Why Do I Still Owe My Real Estate Agent a Full Commission After Paying for Home Repairs?

A home seller's profits can go down as the buyer demands money back for repairs and so on, so why doesn't this necessarily reduce the agent's sales commission?

Question

I just sold my house. I was fortunate to have received more than one offer, and the house actually went for more than the asking price. However, the buyers seemed determined to get some of that money back in the course of the negotiations leading up to the closing.

They hired an inspector who must have spent hours poking around every nook and cranny, and who came up with a list of repairs that ranged from fixing a switchplate to tearing out the wood around the shower and toilet.

Then, at closing, I discovered that even though I had to shell out thousands of dollars for these various repair needs, my agent’s commission hadn’t dropped by one penny. Is this legal? Or fair?

Answer

The short answer to your question is that yes, it is legal—in fact, it’s the industry standard—for your agent’s commission to not change despite all your unforeseen costs.

The longer answer is based on the contract that you entered into with your agent at the outset of the process of selling.

When you agreed to work with your agent, you signed an agreement (the name of which varies from state to state) specifying when and what amount your agent would be paid. Most often, these agreements state that the listing agent will be paid a percentage of the sales price of the property at the closing. The terms of this agreement are set prior to the sale, with no concessions for surprises or extra costs incurred by the seller.

It is normal real estate industry practice for the commission to be based off of the final sales price, whether or not there are credits back to the buyer for repairs, unforeseen circumstances, or any other reason. The only time an agent’s commission amount will change is if there is a change in the actual sales price.

You asked in your question whether this situation was fair. That’s a subjective call, but here are some things to consider. Did your agent explain the effect of making these repairs versus offering the buyer a price reduction in lieu of repairs? If not, you might discuss your misunderstanding with your agent and ask if he or she can be flexible with the commission to help undo some of the harm from the misunderstanding.

On the flip side, though, did your agent do a good job of marketing your property and act as your advocate throughout the negotiations? If so, the result may just be an unfortunate set of circumstances.

Either way, you should discuss your point of view with your agent. Most agents’ business depends on referrals and word of mouth and, if your agent sees merit in what you’re saying, he or she may want to arrive at some compromise to ensure that you walk away from the transaction as a fan of the agent, not a disgruntled client.

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