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Expert: Risa French — 6/13/2006

Question

Unethical, Dishonest Broker Coerces Us into a No Win Situation

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

Dear Steven,

Thank you for contacting allexperts.com. I hope that I can assist you with your question.

I am not an expert on all of the rules and regulations governing real estate in every state. However, from what you tell me I would say that what is happening here is either illegal or very unethical. It’s brokers and agents like this that give all real estate a bad name. Extortion should not be part of a real estate contract!

The first thing I would do would be to contact my state’s Real Estate Commission (normally located at the state government level) and find out if this type of behavior is sanctioned by them. My guess is that it is not. At which point, if you feel it is necessary you may file a complaint against the realtor in question.

If by chance these practices are legal and sanctioned by the board you are in a very difficult situation.

First of all, if you put an offer in on any property that the realtor showed you, most likely your buyers agreement states that you are responsible to pay him his commission whether or not he brought the contract to the seller. Therefore, even if you go to another realtor at this date, you will still be required to pay the broker his commission. Most likely too, if another realtor finds out that you already have a relationship with someone, they will not wish to interfere with that relationship.

If you go directly to the listing agent, most likely (depending on how your contract reads), you will still be responsible for the commission.

Here is what I would do if I were you. Beat the guy at his own game.

Find out from the commission what the rule and regulations are. Find out where he is in violation. Have the board fax you a copy of the statutes/rules/regulations that cover commissions, etc. Then contact the realtor and tell him that you INTEND TO FILE A FORMAL COMPLAINT WITH THE STATE BOARD AS WELL AS THE LOCAL BOARD OF REALTORS, if he does not, immediately release you from your buyer’s agreement with him.

Be sure that you have a release prepared and have him sign it IN FRONT OF A NOTARY. Most likely if he is the kind of shady, scammer that I think he is, he will be more than happy to avoid any investigation by the board of realtors for his actions.

Make certain that the release states that ALL PROVISIONS OF THE BUYER’S AGENCY AGREEMENT are null and void, and that the realtor releases you from any obligation, whatsoever, including financial, for any property that you buy regarless of whether or not the property was located while the agreement was in effect.

REMEMBER! Do not be intimidated by scare tactics where he says he will SUE YOU! If the rules and regulations forbid his behavior, he will not have a legal leg to stand on. Any threats of legal action on his part is simply intimidation and bluffing. Do not let him scare you.

I think this will solve your problems. Now, if what he is doing is ok with the board, you are up a creek. In this case, the only option you would have would be to make arrangements with the seller to rent or lease the property until the buyers agreement expires and then wait 30 or 60 days (according to the buyer’s agreement), before you could put in an offer without owing him anything. This would be difficult, but it might be your only option.

Let me know if I can help further.

R. M. french

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