Realtor charging me $2,500 to buy?!?

Question

Hello -

I've bought a 6 duplex's in the past year using the same realtor. I recently placed an offer for another one and noticed a "promissory note" of $1,000. This sparked my interest as I expected the realtor to be paid commission from the seller.

I looked back at my other properties I purchased and noticed on the first 3 I paid the realtor $2,500/duplex and the second 3 I paid her $1,000/duplex.

I'm disappointed in myself for not catching this earlier, I assumed she would have been forthright.

My stupidity aside, is it common practice for her to charge me $1,000 to $2,500 to use her services AND received commission fees? If so, is she required to speak to me about this or just sneak this into the pile of documents?

Any insight from professionals is very appreciated.

Thanks,

Dave

Mike Cumbie · Answer

Hi @Dave Brodie

When someone lists a property for less than my fee covers I have them pay the difference. For instance if Someone puts a 2% commission split, I then have to have the buyer pay the difference. Which is also why when someone lists low they don't get the traffic. Because agents tell their client that they have to pay a additional 1% (or whatever their fee is)and buyers say "No Thank you, what else do you have".

All that being said, there is not a situation on this planet that my client would not be fully informed as to what is happening.

John Chapman · Answer

In answer to your original question, it is not unreasonable to pay something on top of commission to a buyer's agent who is helping you buy investment properties, particularly if it's a lower end property.  Back in the day, I'd throw my agent money on top of the paltry commissions she'd make on foreclosures.  She needed to eat and I wanted her happy.  Deals still worked and we were both happy.  She was very upfront about it, though.  We spoke about it and it was in the paperwork.  I suspect your paperwork discloses the payment, but if your agent never specifically raised the issue, it's probably bad form (not sure it rises to the level of unethical.)  I have to agree with @Russell Brazil that it's really weird you are just now noticing all these fees you paid.

Kristin Kiddy · Answer

@Lien Vuong has a point.  Did you sign a buyer's agent agreement?  Often the contract will specify that the agent's commission will be paid by the buyer if the seller doesn't agree to do it themselves.  Also, commissions are not always percentage based.  They can be a flat fee or a combination of the two.  It is also possible during your purchase negotiation that the price was lowered but the seller told they didn't have to pay the buyer's agent fee (making it a wash more or less).

Lien Vuong · Answer

It is a reasonable addition to add that onto the Buyer's Agreement Contract. While I personally believe that it is dishonest and that's why I do not practice this myself, they should have been more forthcoming with you about it I see this situation happen from time to time. To ease your pain, in the Boston market sometimes the fee that is paid by the BUYERS is around 1% of purchase price.

They do it as a measure of protection for their time and effort in helping you with your search but they are clearly crossing the line of business integrity when they did not ask for your formal consent.

Anthony Rosa · Answer

For sure I would call and ask about this "promissory note" fee then bring up the other 6 that she got paid for.

Tchaka Owen · Answer

@Dave Brodie - the fees aren't the big issue, it's the non-disclosure that is problematic. While what your agent did is not illegal, it's arguably unethical. That action erodes trust, I agree that you should find a new agent.

Russell Brazil · Answer

Read everything you sign. Also, check your closing documents to actually see if this is a fee you paid.  Many people misread these agreements as they do need to typically state a fee to be paid, but that fee is offset by a cooperative fee being offered from the other agent.

It would seem weird if you kept paying fees out of pocket and never noticing.

Melissa Barnard · Answer

Hello @Dave Brodie, I wouldn't beat yourself up over just finding this out. Contracts are sometimes very foreign if you are not familiar with them! Most agents will only take the commission fee paid by the seller and be done with it, especially if you are a repeat customer. It seems like you have a greedy agent on your hands. Unfortunately, it is the buyer's job to read over the contract and can even have any lawyer review it as well so the agent really isn't required to tell you that they put that in there. You would just think out of good faith that they would. I would personally find a different agent that you can fully trust and that will not take your money intended for investing!

Realtor charging me $2,500 to buy?!?

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