I've spoken to a number of property sellers who, after thinking that everything was okay with their sales transactions, got the dreaded double commission claim surprise. It is never something people prepare for financially, but it is something that sellers can prepare for contractually.
The reasons for double commission claims on a property transaction can always be traced back to the seller's choice of marketing agreement(s), the way the sellers handle the marketing agreement(s), and the way purchasers conduct themselves during the sales process.
Sole and exclusive mandates
Sole and exclusive marketing agreements or sole and exclusive mandates leave no room for incurring double commissions. Only one real estate agency gets appointed to market the property. Therefore, only one agency can claim the sales commission.
There might, however, arise some extraordinary circumstances, which can lead to double commission claims even in the case of a sole and exclusive mandate. For example, if the seller ignores the rules and appoints a second agency, or sells the property privately to a purchaser who was introduced to the property during the mandate period, the mandated real estate agent may rightfully claim commission on the sale.
Open mandates
Open mandates can be a double commission nightmare, compared to sole and exclusive mandates. For instance, if one spouse gets introduced to a property by agent A with an open mandate to sell the property, but the other spouse gets introduced to the property by agent B, who also has an open mandate to market the property, because agent A was unavailable at the time, there may be a double commission brewing.
Only one of these agents can be the effective cause of the sale. And agent A gets my vote on this one. But the contract the couple signed with agent B specifies that agent B is entitled to the agent's commission. So, a situation has arisen where both agents A & B have become entitled to commission! And guess who has to pay for the purchasers' erratic agent use? The sellers, of course!
Contract protection against double commission
Because nearly ANYTHING can be written into a sales contract, it is possible for sellers to build a double commission block into the contract of sale. By adding an annexure to the offer to purchase, either as part of a counter offer, or right from the start, sellers can be protected against double commission claims for situations over which they have no control.
I think that an annexure with the following wording might do the trick:
Annexure ____
Double commission contingency
The purchasers hereby declare that they were introduced to the property by _______________________________________________________________________(the Selling Agent), and that no other agent was involved in the process of viewing the property, or negotiating the offer to purchase the property.
The sellers undertake to pay the Selling Agent the commission of R____________________(________________________________________________) as negotiated at the time of granting the mandate.
The purchasers undertake to pay the commission of any other real estate agent who successfully lodges a claim for commission for the sale of the property.
Contract protection against commission claims in a private sale
Sometimes purchasers can try to "save" a few bucks by bypassing the real estate agent who introduced them to the property, by dealing with the seller directly and negotiating a private sale. These purchasers typically convince the sellers to accept a reduced purchase price, because no agent's commission will presumably be payable.
And then, when transfer is about to take place, the real estate agent lodges a claim for commission. And once again, the seller has to cough up the dough!
As for double commission, I feel that it is possible for sellers to build a commission block into the private contract of sale also. By adding an annexure to the offer to purchase, either as part of a counter offer, or right from the start, private sellers can be protected against commission claims.
I think that an annexure with the following wording might do the trick:
Annexure ____
Private sale commission contingency
The purchasers hereby declare that they were not introduced to the property by any real estate agent and that no real estate agent was involved in the process of viewing the property or negotiating the offer to purchase the property, or any other action that may be construed as contributing to the sale of the property.
The purchasers undertake to pay the commission of any real estate agent who successfully lodges a claim for commission for the sale of the property.
Rest a little easier
With clauses such as this, the responsibility for unexpected commission claims becomes the responsibility of the purchaser, instead of the seller.
Including a Double commission contingency clause or a Private sale commission contingency clause in the sales contract, the sellers can rest a little easier. Don't you think?
