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How common is an agency agreement *Success Fee*?

Posted by folkvictorian (My Page) on
Tue, Aug 23, 11 at 20:36

A few years ago we purchased a property using an agent from Madison, Wisconsin. The Agency Agreement that we signed included language regarding a Success Fee, stating that the fee was due even if the deal failed to close. Our deal did close, so we didn't have to deal with paying a commission on a dead deal....but is this type of language common?


Follow-Up Postings:

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RE: How common is an agency agreement *Success Fee*?

I have not heard of that. Why would you have agreed to that?
Are you sure that it did not mean that if the agent found a willing, ready and able buyer at an agreed upon price, then you would owe a commission if you defaulted under the terms of the contract? I have heard of this arrangement.


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RE: How common is an agency agreement *Success Fee*?

Thank you for the answer, NCR. To clarify, here's the language:

"If this Agreement calls for a success fee, it is agreed that Broker has earned the success fee if, during the term of this Agreement, Buyer or any person acting on behalf of Buyer acquires an interest in property or enters into an enforceable written contract between owner and Buyer to acquire an interest in property, at any terms and price acceptable to owner and Buyer. Broker's compensation remains due and payable if an enforceable written contract entered into by Buyer fails to close. Once earned, Broker's compensation is due and payable at the earlier of closing or the date set for closing, unless otherwise stated in writing."

To me, it sounds like we would have owed the $$ no matter who broke the contract, once it was entered into. Am I reading it incorrectly? Since I've only received one answer to my question, I'm guessing this isn't common. The real estate deal we closed was for a very small amount.


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RE: How common is an agency agreement *Success Fee*?

Looks like a 'buyers agent' agreement that is trying to collect from the buyer if they screw up.

Since they do not have a contract with the seller they cannot collect from them if the deal falls apart.


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RE: How common is an agency agreement *Success Fee*?

" between owner and Buyer to acquire an interest in property,"

One could argue that the transfer of interest in a property happens when ownership changes hands at closing.
It is badly written and in need of consumer/buyer protection clauses.


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RE: How common is an agency agreement *Success Fee*?

OK, it's loud and clear that this clause isn't the norm and if we ever see anything like it again, we should avoid it! Thank you one and all.


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