Mr. Feichthaler:

Recently I sold my house in Cape Coral privately to a couple who engaged a real estate agent because of language difficulties. The agent convinced the buyers to pay a 2% sales commission while I refused to agree to any commission on my part. Just before the June 1 closing the buyers cancelled their agreement with me.

The escrow funds were placed with a title company. I found out that the Realtor is on the verge of receiving the 2% commission from the title company as soon as I agree to sign off. Since the sale was not completed, I fail to see how the Realtor is entitled to the funds especially since I never agreed to pay them anything. And, I was under the impression that buyer and seller are the only ones able to decide on distribution of funds. Yikes!

– Al C., Ontario, Canada

Dear Al:

This question is an interesting one, and covers an area I seldom delve into: real estate commissions. Typically, a seller like you engages a Realtor, and agrees to pay a certain commission upon the successful completion of a sale. Typically, this rate is 6% of the sales price. I represent many clients that have found a buyer for their property on their own, and handle the preparation of their contracts and title work. For those who do not have a buyer ready, I have found that, in most cases, it is beneficial to engage a Realtor. Typically, any commission is absorbed by a higher purchase price, compared to a For Sale By Owner (FSBO) transaction.

When a transaction falls through, the sales contract will dictate where deposits will go. Your question does not make clear who you think should be entitled to the escrowed funds. If the buyer defaulted, typically you, as seller, would be entitled to those funds. If the buyer cancelled during the inspection period, or otherwise had the right to the funds, they would be returned to the buyer.

You note you are “signing off”, which is likely a “Cancellation and Release” document. This cancels the contract, and dictates where the funds go. If the buyer is entitled to the escrowed funds, then it would be theirs. However, it appears this buyer may have made a separate agreement with their Realtor, paying them directly for their services. That agreement may have provided that, if the deal fell through, that their Realtor would still be compensated for their efforts on the transaction. If you or the buyer don’t agree on the distribution, the title company should not release any funds. Eventually, this matter will find its way to the courts if that occurs.

You may want to seek professional advice on whom the deposit should be paid to, you or the buyers. f the buyer cancelled right before the closing, you may be the rightful owner of those funds, and you would have no obligation to their Realtor. However, if the buyer is paying a fee to their Realtor out of funds that the buyer receives, I would advise you that the agreement between the buyer and their Realtor should not be your concern.

Eric P. Feichthaler has lived in Cape Coral for over 30 years and graduated from Mariner High School in Cape Coral. After completing law school at Georgetown University in Washington, D.C., he returned to Southwest Florida to practice law and raise a family. He served as mayor of Cape Coral from 2005-2008, and continues his service to the community through the Cape Coral Caring Center, Cape Coral Historical Museum, and Cape Coral Kiwanis. He has been married to his wife, Mary, for over 18 years, and they have four children together. He earned his board certification in Real Estate Law from the Florida Bar. He is AV Preeminent rated by Martindale-Hubbell for professional ethics and legal ability, and is a Supreme Court Certified Circuit Civil Mediator.

Mr. Feichthaler can be reached at eric@capecoralattorney.com, or (239) 542-4733.

This article is general in nature and not intended as legal advice to anyone. Individuals should seek legal counsel before acting on any matter of legal rights and obligations.