How to collect your fee when your client refuses to sell

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A woman stands behind a small model of a house on a table and cups her hands around the sides of the model.

02/20/2015 | Author: Editorial Staff

My client received a full-price offer on a property I listed for him after signing a Residential Real Estate Listing Agreement Exclusive Right to Sell (TAR 1101), but he now states he is no longer interested in selling his property and refuses to accept the offer. I believe that I still deserve my commission because I fulfilled my obligation under the listing agreement by bringing him a suitable buyer. Am I still entitled to receive my commission?

Yes. Paragraph 5 of the TAR Listing Agreement explains that a seller will pay the broker either a percentage of the sales price or a set fee when the compensation is earned and payable. This paragraph also lists the circumstances when compensation is deemed “earned” and “payable.”

In this situation, you could argue that the compensation was earned when you procured a buyer who was ready, willing, and able to buy the property at the listing price, and the compensation was payable when the seller refused to sell the property after your compensation had been earned. Alternatively, you could argue that the seller’s refusal to sell the property was a breach of the TAR Listing Agreement, and that compensation was earned and payable as a result of that breach.

If negotiations with your client fail and your client is not willing to pay your compensation, you may need to contact an attorney.

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Categories: Forms, Legal
Tags: legal, legal faq, forms, listing agreement, commission


Rick DeVoss on 05/28/2015

Gaye—- You have several issues that will need your attention.  If you are new in the business, you are learning on this one.  If you are Not new in the business, you are certainly learning on this one!

First of all, never let someone put “N/A” on contract.  The question either requires a yes/no answer, the word “none”, or some other write in such as “not applicable.”  The seller’s attorney should be responsible for that one.  So before you start considering lowering your commission, much is the attorney getting paid?

Unfortunately, this relates to another blog I just wrote on, and it shows how attorney’s are getting paid up front and Realtors are not.  Why have we let this happen people?

Secondly, I would say you need to know the people you are signing contracts with and expecting to pay you.  Are you saying that you signed a Listing Agreement with a person who is illiterate but you did not know that when you signed the Agreement?  Are you saying they are smart enough to be a member of Country Club, but not enough to pay the dues and taxes?  (Perhaps I should rephrase that: They have enough money to be a member of a Country Club, but not to pay the dues?)

$13,000 in back taxes is a lot of money on a vacant lot.  You did not disclose the price of the lot.  Why was this all not researched when you first listed the property?  Why was the situation not discussed when the title company produced the paperwork 5 days prior to closing?  ~In the scenario you gave, it should have never gone to the day of closing.

And third, don’t play ‘intermediary’  and go hire an attorney.

Good luck!

Joe on 05/27/2015

Well to start with the blank you are talking about which happens to be critical in this case should be answered with YES or NO..  I believe most understand N/A to mean Not Applicable..  Why did you allow N/A to be placed in that blank?

Are you the broker? If not, the decision about what to do at this point is dependent on what your broker wants to do.

Anyway, it sounds like you or the broker will probably either just have to write it off as a bad experience,  contact an attorney or try to negotiate with the parties and try to get them to both make up the short-fall and/or you maybe reduce your commission if there is enough commission money in the deal to make it worthwhile..

Good luck!

Gaye Watkins on 05/27/2015

I have a Listing Agreement (for a lot not a house) signed by the seller in front of his attorney.  On the LA, it states “n/a” for are there any unpaid, taxes, poa fees, etc.

Seller and attorney received copy of title commitment 5 days before closing showing $13,000 worth of back taxes, POA fees and country club dues. 

HUD was given to seller the day before closing showing they must bring $13,000 to the table. 

I am the intermediary and all parties have signed off that it’s okay.

Day of closing, BUYER signs and sends his wire (cash transaction).  Seller says they don’t have $13,000.  Bank that seller owes the mortgage to, states he will not reduce payout, that he’ll take it to foreclosure first.

Seller is being advised by attorneys and all docs are signed in front of attorney as I understand seller is illiterate.

What is my recourse if this doesn’t close?  I brought a willing buyer/seller.

Rick DeVoss on 03/02/2015

You have brought up an interesting question, ...but an attorney should be consulted.  It is possible that both you and the listing broker are entitled to the commission.  Under the terms of the listing agreement, the seller swore that he had clear title to the property.  (Is it ‘fraud’ if he doesn’t?)  So the seller’s broker would have to sue him for the total commission, and then pay you the portion agreed to.  (Notice, I did Not say “split.”  Listing commissions are not “split”!  ~Whoever came up with the idea that they should be 50/50??)
It is a good idea to have your favorite title company run the title search as soon as the property is listed.  Perhaps your cash offer caught them by surprise.
The English language is full of pot holes and booby traps.  The word for an encumbrance against the property is “lien”.  The word “lean” is like a steak with no fat.  (adjective)  Or, as a verb, it can mean to put your weight up against something, or to stand at an angle which is not upright.
Perhaps you and the listing agent could negotiate a settlement with the seller, and tell him you won’t sue for the full listing commission if he will compensate you for your time.  (Maybe he doesn’t want another lawsuit.)  Good luck!


Lucy Ndoro on 03/02/2015

I had a buyer few weeks ago. We made a cash offer it was accepted after a long negotiation process. My buyer had inspection done, but the day before the closing the title company pulled the title and there was a lawsuit and the house could not sell. The seller claims that the house was not supposed to be part of the lawsuit. Am I entitled to anything? The sellers broker says she had no idea there was a lean on the property and I believe her.

Rick DeVoss on 02/27/2015

@Dottie—Your question may need an attorney to answer it.
But I would presume that one opinion might be that the Listing Broker only agrees to pay the Selling Broker when the transaction closes.  The MLS “contract”  is not the same as the Listing Agreement.

Dottie Worthington on 02/26/2015

Another scenario….what if you are the buyers agent and bring a full price cash offer to the table and the MLS offers 3 or 4% to the co-broker, does the listing broker have to pay the selling broker anyway when the seller backs out?

Rick DeVoss on 02/26/2015

Several good comments have been made so far.  I am just trying to figure out why I just got this newsletter when it is 6 days old.(?)

I like the analogy to a large cruise ship that is steaming full speed ahead.  ~It takes a lot of effort to “turn the boat around.”  For all the many years I have been in this business, I have advocated that we need to change the way we do business, and this is one good example.  I have left several Brokers because they did not agree to back me up.  As an “agent”, your hands are tied.  The contract is always with the “broker”, and he/she may not agree to pursue someone when you want to go after your money earned.  So you either have to go to work for a different broker (interview them first), or, you have to get your Broker’s License.

What you CAN do as an Agent, is to write in the agreement the amount of money you expect to make under any scenario, and get the client to sign & agree to it.  The money goes to your Broker, but most of them will pass it on to you when you earn it.  (especially if it is a small fee, and not a full 3%  commission.)

Personally, I think we should all be paid a ‘retainer fee’ up front when working with any client.  You can word it different ways in your written agreement, but the point is, it needs to be in writing.  When working with a buyer: Do you show them houses for free??  Do you let them get away without paying you anything when they decide not to buy a house after 3 or 4 months of working with them??  (Maybe they called another agent and just didn’t want to tell you…)

Buyer’s should have to pay a fee up front in my opinion.  Maybe it is small (like $500), but it depends on how much work you are putting in, and maybe the price range.  (One Hollywood agent told me he would not put a buyer in his car for less than $1,000.)  You can charge them up front, and offer to rebate it at closing.  This guarantees that they will stick with you and not call on another sign.  You could even offer to double the rebated amount at closing.  But I really hate it when people have the impression that Realtors work for free.  ~And who gave them that idea??  WE did!  It’s our own fault, people.  We need to turn this boat around!  But only your broker can do it, in conjunction with all the other brokers in town.

Now I am not suggesting we violate the FTC rules, so don’t write me about that one.  We can all get better educated, and act a little wiser when we write up a contract, or working agreement.  We can design our own Buyer’s Rep Agreement, and put in the terms that you want to work for.  The buyers will either sign it or walk away.  Why are we all so afraid they are going to walk away??  ~It may be better for a few jerks to walk away, and then we can go spend our time working with people who appreciate what we do for them.

As for sellers, it is a bit more difficult.  But you can do two things without even getting the Listing Agreement changed (like it should be).  You can charge a fee up front for your advertising expenses.  (I would say that $500 is a minimum.)  You can also charge a termination fee that applies for ANY reason.  I usually make it $1,000 if the seller terminates at any time after the first 3 days.  What is a “full price contract”?  I don’t think you will get any two attorneys to agree on that one!  And what about all the lower offers we get?  What if the seller rejects a perfectly good offer on his over-priced listing?  ~Your advertising efforts are what brought him that offer.  Shouldn’t you be paid for that?

Ask yourself what your time and expertise is worth.  If the answer is “Zero”, then you can continue acting the way you’ve been acting.  But if you think your time is worth more than nothing, then I suggest you write the amount into your agreements that you expect to be paid under ANY circumstances.  And stick to it!

[I had one guy who refused to pay me $25 for the gas to show him HUD foreclosures, and I picked up my file and walked away.]  That was a long time ago; today it would take $50 to fill the tank.

Charge customers what you expect to be paid, and if they refuse to pay it, let them go waste another agent’s time.  You’ll be happier in the long run, and you won’t need those blood pressure pills from your doctor.  (who gets paid for an office visit up front)

Milton Watson on 02/26/2015

I am a broker and I agree with Bill Morris that loss of time and reputation would prevent me from ever suing a client to recover the commission.  Just let the good Lord reward you in other ways, such as those listings that sell in a couple of days at no cost to you.  We have to take the bad along with the good.  Our reputation is too important to allow things like this blemish it, whether we are in the right or not.

Joe on 02/26/2015

Yes agree with the answer provided by the Editorial Staff in response to the question. In the real world of real estate, that exact scenario isn’t normally that cut and dried.  Yes, the broker would be “entitled” to the commission, but the real question would be, “is it worth pursuing”? Sure, ask the client for the commission! Use your negotiation skills to help the client understand that you “earned” the commission. The amount of the commission might have a direct impact on whether it’s worth pursing in a court of law or through mediation. Is the commission $1200, $12,000, or $120,000. See my point? 

Bill Austin, you bring up some good points. I personally don’t believe that just because it’s titled a Listing Agreement, that makes it an agreement and not an enforceable contract.

I do believe the Listing Agreement Form could be cleaned up and further details about what constitutes bringing a Buyer ready, willing and able to buy the Property at the Listing Price. With that wording it sets up a potential conflict if an offer came in that was at the List Price, but everything else in the contract was undesirable for the Seller (Survey, Line 12 Closing Cost Assistance, Title Policy, Multiple Contingencies, Extremely Low Earnest Money, Extremely Low Option Fee, Unreasonable Repair Requests, Unreasonable Special Provisions, Unreasonable Closing Date, Etc..) Everything is much clearer if the Seller had accepted an offer for any Sales Price and then later breached the contract. Commission is clearly earned in that case, but the “bringing a ready, willing and able Buyer” part of the agreement is messy.

As is normally the case in life, something bad will probably have to happen before the language is cleaned up or refined to make everything clear or make better sense.  It’s not hard to envision some broker somewhere where with a multi-million dollar listing deciding to sue for commission because the Seller changed their mind about wanting to sell and then a Buyer coming along and giving an offer that meets the full List Price provision in the Listing Agreement, but nothing else about the offer is good for the Seller. 99.9% of brokers probably wouldn’t do it, but it’s probably just a matter of time before someone does, if it hasn’t already happened.

Bill Austin, Bullet Point #3 “Are you willing to sue your client?” : Don’t you think it probably depends on the amount of money at stake and the investment (money and time) that had already been made by the Realtor to market the property.

Bill Austin, Fiduciary Interest Comment: If the client already breached the Listing Agreement and or Sales Contract, I don’t think the “fiduciary interest” is in play.. Are you going to be concerned with the fiduciary interest of the client, if the client is suing you? The fiduciary interest only applies as long as the client is under a viable agreement/contract.  Not for life and certainly not after the client breached an agreement or contract.

Marilyn Newland on 02/26/2015

This happened to me in December of last year. We were in contract and the buyer needed an extension of the closing date . The seller refused to extend because they had decided not to sell after all. I have a termination fee in my listing agreements of $395.00 , which the seller paid. It’s nowhere near enough for the time I put in but it does cover the photographer’s fee and some of the hard costs. I am getting ready to increase it to $500.00 because my costs are increasing. I think this is only fair- or at least close to it- and I don’t ever have sellers refuse.  I explain to them that it’s one thing to not make a commission , but another thing altogether to lose money I have already spent.

Karen Coughlin on 02/26/2015

This may be one of the most painful parts of this business.  I had a listing, obtained a full price offer within 10 days and when the buyer’s title company did not do their due diligence within the title search work and it involved the IRS.  Unfortunately, my hands were tied but the buyer held me responsible for the delayed close.  They had contracted another home on a contingency.  When this occurred, they released me as their agent and immediately allowed the agent that had the listing to sell the home.  In this scenario,  I felt I should be able to approach the other agent and agree to compensation.  But as many of you had said, is it worth the money, time and battle.  I do, however always learn another tip of the industry when this type incident occurs.  Buyers and sellers will continue to hold agents responsible even when our hands are tied.

Debbie Russell on 02/26/2015

In response to Bill Morris’s comment above Yes I agree with all that you have said.  If an agent is concerned about this they can or should add to special provisions; 1) pre-determined monetary termination fee. 2) if the seller is going to pay the title policy, if the seller is going to accept FHA, VA, etc. there is a pretty decent check list that could be made up and signed in advance to where the perimeters of this full price or full ask listing.  The problem is most agents wait until later to raise their hands regarding their monetary protection.  If you want protection own it, own it up front and in writing and make a decent check list of what the seller considers full price or full ask and get it signed by the seller.  It’s impossible to cover all the bases and yes sometimes we do lots of work and don’t get paid right or wrong at the end of the day I can hardly believe that the time effort and drama would be worth it.  That’s when you just “give it over to the higher source of Universal Rule of Law, what comes around goes around”.  Sometimes the seller has a genuine reason to terminate perhaps they are too embarrassed to share this genuine reason.  Other times they are just careless and don’t care.  Getting to the heart of the termination and having a peaceful meeting of the minds if possible is best for future business.

Morris "Bill" Austin on 02/26/2015

Also not an attorney…but here are a few thoughts to consider.
1) We use a “listing agreement”, right? Is it a “contract” or an agreement?
    An agreement can only be in effect when the parties continue to agree.
2) Is an offer “full price” when there are items the seller will have to pay for within
    the offer? Title Policy? Survey? Home Service/repair,  HOA transfer fees?
3) Are you willing to “sue” your client?
4) If you lose at what cost? $‘s, Time, Reputation?
What about your fiduciary responsibility to serve the client before all others including yourself? If a client changes his/her mind about selling are you serving their needs by suing them?

Does it suck? Yes!

Michelle on 02/26/2015

Yes you might still be able to cloud title.  I am not an attorney either but a contractor lien is a feasible cloud to the title and since the breach of contract is about the home this might be viable in the eyes of the law.  Contactor liens are not waived by the homestead exemption and technically you are a contractor to do work for the property.  Just a thought.

Barry Buchanan on 02/26/2015

I had a listing agreement on a home and later the seller wanted to cancel the contract. I said ok, but you have to pay me for my advertising.  I received a check for a little over $2000 for advertising.  My point is, you have to negotiate on everything.

Carleen on 02/20/2015

The residential business model has been that we work on a contingency basis and in most cases never get any money from the buyer or seller just to cover our costs.  ‘It takes so much effort to turn the “BOAT” around.’  There have been a number of companies out there that have provided services on a fee basis.  When that is done, it is usually at a minimal cost to the clients, but at least the clients have some skin in the game. 

I have said we should always take a retainer fee up front (like an attorney or a management consultant) at the time of a listing or when a buyer wants to start looking at homes to buy.  In both cases, there should be a written contract between the client and the agent/broker.  We would then be paid for our experience and knowledge in the market place.  That means everybody pays for our services, not just the ones that listen to us and we have a successful closing with them.  As long as we jump and run any time someone calls to see your listing, advertise “free market analysis” and/or offer to give back part of the commission (professional service fee would be a more accurate term)  to either party, we will be at the bottom of the food chain instead of a professional provider of real estate information.  Of course, that means many of the real estate agents out there need to get the proper training and “be in the market” every day, not try to do real estate PART TIME.

Richard Weeks on 02/20/2015

Some will
Some wont
So what

So the broker takes this person to court.  How much will you and the broker lose when this individual bad mouths you to everyone they know.

Not worth it.

Dena Smith on 02/20/2015

Yes contact an attorney and I’m NOT an attorney.

It is the broker’s decision whether or not to pursue your client -  the contract is between the broker and the client.

The reality is… if you pursue this you will most likely end up in small claims court. And if you win, you will get an abstract of judgment to be filed in the county or counties where your client might own property.

Here’s the catch - if your client has a homestead exemption filed he can sell and not have to pay you to close the transaction. You do not have the ability to cloud the title on a property with a homestead exemption in place in Texas. So unless your client has multiple properties it isn’t likely you will ever recover your commission this way.

If your client is willing to discuss and negotiate, you might be able to convince him to pay some of your commission to cover expenses. That’s going to be a tough sell.

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The material provided here is for informational purposes only and is not intended and should not be considered as legal advice for your particular matter. You should contact your attorney to obtain advice with respect to any particular issue or problem. Applicability of the legal principles discussed in this material may differ substantially in individual situations.

While the Texas Association of REALTORS® has used reasonable efforts in collecting and preparing materials included here, due to the rapidly changing nature of the real estate marketplace and the law, and our reliance on information provided by outside sources, the Texas Association of REALTORS® makes no representation, warranty, or guarantee of the accuracy or reliability of any information provided here or elsewhere on Any legal or other information found here, on, or at other sites to which we link, should be verified before it is relied upon.

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