ~ Metro Detroit Realtor call (248) 310-6239
Real Estate One - Commerce, MI
Michigan homes for sale ~

It is going to be tough to get commission on a home that hasn't actually sold. 

Jun 29, 2008 01:08 AM #24
Sun City Grand Homes Surprise AZ Real Estate Leolinda Bowers Designated Broker Leolinda Realty
Leolinda Realty - Surprise, AZ
Sun City Grand in Surprise Arizona

Kathleen, I've recently been approached by several buyers asking the same question.  According to other agents in my company, the percentage of the option being exercised is extremely low.  Good luck. 

Jun 29, 2008 04:51 AM #25
Myrl Jeffcoat
GreatWest Realty - Sacramento, CA
Greater Sacramento Real Estate Agent

I've not had a Lease-Purchase that paid commission before actual transfer of property into the buyer's name.

But, it is an interesting concept - perhaps partial commission for the leasing portion of it, and then remainder of full commission upon transfer of title to buyer.

Myrl Jeffcoat


Jun 29, 2008 03:51 PM #26
Jim Crawford
RE/MAX Paramount Properties - Atlanta, GA
Jim Crawford Atlanta Best Listing Agents & REALTOR

I have never paid a lot of attention to these things, because so few ever really close.  I understand it is important to get something on the front side.

Jun 30, 2008 12:48 AM #27
Karen Anne Stone
New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX
Fort Worth Real Estate

Kathleen:  I read all of the comments, and the two I like best are the second one by Sylvie Conde, and the comment by Deb at Brooks Prime Properties.

I agree that you cannot collect a full sale commission up front, because the home has not sold yet.  One month up front would be what I would do on the lease part.  My only other suggestion would be to keep it at a two year lease.  Although the sale/lease purchase contract has taken place during the period the listing was in effect,

I am wondering if maybe you need to either extend the listing period per contract to expire six months after the end of the second year of the lease.  That way the seller and buyer would be more inclined to consider you as part of the transaction when it happens way down the road... rather than hoping you would just disappear.  I would ask your broker about this, because it is an idea I just thought of, and am not sure of the legality.  Best of luck...

Jun 30, 2008 06:12 PM #28
Jessica Cordell
Century 21 Hendershot Realty - Madisonville, TN

Thanks for the great information . I have'nt worked with a lease purchase sell as of now and hopefully with the new information, I will know a little more about the details if I have the chance to to work on one. Thanks Again, Jessica Cordell

Jul 02, 2008 03:36 AM #29
Brad Clement
RealtySouth - Birmingham, AL
Brad Clement


We use a Lease-Purchase Addendum to the Sales Contract which spells out the terms of the lease.  You can negotiate with the seller to pay a portion of the commission upfront.  I'd be glad to send you a copy of the agreement. 

Feb 16, 2009 07:39 AM #30
Karen Anne Stone
New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX
Fort Worth Real Estate

Kate:  Watch out for the comment above me.  It is a spam comment.  I have seen perhaps ten of them tonight.  Also... I suggest you NOT click on the link... since it is spam... and may lead to some virus or trojan horse.  I suggest you DELETE the above comment.  Take care...

Jul 17, 2009 01:38 AM #31
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