Buyer to pay closing costs? Contract issue

I have a question regarding the legality of a contract and information that was filled out beforehand through paperwork (non contract, information only). I attract buyers to my website where they fill out a form regarding their home, address, current mortgage, value of property, etc… actually, you can find it here.

A potential seller contacted me and we worked out a contract where I would pay closing costs (because closing costs were known to be title closing costs only). There would be no mortgage necessary and according to the form the seller filled out, the home was not listed with an agent.
Come to find out as we get closer to closing, the seller stated that they had signed a contract with an agent and I would have to pay those closing costs (because the contract stated that the buyer shall pay all closing costs).

Now, besides the fact that I’m slightly disgruntled at this point and realizing that the agent fee would equate to 17.5% of purchase price, does the seller have a leg to stand on when they previously noted (filled out the form on my website)that there is no real estate agent/broker fee yet the contract states that the buyer pays all closing costs? Do I have a leg to stand on? Take away anything that this would be a fantastic deal or a fantastic loss on my end. What would be the right thing to do in this situation?

Have you seen the listing agreement with the agent? When was the agreement entered?

You will have to explain the agent’s fee structure. When the standard commission is around 6%, how did this agent’s sales commission get so high?

How much earnest money do you have at risk?

I suppose you could always try to reopen negotiations and add an addendum that reduces the contract price by the amount of the sales commission due a real estate agent should a real estate commission become part of the closing costs. If the seller rejects your addendum, then maybe you can declare the whole contract void.

I am not an attorney, just thinking out loud.

Dave, I have $500 earnest money in the deal. My understanding is that he has a few months left with the agent and signed for a set fee on the contract. The home is what I would call very low priced and he agreed to the set price (my guess) because if the realtor who listed the property were to receive their standard 1.5%, they would get around $200. Course the agent didn’t bring us together, the form on my website did.

Well, it seems that the seller withheld a material fact that affected your purchase price. You can withdraw your offer and declare the contract null for failure to disclose a material fact, or, reopen negotiations and try to reach mutual agreement on a new price.

Do you know what type of listing agreement the seller has with this agent? If it is an exclusive listing agreement, the agent’s fee is due for any sale that occurs during the term of the agreement, even if the seller finds the buyer on his own. If it is an open listing agreement, then the agent’s fee is only paid to the agent who brings a buyer to the settlement table. If the seller finds a buyer on his own, then no fee is paid.

Even though the seller has a signed listing agreement, the fee is still negotiable up to settlement. You could tell the seller that you will pay no more than the standard commission rate of 6%. The seller could agree to make up the difference, or the seller could ask the agent to reduce his fee to 6% so your deal can go through. You will probably add an addendum to your contract to reflect this understanding.

The last option to discuss is to just pay the sales commission. From the numbers you provided, it seems that the commission is around $2300. If $2300 is a deal breaker, then the deal is too thin in the first place. You should just walk away from this one.

On the other hand, if you can not reach an accomodation with the seller and/or the real estate agent, AND, if there is so much potential profit in this deal that you aren’t hurt by paying $2300 more than you expected at closing, then stay in the deal but resolve to write a contract provision in your next agreement that says you will pay all closing and settlement costs except for a real estate sales commission. Sales commission remains the seller’s responsbility.

Dave, the seller is giving in and has agreed to pay the agent fee if I pay the title closing fee of $153. The $2500 was not in itself a deal breaker but I don’t like when someone tells one thing about the property/mortgage and you find out something that is quite different just before you hit the closing table. Welcome to REI right.