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Does An Estate Agent Get Paid Even Without A Sale?

Written by The Landlord on 23 Jun 2008

Estate Agents love money

So, the question is, does an estate agent get paid even when they’re not responsible for selling your home? I’m afraid so, it’s very possible. Don’t be alarmed if estate agents try and unfairly squeeze every penny out of you they can, they’re only doing their job (even if they didn’t actually fulfil a service).

It’s an interesting question, and a situation that I’m sure many people have got themselves into. Hypothetically speaking, you instruct an estate agent to sell your property with the condition of being liable for a pay 1% commission fee if the agent introduces the buyer. But somewhere with in the contract it states,

“you will be liable if we find you someone ready willing and able, even if you subsequently withdraw from the sale”

What does that exactly mean? If the vendor decides to withdraw their property from the market for no reason other than changing their mind, will they still be liable to pay commission? What if the vendor finds a private buyer? More importantly, how long does the terms apply for?

Ultimately, it can vary from agent to agent; the terms and conditions are, as always, stipulated in the agreement. Every estate agent generally uses slightly different wording, consequently it’s sometimes difficult to say whether commission is payable or not.

The general rule is that commission is paid only where there is a completed sale of the property, and not where the agent merely introduces a potential buyer. And of course, that’s how we all know the operation of paying an estate agent works. However, some of the more sneaky, sneaky estate agents often stuff the agreement with a clause which implies that they are entitled to a commission fee if they introduce a buyer that is “ready willing and able” to exchange contracts at a certain price. If there is such a clause, you may have to pay commission if you choose to back out after a buyer makes a firm offer.

The law- Foxton’s Vs Pelkey Bicknell case study.

The law is quite sketchy about the entire issue- there is nothing set in stone, from what I’m aware. However, there was a recent case that dealt with the issue, by the Court of Appeal in the case of Foxtons Ltd v Pelkey Bicknell. In that case, a Foxton’s agent showed a potential buyer around a house. The potential buyer later viewed the same property through another agent a few months later. Eventually, the buyer purchased the property from the 2nd agent, so they got the commission. Foxton’s believed they were entitled to the commission because they initially introduced the buyer to the property, and in the agreement with the vendor there was a clause which stated something along the lines of them being liable to pay commission if they introduced the buyer. The court decided that Foxtons weren’t entitled to the commission because they had not been the “effective cause” of the sale itself.

If the case study was put into the current content, the vendor would prove to be victorious, and the agent wouldn’t be entitled to any commission. However, that was one case, so it’s still not clear which side the law is on.

More importantly, how many people would actually take an estate agent to court over this issue? I’m sure many people would just read the clause in the agreement, believe the agent’s argument of doing their job by introducing them to a “potential buyer”, and then cough up the doe while slapping themselves on the forehead for working with such idiots and completely ignoring the smallprint.

Things to remember

I guess the most important rule is to ALWAYS read the agreement in complete when engaging into a working partnership with an estate agent- be ary of pretty much every clause. The secret is in the writing, as always. Just for clarification, you should verbally go over the commission structure in detail.

A few questions to ask agents:

Will I be entitled to pay commission if I end up selling privately?
How long am I tied into our agreement for?
Am I still liable to pay commission even if I change my mind and decide not to sell my property

If the estate agent DOES have a clause which states that you are liable to pay commission even if they don’t ultimately push through a sale, then I would either:

a) tell them to remove that clause
or
b) refuse to work with them. Why would you want to work with such money grabbing parasites anyways?

Has anyone been in this kind of situation, or heard of anything alike?

Sale-And-Rent-Back Scheme

Interview With The Hippy (HIP Consultant)

Estate Agent Uses A Poor Choice In Picture To Market A Property

Just Another Reason To Hate Estate Agents

Estate Agent Walks Into Property And Takes Viewings Without Notifying Tenant

Why You Shouldn’t Always Trust Your Estate Agent

1 Comment - join the conversation...

adnan ghani2011-10-22 15:19:55 I was using Foxtons to sell my house. The buyer introduced by Foxtons exchanged but did not complete. I am being asked by Foxtons to pay full amount of the fee because their standard contract states that fees are due on exchange and not completion. What should I do? 1