Who should own rental property?

October 28, 2013

The written contract negotiated between your mother and the agent contains the answer. It is very possible that the contract reads the commission is payable upon the signing of the lease. Some real estate companies collect the fees due them out of the rents collected. Others collect their fee up front.

negotiation quoteReader Question: A real estate agent did not screen a tenant for rental and collected 6% of one years rent payments. The tenant only paid one month and a partial security deposit. Is the real estate agent entitled to keep the 6% that was pre-paid to her for the whole year? This agent said she did not screen because my mom said she trusted the tenant and did not need to screen. Should not the agent have screened without having to ask my mom? My mom knows nothing about renting or real estate. When my dad was alive he handled all the real estate matters. Barbara H.

Monty’s Answer: Hello Barbara, and thanks for your question. The written contract negotiated between your mother and the agent contains the answer. It is very possible that the contract reads the commission is payable upon the signing of the lease.

Check out some alternative companies

Some real estate companies collect the fees due them out of the rents collected. Others collect their fee up front. Some will rebate and start over and others will not rebate. Additionally, real estate companies that specialize in, or have a division for, property management may have superior operating policy and procedures in place.

The blind leading the blind?

The argument for the fee rebate is the landlord paid expecting the agent to find a paying tenant. The argument for not rebating the fee is the work to find any tenant requires similar time and expense. The contract may state the commission is for locating the tenant to sign the lease, and is silent on a guarantee.

Does your mother admit to telling the agent not to screen the tenant? Who would have paid for the screening? Unless you were present when the conversation took place, it may be hard to determine the exact tone or expression of the communication itself. Perhaps the agent should have challenged your mother’s feeling of trust, but the agent is at peril going against her wishes. The agent may not know enough to challenge her. The agent may have liked not having to do the extra work.

The potential options

If, the issue has already been broached with the agent and they will not refund the fee, here are several choices:

1. Accept the decision and chalk it up to experience and use the same agent to start over.

2. Accept the decision and chalk it up to experience and interview new agents.

3. Go to the agent’s broker, explain the situation and ask them to intercede.

4. Seek legal advice as to your rights and options in the contract.

5. If your mother believes she has no liability (hint- ignorance is not a good excuse) and still wants relief, a complaint could be filed against the agent and the broker with the department in your state that handles licensing, supervision and disciplining real estate agents.

6. If the agent is a Realtor, there is a method for filing a grievance with the local organization that will mediate your complaint against the agent if their investigation reveals probable cause.

Taking a closer look

It is very possible that your mother does not want to own rental property. Has anyone asked her if she wants to own and manage the property? Who is going to help her when the furnace goes out in the middle of the night, on a Saturday? Has she considered turning the management of the property over to a property management company? Locating and retaining a property management company who finds tenants, screens prospects, collects rent, evicts tenants and keeps the property in good condition may be a better way for your mother and the rest of the family to own property.

If mom “knows nothing about renting or real estate,” perhaps other family members should be involved before costly errors transpire. If other family members are in the same boat as mom, it may be wise to investigate property management, taking a property management course or selling the property.

When interviewing potential property managers, the same care and process utilized as interviewing residential real estate agents should be followed. The questions are slightly different. ” If the tenant is non-pay or bolts early, is the charge based on the rent you collected?” Look for a property manager that keeps the property in good repair and stands behind their work. Remember the words of Dr. Chester Karrass, “You don’t get what you deserve, you get what you negotiate.