Q&A: Does Commission Change When a Family Member is the Buyer?

Q. We have our home listed with a REALTOR whom we feel has done a really good job for us in getting the house listed. The agent also has done a great dealing of advertising, has nice flyers etc. The house has been on the market for more than 4 months but we have not gotten any offers. Now we have what could be a good thing or it could be a problem. WE have been approached by a family member who wants to buy the house. We would like to sell it to them and can negotiate the terms between ourselves. Our question: Do we owe the full commission to the real estate agent who has the house listed since they did not technically find the buyer?

A. Most likely you owe the full commission to the company who has your home listed. As you presented the scenario it appears that the discussion with the family member only came up recently and therefore could not (or might not) have been discussed prior to you signing the listing contract.

The major consideration is what does your contract state:

a. About the amount of commission which will be paid?

b. About any ‘exceptions’ to that payment arrangement?

If you had known that a family member MIGHT be interested in buying your home, then you could have included in the contract a provision which excluded you from paying a commission if this SPECIFIC PERSON decided to purchase. Or you could have negotiated to pay a smaller percentage of commission to compensate the brokerage/agent for their work and expenses but something less than the full commission. The brokerage most likely would have insisted that the exclusion be for a set period of time, like 45 days. It would have been a matter of negotiation between you and the agent to determine what amount of commission and what amount of time worked for the two of you.

One of the core principles of issues related to housing is that it always comes down to ‘what does the contract state’. You can be held to the terms which you agreed to when you entered the arrangement.

What can you do now?

1. Read your contract so you know what it states. Are you prohibited from selling to anyone who has ‘viewed’ the home during the terms of the listing for a certain period of time AFTER the listing expires? (Most contracts have such a provision)
2. Ask your agent for a meeting to discuss your listing. Speak candidly about your situation and suggest a compromise of less than full commission.
3. If you get their agreement, then you need to have them put that in writing and get the signature of the broker who will ultimately be the party who is receiving less than the contract stipulated.

IF you are reading this and are considering listing your home, it would be wise to include an exclusion of anyone who has already expressed even minimal interest in your home, how long do they have to submit a contract and clearly state what amount of commission will still be due under the contract.

Selling to family members can be dicey (to say the least). I personally feel both of you still need the help of a real estate professional to work through the details and that you should expect to pay for that representation.

Best of luck with your home sale!

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