I had an interesting issue arise this month. The Realtor had a Buyers Agent Agreement and the property was being sold as a “For Sale by Owner”.

In order to increase the price for mortgage purposes, there was an additional term of sale written in the Purchase Contract that stated as follows:

“The seller agrees to pay the buyer 1.75% of the first $100,000.00, and 0.75% on the balance of the final sale price plus GST thereon to settle the amount of the buyer’s commission due to the buyer’s brokerage for this transaction. The seller irrevocably and unconditionally directs the lawyer acting on behalf of the seller to deduct this sum and GST thereon from the proceeds of sale, or monies forfeited by or recovered from the buyer, and to pay the sum and GST thereon to the buyer’s brokerage forthwith upon closing of this transaction, and to close this transaction according to this irrevocable assignment.”

The purchase price was increased accordingly. However, the Realtor was looking for twice that amount in commission. The Realtor also had the seller Sign a “Seller Customer Status Acknowledgment and Fee Agreement” providing that the seller would pay the buyers realtor’s brokerage “1 .75% on the first $100,000.00 and 0.7 5% on the balance of the final sale price plus GST”, which is of course, the same amount again as was written in the
PUrchase Contract. If you read both documents together it seemed that the contract for sale was referring to the same money that was provided for in the Seller Customer Status Acknowledge and Fee Agreement. The Realtor said that they were two different amounts, both payable to the Realtor.

Fortunately for the Realtor, the seller did pay a total of 3.5% on the first $100,000.00 and 1.5% on the balance. If the seller had contested the matter I am afraid the Realtor would have been out of luck for half of the commission.

So if you do intend to protect a buyers’ agent commission in this way, make sure it is clear that both sums have to be paid by the seller.

-Bill Fric

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