Sometimes it is the things we think we know that cause us the most problems. For example, if I were to ask you Do, You Have To Pay Your Realtor If You Decide Not To Buy? You’d probably answer No, of course not; they get paid when I buy a home – but, SURPRISE, you’d be wrong. To save you potentially making a costly mistake, I’ll let you in on the real answer.
Do You Have To Pay A Realtor If You Decide Not To Buy A Home? If you withdraw from a sale after making an offer, for a reason not covered by a contingency in your offer to purchase, then yes, you may have to pay your real estate agent if you decide not to buy. If you withdraw because of a reason covered by contingencies, then, generally, no, you will not have to pay your Realtor.
However, there is a lot more to this than can be covered in a few lines, so let’s take a look in a bit more detail at your rights and responsibilities if you decide not to buy a home.
Why Is Deciding Not To Buy Is Such A Big Deal?
When you are considering buying a home, one of the pieces of advice that you will hear over and over again is, “Be sure you are doing the right thing.” This can apply to buying a home in general and to purchasing a specific home in particular. The reasons why it’s so important to be sure you want to buy a specific home before you make an offer are twofold:
- Buying and selling homes is a stressful process at the best of times, and you want to neither cause yourself or the seller any undue stress by making an offer and then withdrawing it unless you have to.
- Once you make an offer to purchase and the seller accepts it, the two of you are parties to a legally binding contract. If either of you were to withdraw from the sale, for reasons not covered in the agreement, then you may be subject to legal action. This can prove to be stressful and can cost you a great deal in both time and money.
For the purposes of this article I will stick to the question of whether or not you have to pay your Realtor if you decide not to buy, but be aware that this is by no means the only thing you should consider before taking the step of withdrawing from a sale once you have signed a contract.
Do You Have To Pay Your Real Estate Agent If You Decide Not To Buy?
Whether or not you have to pay your Realtor if you decide not to buy depends on a number of factors:
- Have you made an offer to purchase a property? And if you have, has that offer to purchase been accepted?
- Why have you decided not to buy it?
- How agreeable and accommodating is your real estate agent, and how much work have they put into the sales process up until this point?
- After your initial decision not to buy, have you since changed your mind back again?
Let’s begin by looking at the first point.
Have You Made An Offer To Buy A Home?
If you have not made an offer on a home and if you do not, in the future, make an offer on a home that your real estate agent has shown to you, you are not obliged to pay your agent.
Both buyers and sellers agents are paid through a commission that is paid from the proceeds of the home sale. Therefore neither the buyers nor the seller’s agents expect to be paid before a sales contract is signed.
However, agents can put a great deal of time and effort, as well as incurring many expenses when showing properties to prospective buyers. Therefore, because a buyers agent is only paid when the sale is made, you should never engage a buyers agent if you do not have a genuine intention to buy at the outset.
Have You Made A Offer Which Has Been Accepted
Once you have made an offer and the seller has accepted that offer, things become somewhat more complicated.
If you decide not to buy because the inspection report has shown significant issues and you and the seller cannot come to an agreement, then you can withdraw from the sale under your inspection contingency clause. This, and other similar occasions where you withdraw from a deal for a reason covered by a contingency clause are considered acceptable and a regular part of the process of buying and selling real estate.
In this situation, the buyer’s agent does not generally expect to be paid.
However, there are occasional exceptions to this situation, which I’ll discuss in a moment.
If you have decided to withdraw from the sale for a reason not covered by a contingency clause, for example, you were moving for work and are now no longer required to do so, and as a result, you will not be moving, then the situation is different. In this case, your real estate agent may not only expect to be paid but if you fail to do so, they may decide to sue and pursue you through the courts for payment.
The Simple Way To Determine If You Might Have To Pay Your Realtor
If you are considering whether or not to continue with a sale and you want to determine whether or not you may be on the hook to pay your real estate agent try this. Ask your real estate agent whether or not you would be entitled to have your earnest money refunded if you backed out from the sale at this point.
If you would be able to have the earnest money returned, it is likely you would not be expected to pay your real estate agent. On the other hand, if the seller would be entitled to keep your earnest money then chances are your real estate agent would have a good chance of pursuing you for their lost commission.
How Agreeable Is Your Real Estate Agent?
If your reason for withdrawing from a sale is unwarranted, then your real estate agent may decide that they would rather just “let it go” than try to get you to pay their lost commission. This is more likely if you want to continue to work with them to find another home.
If your real estate agent is on the fence about just moving on, there are a few things you can do. First of all, simply speak with them, be honest about your change of heart, and say that you appreciate the effort they have until this point. Then offer to make a payment for any costs they have incurred working with you until this point. In most cases, this will be enough for your agent to refrain from pursuing any claims against you.
The Point At Which A Real Estate Agent Has Earned Thie Commission
Now, let’s go back to the point I made earlier that a buyer’s real estate agent does not usually require payment if you change your mind, and a contingency clause covers the reason.
Depending on the state in which you were making your purchase, the real estate agent could still have a valid claim for payment, even if the sale fell through “for cause.” This is because of a quirk that can occur in the way real estate agents are paid.
The wording on some contracts essentially says that once you have an accepted and signed offer to purchase, the real estate agent has done their job and, as such, is entitled to payment. It is not unknown for an agent in this situation to pursue the buyer for the commission the Realtor would have been paid if the sale had gone through.
What Happens If You Buy A Home At A Later Date?
Even if you fire your real estate agent, if you buy a home for which they are responsible for you seeing, then they may be able to claim an entitlement to a commission.
Therefore, if you decide not to buy, and part ways with your real estate agent but at a later date, with a new agent change your mind back again, your original agent can make a claim for the commission they would have earned. In this case, you will be responsible for paying your first agent the same amount that your current agent earns from the sale.
Before you have had an offer to purchase accepted, you do not have to pay your Realtor if you decide not to buy it. However, once you are under contract for a home, it becomes more tricky. If you are withdrawing for a reason covered by the contingency clauses on your agreement, then most agents would not expect or pursue payment.
If you change your mind about the purchase for the reason that is not covered by a contingency in your offer to purchase, then whether or not you have to pay will be down to whether or not your agent demands payment.
In this situation, the agent is entitled to pursue you for the commission they would have earned had the sale gone ahead.
About The Author
Geoff Southworth is the creator of RealEstateInfoGuide.com, the site that helps new homeowners, investors, and homeowners-to-be successfully navigate the complex world of property ownership. Geoff is a real estate investor of 8 years has had experience as a manager of a debt-free, private real estate equity fund, as well as a Registered Nurse in Emergency Trauma and Cardiac Cath Lab Care. As a result, he has developed a unique “people first, business second” approach to real estate.
This article has been reviewed by our editorial board and has been approved for publication in accordance with our editorial policy.