No sale, but agent still gets $9,446

When you put your house up for sale and expect a real estate agent to spend time and money marketing and advertising your property, you have to take the process seriously. If not, you may have to pay a commission later, even if you change your mind about selling.

Here’s a recent small claims court case that was heard in October in Woodstock, Ont.:

Richard Fody owned a vacant piece of land in Tillsonburg, Ont., and in early 2009 signed a standard listing agreement, with T.L. Willaert Realty Ltd., to sell it for $199,000.

The language in his listing agreement was standard and said he agreed to pay the broker 4.5 per cent commission for any valid offer to buy the property during the listing period. In February, 2009, there were a few low offers.

In March, Benjamin Vink made an offer close to the listing price and Fody signed it back for $195,000. It was not accepted, but Fody told his agent he did not want to lose this buyer and asked to see what could be done. At the end of April, Vink offered the full listing price of $199,000.

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But when the agent brought it back to Fody, all of a sudden Fody was unreachable and the deal fell through. As it turns out, he had changed his mind and decided not to sell.

The agent sued in small claims court for his commission. At the trial, Fody argued there were problems with the offer including that the buyer would not close fast enough and the buyer did not agree to install, at his own cost, a well and septic system.

The judge found that these two arguments were irrelevant and did not affect the sale price. Since the buyer knew there was no well or septic system, there was no risk to Fody, he reasoned.

Fody also argued that the agent should have explained more clearly that if he brought in a full-price offer which was not accepted, he still had to pay commission. The judge found the clause was self-explanatory, meaning that commission was payable even if a deal wasn’t signed.

The judge found that the agent had worked hard to bring in a full-price offer and Fody had just decided to change his mind. Willaert won its commission of $8,995.50 plus GST of $449.78 and $1,050 for his legal fees.

This case is important for sellers to understand. In my opinion, it was wrongly decided because commission should not be paid unless the seller accepts an offer. This decision is currently being appealed.

Here’s why you should be careful though. Some sellers try to create bidding wars by deliberately listing their properties below fair market value. If you do this, make sure that your listing agreement is clear that you only will pay commission if you actually accept an offer.

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