You hire a real estate agent to sell your home. That’s the beginning of the process for most people, regardless of the reason for their sale. The brokerage is due the commission upon title transfer to the new buyer.
But what if the home is listed, on the market, and circumstances change where one spouse can buy out the other?
Companies vary in their policies on this, but I will explain how we work.
Typically, before we take the listing, we will ask about the possibility of one spouse buying out the other. The odds are relatively low at this point, since the decision to list the property has been made. But we still ask.
Upon occasion, circumstances change. The couple can reconcile and decide not to sell, for example. In that instance, we cancel the listing and are reimbursed for our upfront expenses like imaging and advertising. Those costs, while nominal in comparison to what the brokerage fee would have been in a sale, keep all us whole for the expenses outlaid.
If a buyout is possible, an exclusion on the commission is wise and fair to all parties. To be clear, the word is “exclusion” and not exemption. In this context, the exclusion carves out a different commission formula than the full price of the home in a regular sale.
Let’s suppose for example that the home is listed for $750,000 and there is a mortgage balance of $350,000 on the home. The brokerage fee typically has an amount apportioned for the listing side and for the buyer agent brokerage for cooperating companies who would bring a purchaser. But in this example, the purchase is one of the spouses buying the other out. The reason for the change is less important but the home could have been on the market for weeks or months before the buyout is promulgated.
In the above example, spouse 1 assumes the mortgage debt and pays spouse 2 their half of the equity of the home, which in this case is 50% of $400,000, or $200,000. They might consolidate the two totals in a refinance, or they might take financial responsibility for the current mortgage in their stipulation agreement and borrow /get the 200,000 one way or another to spouse 2.
Our commission in cases like this would be the listing side of the brokerage fee only on the buyout monies, which would be roughly half of the contractual brokerage fee on the $200,000.
This keeps things win/win for all parties. I know some companies will charge a full commission for market value of the property, but we do not. The time and resources an agent devotes to a listing are beyond a photography bill, often considerably more so depending on how long the property has been on the market. But the clients also save on the vast majority of the brokerage fees and still have their agent on speed dial throughout the process. We can help with determining the equity position of the property so the buyout is accurate and fair, we can direct them to financing sources, and we remain there for all parties for any possible need, right down to movers, contractors, and title.
All companies vary in how they enforce their contracts, but I think how we approach the matter is the most fair for all parties.
