Dear Real Estate Adviser,
I signed a contract with a real estate agent three months ago and we’ve since lowered the sale price twice, based on his suggestion. He’s asking me to reduce it again, but I’m just not willing to do that.
I now want out of the contract but there are still three months left on it. If I rent out the property, the agent says he still gets a commission. Do I have to pay him?
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You’d have to pay your real estate agent something if his marketing efforts bring a renter to you — and possibly if they don’t.
First, let me stress that a seller should not (in nearly all circumstances) sign a listing contract longer than three months. If a home doesn’t sell in 90 days, but sellers believe the agent is doing his best under challenging circumstances (e.g., buyer’s market, high-crime area, isolated listing, etc.), the seller can then always ask the agent to extend.
However, generally speaking, for-sale listings start growing stale after a quarter of a year or so in the minds of buyers and their agents — who will begin to think there’s something wrong with the house.
Comb your contract
An exception might be a multimillion-dollar home because that buyer universe is far smaller, and the selling process is, by nature, more drawn out.
As for the agent’s contentions, you’ll need to comb through your contract. As noted, if the agent produced the renter, he’d likely be eligible for some commission, perhaps 10 percent of the gross amount of a one-year lease, or about a month’s rent. If the deal is written as a “lease-to-own,” the real estate agent would be eligible for a full sale commission if the renter eventually buys the place (which is rare), minus the juice he already got from the one-year lease, ideally.
But if you were to find your own renter before the unwieldy 180-day listing expires, that could muddy the waters. The agent could claim you acted in bad faith and impeded his efforts to sell the place in an active listing contract. He could demand some compensation and even threaten to sue.
Maybe it’s your fault
Realize that you may have thwarted a possible sale yourself by overpricing the place from the start. Agents sometimes accept what they consider overpriced listings, reasoning that the buyer will eventually have to drop the price anyway.
However, the truly ethical agent will find a diplomatic way to tell you that your price is too high, before taking on your listing to avoid just the kind of acrimonious situation you’re in now.
If you have cause to believe the real estate agent is not working in your best interests, document your complaints, and call or write to the manager of the brokerage saying you want out.
You might be able to exit simply by compensating the agent for his marketing costs. Many agents don’t want to work for someone who doesn’t feel comfortable working with them anymore. But I get the feeling your agent might not be this type.
You may have to stick it out
If you can’t gracefully dispense with the agent, stick to your current price and hang on for another three months if you can afford to do so. You can then rent it outright when the contract lapses or try to sell it again.
This time, thoroughly vet the agent, who ideally will be a top producer, and be sure to carefully consider his or her pricing suggestions and the rationale behind them before you put the place back on the block.
Rules vary from city to city on how long a home has to be off the market to reset the “days-on-market” marker to zero, but the range is usually 45 to 90 days. First, be doubly sure your current agent didn’t somehow tie you to a commission after your contract expires.
By the way, it is amazing to see how many sellers don’t read their listing contracts before signing them. Read your next one thoroughly or have an attorney do so.
Ask the adviser