Can the Agent Charge a Withdrawal Fee?

: Richard Montgomery on Oct 22, 2024

Dear Monty: If the contract states that the broker will disclose to the owners if any fees are to be paid by the owners, the agent writes "Withdrawal Fee of $575," and the owners decide they do not want to sell their property anymore, can the agent keep that $575 when she has done nothing but put the owners' private photos on the internet site? We wanted to start out at $359,000, but she convinced us that it would not sell for that price, so she made us write $299,500 in the contract space on "price." We decided we did not want to sell our house at her price. Is the agent legally allowed to do this? Is there any rescinding of a three-day limit when selling our house? Is this a fair practice?

Monty's Answer: This situation highlights several important aspects of real estate contracts and agent-client relationships. Let's examine the key points:

1. Disclosure of fees: The contract clause states that the broker will disclose fees to be paid by the owner. This clause is designed to ensure transparency in the transaction. However, the effectiveness of this clause depends on how and when the fees are disclosed.

2. Withdrawal fee: If disclosed in the contract, a $575 withdrawal fee is likely legal. This fee compensates the agent for initial work, such as market analysis, listing preparation and marketing efforts. However, the fairness of this fee can be subjective and depends on the amount of work the agent performs.

3. Listing price disagreement: The significant discrepancy between the owners' desired listing price ($359,000) and the agent's recommended price ($299,500) is concerning. While agents often provide pricing guidance based on market analysis, the final decision on listing price should ultimately be made by the owners. Pressuring clients to list at a specific price, especially one significantly lower than their preference, raises ethical concerns.

4. Three-day rescission period: Many states have "cooling off" periods for specific contracts, but these typically don't apply to real estate listing agreements. However, some states or brokerages may have policies allowing cancellation within a short period.

5. Legal considerations: The legality of the agent's actions depends on the exact wording of the contract and applicable state laws. The withdrawal fee may be legally enforceable if it is clearly disclosed and agreed upon. However, if the cost wasn't properly disclosed or the agent misrepresented any aspects of the agreement, there might be grounds for dispute.

6. Ethical considerations: The agent's actions raise ethical questions even if legally permissible. Real estate professionals are generally expected to act in their client's best interests. Pushing for a significantly lower listing price than the owners desires and charging a substantial fee for minimal work may not align with this expectation.

Recommendations for the homeowners:

1. Look for specific language about withdrawal fees and any clauses related to early termination of the agreement.

2. Express concerns about the listing price and fee. There may be room for negotiation or compromise.

3. If unable to resolve issues with the agent, escalate concerns to the managing broker or brokerage owner.

4. Consider consulting a real estate attorney to review the contract and advise on options.

5. If necessary, file a complaint with the state's real estate commission.

Richard Montgomery is a syndicated columnist, published author, retired real estate executive, serial entrepreneur and the founder of DearMonty.com and PropBox, Inc. He provides consumers with options to real estate issues. Follow him on Twitter (X) @dearmonty or DearMonty.com.

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