When Do You Owe Your Realtor a Commission? You Might Be Surprised

It's obvious to almost anyone that an agent has earned their commission when they've helped a buyer or seller close on a home.  However, based on the standard real estate agreements used by the majority of North Carolina brokers, real estate buyers and sellers are surprised by some of the other scenarios in which a real estate agent has technically earned a commission. In Part I of this "When do you owe your agent a commission?" series I'll address some of the lesser known instances in which a buyer's agent is owed a commission.  

Aside from a Closed Sale, A Buyer Agent's Commission is Earned When:

1. If the buyer, within an agreed upon period of time after the expiration of the buyer agency agreement, enters into a contract to purchase a home.  (This only applies if the former buyer's agent introduced the buyer to the home.  This does not apply if the buyer has contracted with another firm or agent.)
   • Basically, if your agency agreement expires and you immediately go back and buy a home shown to you by your former agent,  you owe your former agent a commission.  
2. If the buyer contracts to purchase a home but defaults (backs out of the contract).  In other words, if the buyer submits an offer, that offer is accepted but they decide not to carry out the transaction.
3. If the buyer enters into a contract to buy a home that the buyer's agent did not show them.  An example being, the buyer goes to an open house without their agent, likes the home, submits an offer and the offer is accepted but they never told their agent about the home. (This only applies if this occurs during the term of the agreement.) 

Will You Really Have to Pay Up?

It generally depends on the agent.  As much as agents are working for you and a commission, they are also working for referrals and future business. 

If you complain to your friends and word gets out to other agents and homeowners that your ex-agent charged you a commission even if you didn't close on a home, it may reflect poorly on that agent.  In addition to negative publicity, agents don't necessarily want to spend their time fighting for a commission. 

However, keep this in mind.  If your agent did their job, worked hard and you backed out or intentionally went behind their back and purchased or sold a home, don't they deserve to be paid for their work?

The Moral of the Story

Again, this is based on the standard forms used by a majority of North Carolina real estate agents and brokers.  Laws in other states and forms used may vary.  Agents can utilize other forms that don't contain these sections or address the same issues. 

A good agent will walk you through any contract.  However, I've seen eyes glaze over and the mindless nodding of heads from many buyers and sellers when it comes to contracts.  The long, dry and seemingly endless agreements can seem daunting and pointless but they're extremely important. 

The point is make sure you read any contract, ask questions and fully understand what you're agreeing to before you initial and sign.