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OFFICIAL MAGAZINE OF THE NATIONAL ASSOCIATION OF REALTORS®

Daily Real Estate News  |  January 30, 2008  |   Builder Sues for Return of Commissions
A builder of luxury condominiums in Florida has sued real estate practitioners, seeking to force them to return the 3 percent commissions paid to them for selling 24 condos on which the deals never closed. In most cases, buyers walked away from their purchase contracts after the value of the condos fell.

Observers predict that this could be a trend. "We're definitely going to see more cases like this," says Austin MacMullan, a partner at Real Estate Research Corp., which studies housing trends. "This is just one of the side effects of the glut that I don't think anyone could have anticipated."

In the suit, Related Group of Florida says that sales practitioners are implicitly obligated in the sales agreement to pay back the advance.

But defendants in the case contend that the developer is to blame and it’s unfair for them to have to take the hit for sales that fell apart. It had become standard practice in the overheated Florida market for salespeople to be paid advance commissions.

Ed Roberts, the owner of Beachfront Realty Inc., says the contracts don't specify what would happen if the purchase fell apart. "We didn't think that if a buyer defaulted we would be asked to give back our commission," he says. What's more, Roberts says, much of the money went to individual broker-agents who left their companies long ago.

Source: The Wall Street Journal, Stephanie Chen (01/30/08)

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