Referral Agreements - Are they with the Broker or Agent?

Question

Here's the scenario:

I'm a licensed real estate salesperson in NJ. I also have a real estate investing company where we purchase a small 2-unit apartment building and partner with a contractor to convert them into 2 condo units. "We" is an LLC that has 2-3 members, of which I am one.

The contractor handles all the permits, drawings, work, etc. and then chooses the listing agent when the units are ready for sale. Another one of our LLC members signs off on the listing and I send a Referral Agreement to be signed. I receive it back from the agent with his signature only - no broker signature. This is my first referral agreement, so I don't know any better.

Fast forward a few months later and one of the units sells. I email the agent that I had the Agreement with and he tells me he's no longer the listing agent but another agent in the same office made the sale. I contact the broker, who is different from when the agreement was made, and she says that the Referral Agreement terminates with the listing agent and since it wasn't the original agent that sold the property, I'm not due any money.

It's my understanding that the Referral Agreement is with the broker since it's their listing, not the agent's and that the agreement should be honored even though it wasn't signed by the broker in the first place (oversight on my part for not catching that). If it were a few hundred dollars, I wouldn't be chasing it, but this is quite a bit more that would be landing in my pocket.

Your thoughts? Thanks!

Wayne Brooks · Answer

@Joshua Kaufman Your original referral agreement is not valid, since it has to be signed by the Broker for the brokerage co.  Now, you could possibly cause some problems for the agent who didn’t get the broker’s signature, which as you know you should have verified, and perhaps put some pressure on the brokerage by complaining to their state real estate commission, your only source of possible recourse, but not likely.

Rick Stein · Answer

Why is your contractor signing the referral agreement? Is he a managing partner with your LLC? Is your LLC licensed as a broker? if not, he can't sign the agreement. A commission can not be paid to an unlicensed entity, LLC or agent. You should be signing the referral agreement as a licensed agent. I have the same exact scenario happening now with a referral I made to Florida. I would  not have  even known a sale happened had I not spoken to the buyer on a another matter yesterday. I contacted my company's referral department and they are pursuing the referral fee.

None the less, the referral was made to an brokerage agency. Regardless of whether the original agent made the sale or another agent within the company, you are due the referral fee.

Wayne Brooks · Answer

As far as I know, All agreements are with the Brokerage Company, and signed by the qualifying broker. An agreement signed by just the agent is not valid.   I’d say you’re out.  And, if it were valid, it would be payable to your former brokerage.....we don’t know what your agreement with them said about fees to you after you leave.

Jason Lee · Answer

Something doesn't add up here. Did the original agent leave the brokerage you had the exclusive with? You just say another agent at the same brokerage made the sale. You need specifics. And where is your broker in all of this? If you're a salesperson then the referral fee goes to your broker. He/she is the one that should be contacting the other broker.

Jonathan Herron · Answer

@Joshua Kaufman from the facts you supply it seems that the Broker when the sale was made is different from the Broker whose Agent you had a Referral Agreement with.  If you changed listing brokers I am not sure that the referral agreement would still be active. (Can't give specifics without seeing the specific language of the agreement).  Did any Member of the LLC sign a new listing agreement?  If not it sounds like there might be other issues related to the transaction.

Also it seems weird that the LLC does not choose its own Listing Broker.  Especially considering that with you being an Agent you would have the knowledge to choose the right Broker.  Feel free to contact me if I can be any further help.

Jon

Aaron Poling · Answer

I don't work and am not licensed in New Jersey and obviously haven't reviewed the documents, and am not an attorney but will give you a basic opinion based on how this is handled. This is not a legal opinion just a personal one.

The referral agreement is with the broker. The listing agent signed on behalf of his company, possibly he shouldn't have but that should really be their issue to deal with. I am guessing that the listing agreement was signed with him, so any agreement he had on that particular listing should follow the listing. Even if they could technically get out of paying you, its bad business. Obviously if they treat you right, it could lead to a lot more business referred to them, and if they don't they risk losing all of their business.

You may also want to check and see if you are getting turned down by the actual broker or a manager. If you don't get the right answer you can always escalate it to the actual broker, the owners of the company, regional managers, etc...

Hope this helps, Thanks Aaron