Buyer broker agreements

I just learned of a friend being screwed out of a very large commission by a lawyer and a sharp, rotten buyer who verbally agreed to his terms but failed to perform at closing and in fact crowed “Hey, I f**ked you – get over it”. This is a growing problem. In the good old days of 2007, sales were all done via the Greenwich Multiple Listing Service, where sellers signed listing agreements guaranteeing payment of a commission to procuring agents and everyone was fat and happy.

Today’s market involves a myriad of players – first mortgagees, seconds, home owners, friends with temporary cash, you name it – and one party’s signed agreement is not binding on the others so even when a deal is pieced together, all the verbal promises that served as the glue are worthless. I myself put together a very small deal, with a commission that was fully disclosed and agreed to upfront by the buyer yet, just as I was patting myself on the back for putting my full, complete  effort into a tiny deal, my “client” came back wanting to renegotiate the commission. I abandoned the deal.

So screw it. My advice to my colleagues is to get everything signed for and agreed to up front, including a property lien from short sellers who won’t have the cash to pay you at closing. In bad times, good faith and words of honor are the first to go out the window.

17 Comments

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17 responses to “Buyer broker agreements

  1. Old School Grump

    Sounds like good advice. Articulate these needs from the beginning — diplomatically, but from the beginning. And when parties balk and act startled and offended and bristle at the fact that you don’t “trust” them, know that you’ve saved yourself hours of unpaid grief.

  2. Old Coot

    “Hey, I f**ked you – get over it” kinda sounds like someone we all know saying “Hey, I won the election”.

  3. whatever

    cf,

    when you say you abandoned the deal does/did the deal still close?

    • christopherfountain

      No, but it might still – I turned the matter over to my partner Fudrucker, who has no hurt pride (ego – the bane of my soul) at stake.

  4. The Duke of Deception

    Send over the address: after he closes the Duke will egg and tp the house. For free.

  5. Mazama

    Someone approached me to advise them on a business matter in which $350,000-$400,000 was at stake and for which he knew I am well qualified to facilitate. I proposed to provide some relevant advice and services to help move things along for a modest fee of $3,500. The guy’s “counteroffer” was $350. “Good luck and thanks for the cup of coffee”, I said as I got up and walked away.

    Six months latter the guy has accomplished nothing and he doesn’t even know why.

  6. Greenwich Ex-Pat

    Situations of this nature are becoming more and more commonplace, at all levels of society and even in rather mundane transactions. It’s not just a sign of the times, this is an example that has been set at the highest levels of government and business. It’s “trickle down” economics, except you have to ask yourself what’s trickling down.

  7. Priapus

    People are dicks.
    This is not new.
    Lather.
    Rinse.
    Repeat.

  8. Peg

    As some of you attorneys know, even “iron clad” contracts don’t mean a lot if you’re dealing with crooks.

    Many years ago, my industrial-Realtor dad sold a building…. and despite firm contracts, the seller wouldn’t pay him. My dad went to his office – and the guy climbed out a window to escape!

    Finally, after literally years in the courts – my dad won a judgment against him … and discovered that his attorneys’ fees were greater than what he had been able to recoup.

    I’d rather deal with an honest man/woman on a handshake than reams of signed papers with a cretin.

  9. Greenwich Ex-Pat

    “a sharp, rotten buyer”

    Sounds like a bad cheese.

    “Have some cheese, rat!” Bugs Bunny (or was it Daffy Duck?)

  10. RR

    what is the going commission on a sale of a greenwich property today? 5% is stated rate..and should it be disclosed to the buyer?

    • christopherfountain

      yes, it’s five percent and yes, it’s always disclosed to the buyer via the listing sheet. It’s also negotiable, but we tend to resist that fiercely.

  11. Old School Grump

    Mazama at 7:26: People like that are seriously annoying! Sometimes they’re flat out trying to cadge free advice (although they’d never admit it), but sometimes they genuinely think they’re doing YOU a favor by sharing their brilliant idea with you. Listen closely, Grasshopper, and perhaps you’ll learn something … consider your contribution to the conversation as the price you should willingly pay for this opportunity to access my wisdom.

    Gotta wonder though … given that this guy balked at paying you all of one percent of the alleged value of the alleged deal, is there any chance this deal was just a pipe dream?

  12. Retired IB'er

    Peg said: “I’d rather deal with an honest man/woman on a handshake than reams of signed papers with a cretin.”

    Could not agree with you more. All a good contract with a bad counterparty buys you is a lawsuit.

    No thank you.

    One of my creedos in life is to die never having sued, or been sued.

    So far so good…

  13. Anonymous

    Much of smart negotiation in business and life generally is based upon character judgments of counterparties, esp in stressful situations (like Sept08)

    Dishonest/noncreditworthy types will litigate nonsense forever

    Opportunity costs argue to simply avoid any negotiations w/such worthless characters; life is too short…

  14. foobar

    the business of brokering all types of assets, not just real estate, is twisting in the wind. The internet has everything to do with it. Margins are being squeezed, and expect more of the same, I say. A down market does not help. Very disconcerting.