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  • Tenant wants to buy but ....

    For my property, I found a tenant through a real estate agency.

    This tenant is living in my property for 2 yrs and now wants to buy my property.
    Tenant doesn't have any buyer's agent and we don't need any seller's agent.
    But we have signed a listing agreement with the RE agency that if tenant buys from us, then we will give them 6%.
    We had asked them to take-off the clause that time but they denied and we signed.

    Now, we don't need any service from them , then why should we give such a huge commission ? We already paid the agency for the services they provided us in listing our rental property and finding a tenant.

    Anyway, we want to make sure whatever we do is legal.

    So my question is : if we use a land trust, will that help us?

  • #2
    I’d vote for whatever your RE attorney advises.
    Our passion is protecting clients and others from predatory advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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    • #3
      The answer to why you should pay is that you signed the listing agreement, also known as a contract. You did not say, but if this was a rent to own deal then I suspect you will just have to pay. Raise the price to cover it. Most real estate deals have fees incorporated by the seller.

      If just a normal rental listing, I’m not sure an attorney will save you money over just paying the 6%. Maybe, but if the contract is valid I don’t see how they will get you out of it. Instead, I suggest reading both the listing and the lease with an eye to the following: First, check to see if when the lease ends, the listing agreement ends with it. If so, just allow the lease to end and write a new one yourself before following up with a sales contract. Second, check the listing agreement. They typically have an end date. If so, then keep renting until then before writing the sales contract.

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      • #4
        So you signed an agreement and now you don’t want to honor that agreement?

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        • #5
          I did a mistake of not pressing enough that time to either remove the 6% commission clause from the agreement or at-least make it 2 to 3%.
          There is no buyer's agent, there is no seller's agent. For absolutely no service , why 6%. I agree, I signed but it is an unfair clause that agencies put to make some free money.

          This is not a rent to own deal. This was a very standard listing agreement.

          There are few ways to do things legally :
          1. Negotiate with the agency (I spoke to the broker and he said the agency won't reduce a dime from their commission)
          2. The tenant has to move out of my property and then buy it after few months (this may not happen because one of the reasons tenant wants to buy is he doesn't want the hassle of moving-out)
          3. Use a land trust and sell it to them and buyer will buy from them (I don't know if this is legal. If this is not legal, then I don't want to do it) - need your guidance on this.
          4. just pay 6%
          5. don't sell to the tenant

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          • #6
            Have the tenant stop renting from you for a day so they are no longer your tenant, then they buy your property, give them a couple percent for the inconvenience .

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            • #7
              From their perspective, they found the tenant/buyer and as such are entitled to some commission.

              Option 1 is to pay the 6%.
              Option 2 is to work to negotiate it. Tell them to reduce the percent or you will have the tenant get a buyers agent which will cut their 6% to 3% anyways.
              Option 3 is to try to get out of the deal, which without seeing the contract is hard to advise on. If you put it in the market as an FSBO does it apply? If the tenant is no longer your tenant for a period of time does it apply? If you reinhabit it as a primary residence does it apply? I can’t imagine the contract states they have the right to a commission on your home sale in perpetuity or if so it is enforceable. For option 3 consulting a real estate or contract attorney in your market essential.

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              • #8
                Is there a term on this agreement? Seems crazy that 2 years later they can collect on this.

                Moral of the story; read what you sign.

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                • #9
                  Do they not have a kid or a sibling who could take over the lease for a few months till the agreement runs out? There's probably a way to get to termination of the referral agreement.

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                  • #10
                    The agency found a good tenant who now wants to buy the house so I’d be inclined to think they earned the agreed upon commission. I’m also guessing the price is at a premium due to the current seller’s market so hopefully you are making out ok.

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                    • #11
                      Unfortunately, I agree that you owe the 6%. If you don't want to pay the 6%, sell the house to someone else that you find on your own. If the realtor found you the tenant, and that same person buys the house, and you signed the agreement to pay 6% should they buy, then you owe the 6%, very simple. You cannot go back now and change a prior agreement that is written in a valid contract.

                      Is it fair that the realtor gets paid this large sum for no extra work? Absolutely not! But you signed a contract and you are legally and morally bound by it. If you try any funny business like letting someone else rent while they still live there, you are likely to be facing big legal bills for a lawsuit that you will likely lose.

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                      • #12
                        Originally posted by wcinewbie View Post
                        Have the tenant stop renting from you for a day so they are no longer your tenant, then they buy your property, give them a couple percent for the inconvenience .
                        That would be considered manipulating the situation in a ridiculous attempt to avoid paying a contractual obligation. It would likely end up in a law suit and the judge would likely rule against the seller, forcing payment of both legal fees and the 6%. That risk would not be worth it to me. And sticking by an agreement that I signed is also a moral obligation. This situation is strictly business. For better or worse, the signed contract rules the day.

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                        • #13
                          Sounds like you should have thought of this before you signed the contract. Either raise the price by 6% and sell to your tenants, or sell to someone else. It's a seller's market.

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                          • #14
                            Originally posted by godroot View Post
                            For my property, I found a tenant through a real estate agency.

                            This tenant is living in my property for 2 yrs and now wants to buy my property.
                            Tenant doesn't have any buyer's agent and we don't need any seller's agent.
                            But we have signed a listing agreement with the RE agency that if tenant buys from us, then we will give them 6%.
                            We had asked them to take-off the clause that time but they denied and we signed.

                            Now, we don't need any service from them , then why should we give such a huge commission ? We already paid the agency for the services they provided us in listing our rental property and finding a tenant.

                            Anyway, we want to make sure whatever we do is legal.

                            So my question is : if we use a land trust, will that help us?
                            ... can I buy it?

                            Comment


                            • #15
                              Tell the property managers that you'll advise the tenant to find his/her own agent so there's less conflict of interest. That may help them lower the price.

                              Agree that the contract is what it is. I personally think it's kinda lame because their job was to find you a tenant, and they did. Have you been paying them a monthly management fee? If not, then maybe I can be more sympathetic towards their contract set up

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