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. But then again, I’m sure no one here is surprised. It’s just another day, another dishonest dollar for an agent. In any case, it’s an interesting question, and a situation that I’m sure many people have got themselves into. So what are we specifically talking about here? Ok, let’s paint a picture. 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, and as always, the devil is in the details of the T&C’s.
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 a similar issue, by the Court of Appeal in the case of Foxtons Ltd v Pelkey Bicknell.
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.
This rubbed the poor folks at Foxton’s the wrong way, they believed they were entitled to the commission because they initially introduced the buyer to the property, while also arguing that there was a clause in the agreement with the vendor, which stated something along the lines of them being liable to pay commission if they introduced the buyer.
So disgusted with the possibility of losing out on a precious sale, Foxton’s took legal action. Yes, Foxton’s wanted the vendor to pay commission to both estate agents. Fair.
Fortunately, the court decided that Foxtons weren’t entitled to the commission because they had not been the “effective cause” of the sale itself.
But the question is, 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, and then navively cough up the doe while crying themselves to sleep for working with such slimeballs.
Things to remember
I guess the most important rule is to ALWAYS read the agreement in complete when pursuing a working partnership with an estate agent- be wary of pretty much every clause.
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
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?
Disclaimer: I'm just a simple landlord blogger; I'm not qualified to give legal or financial advice. Any information I share is my opinion based on my personal experiences as an active landlord, and should never be contrued as legal or professional advice. For more information, please read my full disclaimer.