Tough Situation, Need Help With Giving A Referral Fee to a Residential Agent
Long story ahead.... My team and I were referred a contact by a residential agent in August 2020. This contact was planning on selling a commercial property with the intention that this contact would provide two transactions because not only were we going to list this property but also help buy another one. It was a residential agent that has known this contact for over 20+ years, and we never agreed upon a specific dollar amount or percentage for the two transactions for the referral. The contact negotiated with us that we would receive 2% commission on the buy-side transaction, and then an additional 2.5% for the listing side if we represent both the seller and the buyer, or 2%/2% if we represent only the seller and there's another broker on the deal. Both buy-side and listing side commissions were below our expectations but we figured that it was a good contact to know and we'd be fine with 4.5% and paying a referral fee once it came to closing both deals. 

&amp;#x200B;

We had several inquiries on this almost $7M+ listing but never gained enough traction to get a LOI because the property was slightly overpriced for our market and the contact was not flexible on price at the time. We were fired from this listing in August 2021 for not having performed up to the standards of the contact, and they hired another brokerage to cover the listing and the purchase. We had agreed upon a protected list for 90 days of the inquiries that we had during our time of having the listing, and that if one of those inquiries were to become interested in the property again, then we would be able to represent the seller again and gain our 2.5%. Naturally we called every single inquiry and found an interested buyer that we had met months prior. When we approached the contact, he told us that we would get 2% and the other broker that they just hired would get the other 2%. When we reminded the contact of our protected list and our agreement, he basically threatened us with his attorney. We dropped it and decided to proceed as usual. Over the next few months, we had this deal die and come back to life several times. It was not an easy transaction. Around November/December 2021, the contact told his friend the referring agent that she should come to us to make sure we're going to honor the referral agreement. I had a conversation with that agent and told her that we are no longer representing the seller and now representing the buyer only. She agreed and we moved on at that point. 

&amp;#x200B;

I'm happy to say that this property recently closed but it is also bittersweet because the referring agent called me again after closing demanding that we pay her a referral fee. While we had every intention to pay this referring agent a "gift" of a few thousand dollars, we were in no position to pay a referral of 25% like she mentioned for passing along the name of her friend, while we did the heavy lifting for almost two years. In addition to that, we were not representing her friend any longer but representing a buyer (who we made contact with while having the listing from the protected period). She and the contact believe that because we found this buyer during the listing, that the referral fee must be paid. The contact is not honoring his side of the deal with our protected list, yet expects us to "do the right thing" and pay a sizeable referral to his friend the referring agent. My team and I are very frustrated because it seems as though whatever amount we pay to this referring agent, she is not going to be happy if it is a penny less than 25%, even though we did not agree on that amount and that we have nothing holding us to the referral since two things: not in writing, and we didn't represent the seller. The other broker that came in over a year later and barely did any work since we spoke directly with our buyers and to the seller contact, yet is getting the full 2% and we are splitting our 2% between three team members and now having to pay a referral on top of this. Total commission came out to about $110K. We decided internally that $10K would be reasonable to pay the referring agent, but we have a feeling she will not be pleased because she is expecting almost 25%. 

&amp;#x200B;

We decided on only paying the $10K out of good faith and hoping to set things right but doesn't seem like that will happen either way. One teammate says that if we're going to be the bad guys either way, why pay anything at all? Which is a great point. Paying 25% on something that this residential agent did nothing but pass a name is out of the question since we spent two years on a very tough deal. The agent said we would never get a referral from her again or the contact as well for future business if we do not do the right thing. I'm wondering if it's worth increasing the referral fee to save that business, or is it a lost cause and we pocket the money? But we have already decided that we will give $10K and be done with it, whether she is happy or not. 

&amp;#x200B;

Any thoughts, or ideas on how to handle this?
[{"id": "hyccusp", "text": "Sounds like the seller owes you 0.5% per your protected list and the prior agreement and you owe the residential agent 0.5% as the referral fee. The seller can make good on your agreement and then you'll be able to make good on your agreement with the residential agent, or they can save the hassle by paying the residential agent directly.\n\nIf the residential agent is expecting 25%, then I wouldn't release the $10k without some kind of release/settlement drafted by an attorney.\n\nDo you really want that agent's referrals if they are all as difficult as this guy? Not only going back on the protected list, but also the unrealistic price expectations, issues getting the deal to close, etc.", "replies": [{"id": "hycfrga", "text": "All great points. Love the idea of the seller paying that 0.5% directly to the referring agent. I have no clue why it has to come from my end again if we're the ones that saw this all the way to close. I even explained to the agent that if we were to calculate our hourly rate based on the amount of hours we worked, we might as well have worked in fast food.\n\nGood point, do I really want this referral source? I'll pay the $10K to be done with this and never work with her or the contact again. Just hoping they don't spread the word to others.", "replies": [], "depth": 2}, {"id": "hydbl9q", "text": "This. Fee would come from whatever the seller pays you (nothing so far from what I can tell), and in any case comes with a release.", "replies": [], "depth": 2}, {"id": "hydlgdx", "text": "Good call on the release/settlement, I forgot to mention that in my post! Definitely get this, or I suspect they\u2019ll keep harassing you for the other $25,000 they think they\u2019re owed.", "replies": [], "depth": 2}], "depth": 1}, {"id": "hyccync", "text": "You're doing her a solid with the 10k.", "replies": [{"id": "hycft75", "text": "Thank you. Feels kinda like paying for the problem to go away", "replies": [], "depth": 2}, {"id": "hyhqg2y", "text": "Agreed. 10k is solid.", "replies": [], "depth": 2}], "depth": 1}, {"id": "hycf9cc", "text": "So you\u2019re fee got halved? So does the referral?", "replies": [{"id": "hycfwu9", "text": "Yes! That's what we told the referring agent but she doesn't see it that way she's still expecting a sizeable referral fee considering our team got $110K", "replies": [{"id": "hyci74j", "text": "Oh well, nothing documented. If you guys didn\u2019t hustle they would have got $0. \nThat or get them to put in the work to get the extra fee youre entitled to and split it with them if they want to show real value.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "hycimc0", "text": "Trash situation. I would count the referral based on the percentage you guys lost out on. Tbh this agent will likely carry a grudge no matter what. You just have to decide how much it\u2019s worth to you. Scummy on both her and the sellers parts though.", "replies": [], "depth": 1}, {"id": "hycob2h", "text": "Is there like a bunch of more referrals coming from this residential agent? Probably not. This is their best shot to make a quick $25k so they\u2019re pressing you. $10k is generous given the circumstances", "replies": [], "depth": 1}, {"id": "hydl7p2", "text": "This really highlights how important it is to have a very clear listing agreement, commission agreement and referral agreement in writing. It sounds like you had most of those, but if there\u2019s still confusion then either the agreements aren\u2019t clear or someone just isn\u2019t getting the picture.\n\nIt\u2019s a pain in the butt, but we\u2019ve had an attorney draft our commission agreement/referral agreements for use. It was a tad expensive, but I\u2019ve only ever had one client not pay and the deal just wasn\u2019t large enough to pursue collection through legal means.\n\nThis is my personal opinion, but I think it sounds like you guys were and plan on doing the right thing. Under the circumstance I\u2019d argue the referral broker doesn\u2019t have any claim to a commission, but I think you were acting ethically by planning on sending them something even though the agreement reached was outside the realm of what would have been covered under the referral agreement (I\u2019m assuming). I think it\u2019s clear the Landlord is trying to protect his buddy, but maybe doesn\u2019t pay the most attention to detail and the referral broker\u2019s been thinking they were getting a $35,000 commission for giving a name and no work and now they see those dollars slipping away and are just trying to get their hands on it.\n\n$10k seems excessive and very generous. They would be nuts not to take it. Frankly with that behavior if I didn\u2019t have a written agreement and hadn\u2019t made any other agreements to the contrary, I wouldn\u2019t do more than a nice bottle of wine or restaurant gift card tbh.", "replies": [{"id": "hydncex", "text": "Thank you for your detailed response! What do you think about this referral, is it truly a referral if we got fired from the listing? The contact and the residential agent believe it is a referral because we found this buyer as a direct result of the listing. That is why we are willing to go over the top with $10,000 and be done with it", "replies": [{"id": "hydpw6a", "text": "So this all comes down to the document that I don't have, I'm also not an attorney so this is all gut feeling, not advice. With that said this is something that would have been addressed in a referral agreement, normally there would be a time frame for the agreement to be valid and binding. I would imagine it would be reasonable to assume the referral agreement dies with the listing agreement, however since your listing agreement had a protection clause that may be the source of the concern, could it be argued the referral agreement would extend with the listing agreement? I think so. \n\n&amp;#x200B;\n\nGiven all of that, as I understand it some time after the listing expired you eventually converted into a Buyer's agent representing Buyer and therefore no longer had a contractual relationship with the Seller. Unless you converted to transaction brokerage or dual agency representing both parties than your original listing agreement would be expired along with your commission agreement. When you began representing the Buyer did you get the Seller to enter into a new commission agreement? If not and you're outside the protection period you may not be entitled to a commission at all if the Seller didn't agree to a commission in writing under the new brokerage status. There's so many factors to consider here and without the documents or being an attorney, it's hard to give a straight forward answer here.", "replies": [{"id": "hydqotx", "text": "&gt;When you began representing the Buyer did you get the Seller to enter into a new commission agreement?\n\nOur 2% commission was covered in the LOI &amp; PSA. We initially thought we'd get the 2.5% but then that was when we were informed that we were not the ones representing the seller any longer. We proceeded to get a buyer's rep agreement and became the broker for the buyers to cover our 2%.", "replies": [{"id": "hydrzcg", "text": "&gt;Our 2% commission was covered in the LOI &amp; PSA\n\nOk good, I still always get a commission agreement as a separate document just to be safe, but if it's in the contract you should be good.\n\nThe way you described it, unless the referral agreement was very specific I don't see how they could have anticipated this situation arising and added that to the agreement. Did they expect that they would give you a phone number and get a 25% referral in perpetuity if you ever brought another deal to that owner? Seems like an unreasonable assumption. Once again this is why it needs to be in writing, at the end of the day all we have to go on is a written agreement (there isn't one) or any verbal agreements made (their word vs yours). From a legal standpoint I don't see how they would litigate it (not an attorney) without any documentation, and from an ethical standpoint, if you didn't make any other agreements or representations to the contrary, without an agreement having been reached I think it is up to your discretion what you give them, they're probably owed something, but how much I can't say. Please seek attorney if you have any doubts about the implications of any agreements that could have been made.", "replies": [{"id": "hye79lh", "text": "Thank you!", "replies": [], "depth": 6}, {"id": "hye7k7e", "text": "&gt;Did they expect that they would give you a phone number and get a 25% referral in perpetuity if you ever brought another deal to that owner? Seems like an unreasonable assumption. \n\nVery true and honestly I can see this happening because the residential agent has already said to me, \"You wouldn't have closed on this property if I never introduced you.\" My counterpoint to that is that this deal wouldn't have closed if I hadn't gave a shit and put forth the effort. We have nothing in writing and now she's trying to swindle me for cash because it has closed. If this were a $2K total commission deal, I doubt I'd hear from her. I'm hearing from her because it is a $110K total deal.", "replies": [], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "hyhn2t7", "text": "I think your case in this situation is clear, your agency and client duties rest with the seller amd the holdover of 90 days has long expired. Quite frankly, the fact you brought a buyer after them essentially firing you--so wouldn't worry about future referrals", "replies": [], "depth": 1}]