Can EA take commission on fallen-through deal?

My folks sold a property to fund some upcoming medical bills.

They accepted the highest bid, a contract was signed, and a 10% deposit was paid.

Turns out that the auctioneer took his 2% commission straight away. Now it looks like the buyer can't get funding and the deal isn't going through. He will probably lose his deposit.

The plot has definitely declined in value since so my follks will lose out and the agent will probably take another 2% commission on the next "sale".

Is it ethical or legal to take a full agent's commission out of the deposit?
How can the solicitor allow this? Is this common practice?
Surely the agent is being paid to find a suitable buyer and sell the plot. If it falls through then he hasn't completed his job.

My folks would be the type to refund a deposit, even on a binding contract. But with the agent having already taken 2% and the plot declining in value they would not be in a position to do that.

It really sticks in my craw to see the EA take two commissions for doing a lousy job.

It's the usual story of "my family has been dealing with his family for generations and we wouldn't like to change" but when there's money involved I wouldn't trust the agent one bit.

Re: Can EA takes commission on fallen-through deal?

The short answer is "yes they can", their obligation is to introduce a buyer. However, it may be they were negligent in their duty to ensure the buyer really was in a position to purchase.

Have they talked to the EA and explained what happened? Perhaps as a sign of good faith the EA may be willing to handle the next sale for a reduced or even no commission.

Although, if the buyer signed the contract you cannot really claim the buyer was unsuitable and your folks should simply hang onto the deposit and not refund it.

Re: Can EA takes commission on fallen-through deal?

The agent should only be taking commission if the contracts are signed, because at that point he has done his job. The commission is usually taken from the fee to ensure that agents are not chasing people looking to get paid. If no contracts are signed its a different story

Re: Can EA takes commission on fallen-through deal?

Its hardly the EA's fault that the buyer signed contracts and then pulled out. They were signed so he's entitled to his fee.

Re: Can EA takes commission on fallen-through deal?

I doubt that they will take commission on a sale that did not happen but they may be due to be paid expenses that they have incurred in advertising and showing the property etc.

Re: Can EA takes commission on fallen-through deal?

The EA should get his/her costs plus time and your parents should keep the 10%. As you pointed out the value of the plot has declined since the contracts were sighed so the buyer has cost your parents a good deal of money, perhaps more than the 10%

I don't understand how the auctioneer was able to take his 2%. Was a booking deposit paid to him and did he deduct from that? Or did the solicitor get 10% at contract stage and hand over 2% without discussing it with the client?

In strict legal terms, the Estate Agent has fulfilled his end of things by introducing a purchaser who signed the contracts and paid the 10%. In reality, were the EA to sue for 2%, I suspect a Court would not order the entire payment and a deal would be done to pay for EA's time and expenses. After all, the Vendor did get 10% so its a little rich to expect that the Vendor would keep it all.

And I suppose the one person who is really at fault here is the purchaser but then again we are in such uncertain times, can a Vendor hand on heart say that a deal is done before the final purchase price is handed over? In reality, no. It can all go pear shaped up to that.

mf

mf1 said:

I don't understand how the auctioneer was able to take his 2%. Was a booking deposit paid to him and did he deduct from that?

Click to expand...

This is what happened when we sold our house-I was amazed to receive a cheque from the EA (less their commission) that was taken from the purchaser's booking deposit. The sale hadn't closed and I'm not even sure if contracts had been signed and exchanged!

Just on a side note, if your families have been dealing with each other for generations I would expect a far better deal than 2%.

Thanks for all the comments.

Of course the EA is entitled to costs etc, but it seems strange that they should receive the same amount for a fallen-through deal as for a deal that goes through. My folks wouldn't feel right about holding on to the deposit if they could sell for the same price, but in this case after agent's commission and decline in value they would make a significant loss if they gave it back. They're also pretty much reliant on trust of the agent, but modern times are a bit different and this agent is all about the maximum he can squeeze out for himself - I know this from other people who have dealt with him.

I'll get them to push for a much-reduced commission for the next sale. But my folks only tend to share financial details with the eldest children and I'm way down the pecking order. Such is Life!

Whay bother with that EA if they are charging 2% - you should be able to get 1-1.25% easily enough.

ninsaga

Switch agents. If the EA don't offer a better than average deal, there's no reason to use them. It doesn't sound like there's any loyalty or goodwill on their side.

What has EA done wrong? He got a buyer and brought it all the way through to a closed deal. The EA need to be compensated.

Looking at it This post will be deleted if not edited to remove bad language ways.......from another perspective:

Effectively the purchaser who pulled out is paying the EA the fee, through the lost deposit, your parents are getting the balance of the deposit for compensation.

Your parents are effectively not being charged the fee. They are entitled and should keep the deposit as compensation for incurred costs and towrds any losses.
I suppose technically, there are further remedies avaialable, for this breach of contract to compenstae your parnets, but they would involve legal action.

Can I ask a question?

Just about the answers before here

I just bought a house, and part of the conditions that was placed on the booking deposit (2%) via my solicitor was That the house was owned by them, and I get a mortgage, with a few other conditions.

So If my mortgage fell through then I should have gotten my booking deposit back even though did not fulfill my end of the bargin.

But once I paid the 10% deposit, and signed the papers, if I fell through with the deal then I lost the 10% which was a fair whack on money too loss.

Now that means to me that I had to sign before the EA got the cash, and I got my booking deposit back if it went pear shaped before I paid the 10% deposit.

This is what I was told?, is that different to reality then?

Gerry

None of that makes any sense.

If you pulled out before contracts were signed, there was no formal contract. You were only a prospective purchaser.
If you pulled out after contracts were signed, there was a formal contract which you should not have signed unless you were confident of being able to complete. You were formally bound to complete. You did'nt. Agent is entitled to fees although in practice, most ( tho' obviously not all) would not charge the full fee to the vendor.

mf