Why Do I Use a Retainer Fee?
Who wants to work for free? That is not a sustainable business practice.
Do you or your family members provide a service or product with the understanding that their clients and customers can simply walk away without paying for their time? Of course, not.
Would you put 30, 50, or 100 hours into a project and expect to not get paid?
Your mechanic holds your car until he gets paid.
Your lawyer doesn’t start without a retainer.
You have to prove you have insurance to go to the doctor.
Yet, real estate agents invest their cash and are expected to put in all those hours and wait 3 months, 6 months, 1 year or even 2 years to get paid. My clients find that to be unfair and, frankly, bad business.
Additionally, as you can read below, it is very common for real estate agents to work on behalf of their clients and the client chooses not to proceed after many hours of work has been on expended on their behalf.
To give you a picture of this, consider working at your job and you agree that they can hold your pay for six months or a year. Shortly before you get paid, you find out that you are entitled to none of the money that you worked long and hard for because the boss decided that he or she did not want to go forward with the project or that a client of the company walked away.
I'm not in business to gamble.
We’re in this together to achieve your goals!
Is it Common for Real Estate Agents To Work Many Hours For Their Clients
And Not Get Paid?
Unfortunately, yes!
30% of real estate contracts fail to close.
Financing doesn’t come to fruition.
Life circumstances change.
Negotiation deal breakers.
And then there are occurrences and shenanigans noted below...
Things People Do That Waste Time, Reduce Showings, and Prevent Real Estate Agents from Getting Paid. Some Are Fraudulent.
Engage a real estate agent just to see what the market price is and then sell it on their own.
Misrepresent that they are not represented by another agent.
Terminate a listing agreement when they find out that their mother’s friend’s daughter’s son’s wife is a real estate agent. This is usually done by stating, “we decided not to sell” and then I find it listed on the MLS the following week.
Terminate a listing agreement or go with another real estate agent who low-balled on the fee. Again, “we decided that we don’t want to sell.”
Common scenario: 2 to 3 months spent working with a seller. House is listed (many hours just for the listing process). Daughter comes to visit and persuades mom not to sell or use her girlfriend’s boyfriend’s mom who has a license but works on the other side of the state. Now that all of the work is completed, and the data is provided to the client, the phantom mom gets to use that work and simply list the property under her name.
Refuse to allow showings.
Refuse to make the house showable, For example, refuse to declutter or keep the house clean.
Being rude to buyers and their agents.
Real estate agents getting in the middle of a divorce or estate battle.
Ne’er do well children expect grandma to give them the house when she dies.
Are Retainer Fees Legal in North Carolina?
Yes.
I use North Carolina state-promulgated legal forms developed by the NC Bar and the NC Realtors Association.
The retainer fee clause on the Exclusive Buyers Agency Agreement is found in Paragraph 4(a).
The Exclusive Right to Sell Listing Agreement uses Paragraph 16 or an addendum to provide for the terms of the retainer fee.