Purchase agreement does not contain any written agreements establishing the amount of Compensation to be paid to any broker

[richards66]

What is the name of your state? Georgia

I wanted to buy a small home to live for $30,000 (my income is less and I cannot afford more than this). I executed a purchase agreement with the seller. The seller has a broker. I have no broker. After the due diligence period is over, I faced some unexpected health issues and spent my money on my health therefore I cancelled the purchase agreement. I paid $500 as earnest money. My question is on the broker (seller’s broker) compensation. The purchase agreement states:

“Rights of Broker: The Brokers involved in this transaction shall be express third-party beneficiaries of this Agreement, shall have the right to enforce all provisions in this Agreement that benefit them or afford them rights and defenses and shall have all remedies at law or in equity in the event of a breach of this Agreement. In the event this Agreement is terminated or fails to close due to the default of a party hereto, the defaulting party shall pay as liquidated damages to each Broker involved in the transaction an amount equal to the Compensation each Broker would have received had the transaction closed. If the same Broker is working with or representing the buyer and seller in the transaction, the Compensation the Broker shall be entitled to in the event of the default shall be the total Compensation the Broker would have received from all parties in the transaction had the transaction closed. For purposes of determining the amount of liquidated damages to be paid by the defaulting party, all written agreements establishing the amount of Compensation to be paid to any broker involved in this transaction are incorporated herein by reference. Additionally, upon the request of any party to the transaction, the Broker(s) shall disclose in writing the Compensation they will receive when the transaction closes so that the party knows the exact amount of liquidated damages they will be obligated to pay should the party default herein.”

However, in violation of the purchase agreement, the purchase agreement does NOT contain any agreements (no seller-broker agreement and no buyer-broker agreement) establishing the amount of compensation to be paid to any broker involved in this transaction. Also, the purchase agreement does NOT list any compensation the broker receives. Simply saying, the purchase agreement does not contain any amount or document (or reference to any document) on the compensation the broker receives from this sale. Therefore, I did not pay any money to the broker.

The broker provided me an agreement that he has with the seller and asking me to pay him (the broker) the compensation (10% of sale price, which is $3,000) listed in that agreement. Am I obligated to pay legally to the broker?

 

[quincy]

What is the name of your state? Georgia

I wanted to buy a small home to live for $30,000 (my income is less and I cannot afford more than this). I executed a purchase agreement with the seller. The seller has a broker. I have no broker. After the due diligence period is over, I faced some unexpected health issues and spent my money on my health therefore I cancelled the purchase agreement. I paid $500 as earnest money. My question is on the broker (seller’s broker) compensation. The purchase agreement states:

“Rights of Broker: The Brokers involved in this transaction shall be express third-party beneficiaries of this Agreement, shall have the right to enforce all provisions in this Agreement that benefit them or afford them rights and defenses and shall have all remedies at law or in equity in the event of a breach of this Agreement. In the event this Agreement is terminated or fails to close due to thethe Compensation each Broker would have received had the transaction closed. If the same Broker is working with or representing the buyer and seller in the transaction, the Compensation the Broker shall be entitled to in the event of the default shall be the total Compensation the Broker would have received from all parties in the transaction had the transaction closed. For purposes of determining the amount of liquidated damages to be paid by the defaulting party, all written agreements establishing the amount of Compensation to be paid to any broker involved in this transaction are incorporated herein by reference. Additionally, upon the request of any party to the transaction, the Broker(s) shall disclose in writing the Compensation they will receive when the transaction closes so that the party knows the exact amount of liquidated damages they will be obligated to pay should the party default herein.”

However, in violation of the purchase agreement, the purchase agreement does NOT contain any agreements (no seller-broker agreement and no buyer-broker agreement) establishing the amount of compensation to be paid to any broker involved in this transaction. Also, the purchase agreement does NOT list any compensation the broker receives. Simply saying, the purchase agreement does not contain any amount or document (or reference to any document) on the compensation the broker receives from this sale. Therefore, I did not pay any money to the broker.

The broker provided me an agreement that he has with the seller and asking me to pay him (the broker) the compensation (10% of sale price, which is $3,000) listed in that agreement. Am I obligated to pay legally to the broker?

An agreement that the broker has with the seller is not an agreement that the broker has with you.

As a note, a 10% commission is awfully high.

 

[richards66]

Thanks for the reply. I have no broker. I am the buyer.

Again, there is no agreement (between seller and broker) is included in the purchase agreement). Nothing is mentioned in the purchase agreement about the broker’s compensation (from the seller, or from me to the seller's broker).

I already provided above, the language (in quotations) the purchase agreement has, about broker compensation in case there is default. Important part is re-provided here:

The purchase agreement states “In the event this Agreement is terminated or fails to close due to the default of a party hereto, the defaulting party shall pay as liquidated damages to each Broker involved in the transaction an amount equal to the Compensation each Broker would have received had the transaction closed …..For purposes of determining the amount of liquidated damages to be paid by the defaulting party [to any broker], all written agreements establishing the amount of Compensation to be paid to any broker involved in this transaction are incorporated herein by reference.”

Am I legally pay any compensation to the seller’s broker due to my default of purchase agreement?

 

[Zigner]

Your question goes beyond what this (or any) internet forum can answer. We cannot give specific legal advice. You will want to speak to an attorney for specific advice regarding your contract.

 

[Mudcrabs]

That “liquidated damages” clause usually only bites if the compensation is clearly defined in the contract, so if it’s missing like you said, it may not apply - but yeah, worth getting a quick legal opinion so you don’t get blindsided.