Agent Commission

[Propertygirl1]

Hi all, hoping you can assist with my query.

If the buyer pulls out of their contract and was able to get 100% of their deposit back for legitimate reason/s, would the vendor still need to pay the agent her commission? as she had successully sold the property but due the building/contract buyer was able to pulled out of the deal.

Thank you.

 

[Big Will]

No as the sale never went unco.

 

[Propertygirl1]

Hi Will, would it matter if it's an auction?

 

[wylie]

How could someone pull out of an auction purchase through a building clause? I don't know the answer but I would think a property sold via auction could mean you are up for the fee, as it has sold and would be unconditional.

 

[PHP]

Hi Will, would it matter if it's an auction?

Hi Propertygirl1,

The buyer would normally do all the inspections done prior to auction. So the buyer will order in a building and pest inspection and also will have to ensure loan is ready or conditionally approved subject to satisfactory val. Once these are all ready, you can then go to auctions with confidence and bid to your limit only. If all goes well, you will sign the contract on the day with no cooling off and pay the deposit. AFAIK, you can no longer get this deposit back if even if the val falls short off the purchase price.

 

[Big Will]

If auction it should be unco the purchase unless agreed otherwise (don't know who would agree to conditions for an auction though).

If it was unco then yes commission should be paid to the REA however you mentioned that they pulled out due to conditions so no.

The REA doesn't even get commission on the cooling off if someone chooses to take up this clause.

 

[JDM]

It will depend on the State and the agreement.

In Queensland, the standard REIQ conditions for the PAMD 22a provide that the agent must be paid their commission if the contract is terminated for the Seller's default or by mutual agreement.

 

[Propertygirl1]

Whilst by nature, the auction will be unconditional; there is concern about the disclosure of some unapproved internal work.

Marketing contracts have been sent out to the potential buyers (that's what the conveyancer calls them)
I am currently working out whether it needs to be disclosed or not at auction.

And if not disclosed, whether you run the risk of the purchaser being able to rescind the contract based on undisclosed unapproved work.

In the case whereby purchaser rescind the contract because of non-disclosure of building works, do I have to still pay the RE?

 

[Propertunity]

It is possible for a sale to go unconditional as per a normal sale or at auction and then for the contract to be rescinded by the purchaser and have his full deposit refunded.

This happens occasionally in the case where the contract is deficient for some reason - missing a document / having an error in a document / full disclosure not given etc. I've come across it a few times.

In this case the selling agency agreement may well say that the agent is entitled to a commission, BUT most fair minded REAs would just resell the property. Bearing in mind that they normally pull their comm from the deposit held in trust, and in this case, they've had to refund it in full back to the first purchaser.

 

[Propertunity]

I am currently working out whether it needs to be disclosed or not at auction.

And if not disclosed, whether you run the risk of the purchaser being able to rescind the contract based on undisclosed unapproved work.

IMO, you are better off to disclose in a special condition, "The vendor discloses that xxx building work has been done without council approval, and purchaser accepts this in its present unapproved state, and blah blah blah."

That way there is no way the contract can be collapsed unless you or the buyer die or go insane in the settlement period

 

[Big Will]

Whilst by nature, the auction will be unconditional; there is concern about the disclosure of some unapproved internal work.

Marketing contracts have been sent out to the potential buyers (that's what the conveyancer calls them)
I am currently working out whether it needs to be disclosed or not at auction.

And if not disclosed, whether you run the risk of the purchaser being able to rescind the contract based on undisclosed unapproved work.

In the case whereby purchaser rescind the contract because of non-disclosure of building works, do I have to still pay the RE?

You should seek independent legal advice. The shed on my property hasn't been council approved but that didn't change my actions. IMHO it is best to disclose it and that way they have no excuse to pull out as it was in the contract.

However if the agent sold the property with an unco contract and you lied on the paperwork, I would think yes they can/will claim commission.

I would think it would be like if you never owned the property and the agent sold it for you and when settlement came the purchaser found out he would charge you for fraud or ask you to pay their commission.

 

[JDM]

Whilst by nature, the auction will be unconditional; there is concern about the disclosure of some unapproved internal work.

Marketing contracts have been sent out to the potential buyers (that's what the conveyancer calls them)
I am currently working out whether it needs to be disclosed or not at auction.

And if not disclosed, whether you run the risk of the purchaser being able to rescind the contract based on undisclosed unapproved work.

In the case whereby purchaser rescind the contract because of non-disclosure of building works, do I have to still pay the RE?

I would stongly consider engaging a solicitor to provide you with the appropriate advice if I were in your situation.

 

[Peterw]

I think it would be helpful to those giving advice, to know which state the sale is in. To the best of my knowledge, the QLD contracts do not require the work on the property to be approved. If the buyer specifically asks if the works are approved and the agent says yes, then that becomes a representation, and yes could be a point on which the buyer could then request rightful termination on a contract which they entered into based on a false representation. This then opens a series of possible problems. What did the seller tell the agent etc.

The next point is, do the works actually require approval. There is a lot of renovation work that can be done to properties, where the structure is not altered,, which do not require "approval". The person who did the works, if qualified would have been able to inform you.

A bit more information would be helpful.

 

[Propertygirl1]

Thanks for all your advice so far.

The sale is in NSW. The conveyancer has sent an updated clause and will get the auctioneer to point out the issue.

I was contacted by the council in the last week requesting an inspection. If I disclose the unapproved structure at auction (which I will be doing), who's responsibility is it during the settlement period? (Presumably it is no longer my responsibility post settlement, as long as I disclose it?)

 

[Terry_w]

Hi all, hoping you can assist with my query.

If the buyer pulls out of their contract and was able to get 100% of their deposit back for legitimate reason/s, would the vendor still need to pay the agent her commission? as she had successully sold the property but due the building/contract buyer was able to pulled out of the deal.

Thank you.

Depends on the agreement entered into.

 

[Terry_w]

Thanks for all your advice so far.

The sale is in NSW. The conveyancer has sent an updated clause and will get the auctioneer to point out the issue.

I was contacted by the council in the last week requesting an inspection. If I disclose the unapproved structure at auction (which I will be doing), who's responsibility is it during the settlement period? (Presumably it is no longer my responsibility post settlement, as long as I disclose it?)

Best not to presume. Get proper legal advice.

 

[Peterw]

You are making things difficult with variations of description. At one point you mention unapproved internal works, and now mention unapproved structure. Terry's comment is probably the one to follow. Get proper legal advice.