Tricky terrain - Any contact with a real estate agent, no matter how innocuous it seems, could wind up costing you money

The Star-Ledger, January 24th, 2007


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English (c) 2007 The Star-Ledger. All rights reserved.

Did you hear the one about comedian Jerry Seinfeld trying to dump his real estate broker at the last minute so he wouldn't have to pay her a $100,000 commission?

As Seinfeld himself might ask, "What's up with that?"

The flap erupted after Seinfeld and his wife Jessica purchased an Upper West Side townhouse for $3.95 million in February 2005, but decided to cut their agent, Tamara Cohen, out of the deal because she was not available to show them the property on the exact day they wanted to see it.

It seems the broker - a Jew who observes the Sabbath - initially showed the apartment to Seinfeld's wife and his financial manager, but did not answer her phone on a Saturday when the Seinfelds wanted to see the apartment again.

A Manhattan judge - not to mention a number of real estate experts - sided with the broker, who introduced the famous couple to the house and had a contractual agreement with them.

Still, not every case involving a dispute over real estate commissions is so clear cut.

For example, have you ever called an agent or a broker for information about a listing? Given an agent your contact information? Toured one or more homes with one or more salespersons?

Then, you may have unknowingly gotten married to that agent, says Tom Wemett, a founding member of the National Association of Exclusive Buyer Agents who has published a guide on the subject, titled "One Date You're Married."

Even typing your e-mail address over the Internet to receive information about a listing from an agent can result in a claim by that agent to be paid a commission, even if you wind up buying that property through another agent, or even the seller.

Unbelievable, you say?

Well, it's true, Wemett said.

"If you make contact with a real estate salesperson who supplies you with information about a property or who shows you a property, they can make a claim to be paid a commission," he said.

Disputes generally revolve around a legal concept known as "procuring cause," defined by the National Association of Realtors as "the uninterrupted series of causal events that lead to a successful transaction."

That's one reason brokers, for example, try to register consumers at their Web sites or at open houses - to keep a record of interactions with that client in cases of procuring cause.

"They feel they alone started the series of uninterrupted events . . . and that they should be compensated for it regardless of whether or not they actually wrote the contract or did anything else to earn the commission," Wemett said.

And consumers often find themselves dragged into these disputes. "If I am a broker and I'm sitting with a buyer and I put this deal together and then another Realtor comes after me and takes my money, I have a right to go after my buyer, especially if my buyer didn't tell me they were working with another Realtor," Wemett said. "It does happen."

In fact, that's exactly what happened to 57-year Michael Schmidle, the owner of RealEstateby, an Arlington, Va.-based flat-fee brokerage.

In November 2005, the North Virginia Association of Realtors ordered Schmidle to pay a $17,820 commission to another real estate agent at a competing firm, according to arbitration documents obtained by The Star-Ledger. The agent, Stacy Martin, who works at the Keller Williams Realty office in Manassas, Va., claimed she was representing the buyer of a property Schmidle helped the owner sell.

Schmidle, who opened his discount brokerage in 1999, says he never met the agent. For a flat fee of $199, he simply agreed to post the seller's property on the multiple-listing service and sent him the usual disclosure documents and a yard sign. That is all he earned on the sale - $199.

For his part, the seller, Bernard Presock, also said he never met the agent. And the buyer, Scott Davis, says he briefly had contact with her - she was the wife of a personal friend - but Martin never actually represented him or showed him the property, according to arbitration documents.

Presock's house was listed on Aug. 6, 2004, and Davis bought the home six days later, according to documents. Martin and her boss, Lee Beaver, a broker at Keller Williams, filed their dispute six months later in February 2005, claiming their firm had been stiffed. Both Martin and Beaver declined to comment.

In a letter to the Realtors board, Schmidle's attorney, Matthew McConnell, said that "if this case had been before a court of law, there was no way the agent would have prevailed."

"She did not have . . . an agent disclosure agreement, or any buyer-agent agreement," McConnell wrote. "She did not participate in the settlement on the property nor did she ask for title work, inspections or anything else associated with the property. We provided two written statements from the buyer and seller stating that there was no agent involved in the sale of the house."

Still, Schmidle, a real estate agent since 1973, lost his case and is currently appealing the ruling.

The North Virginia Association of Realtors refused to comment on the case, because the appeal is still pending.

"This is nonsense," Schmidle said. "I am going to give them a chance to undo this mess, but I don't have any confidence in the process. And if they don't undo this mess, I am going to sue everyone - the buyer, the seller, the agents and the board of Realtors. We'll get everyone into court and let a judge sort this out."

It's unusual for commission disputes - especially high-profile ones like the Seinfeld case - to wind up in court and create a public record.

Typically, local branches of the NAR resolve most of these so-called "business disputes" quietly, through arbitration.

The NAR said it does not specifically track statistics related to the number of procuring cause-related disputes.

But Wemett said there is "a tremendous amount of squabbling that goes on in terms of broker commissions."

And in a slowing housing market, such disputes can get downright ugly as agents battle fiercely with one another for a smaller share of the commission pie.

Among the many factors typically considered by arbitration panels are who introduced the property to the buyer, who wrote and negotiated the offer and who helped clear any last-minute hurdles to the deal.

Avoid entanglements

What buyers and sellers can do to protect themselves:

  • Don't sign any written documents, except mandatory agency disclosures, with any real estate agent or broker except the one you choose to be your agent.

  • Make it very clear from the beginning that you are interviewing several agents before deciding to use the services of one exclusively.

  • Don't leave your contact information with any real estate agency or broker, because you are inviting marketing efforts and potentially starting a relationship.

  • If you are asked to sign in at an open house, give your name, but don't leave your address or phone number. Take the agent's business card and say you will contact him or her if you are interested.

  • Don't continue or encourage the development of a relationship with a salesperson you probably don't want to use in the future.

  • If you have any doubts about the status of a relationship with an agent you have dealt with in the past, you should make one last contact with that agent to end the "relationship" with them. Even if you never signed anything or feel you have no obligation to the previous agent, they may still think you are their buyer or seller and that a relationship exists. Make sure to give your new agent or the seller, if you are buying direct, a copy of the letter and make sure you don't have any further contact with the previous agent.

  • If you are contacted by a real estate licensee that you are pretty sure you don't want to use, ask them to stop contacting you. Ask them to remove your phone number or e-mail address from their records.