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Commission Factoring - A Dangerous Development OPINIONby Peter Mericka B.A., LL.B Real Estate Lawyer and Qualified Practising Conveyancer Victoria Lawyers Real Estate We have argued that real estate commissions are a major cause of corruption in the real estate industry. But what if the drive for commission is intensified? What if the estate agent has spent the commission in advance, and fears that the sale may collapse? 
It is the common experience of lawyers and conveyancers that estate agents involve themselves in real estate contract matters when they have no right or reason to do so.
Commission rage is often a factor, as the tendency to meddle in contract matters appears to rise with the estate agent's need for money. This flyer is being distributed to Melbourne estate agents, with the message, "Why wait six weeks or more for commissions to be paid? It's your money, so get paid NOW!"It appears that an estate agent with cash-flow problems can now spend the commission in advance. Does this mean we can expect more desperate attempts by estate agents to control real estate contracts? Commission-Driven Misconduct An estate agent who anticipates a commission in excess of $10,000 just for having two parties sign a document, will often go to extraordinary lengths to bring about this simple occurrence. The desparation of some estate agents leads them into behaviour which is not just wrong, it is actually criminal. Commission-driven misconduct can include the following:
A Major Misconception Estate agents believe that they are entitled to a part of the deposit, when in fact they are not. The estate agent is entitled to deduct commission from the deposit only when the vendor becomes entitled to it. The conversion of the deposit, from funds held on behalf of the purchaser, to funds payable to the vendor (and therefore accessible to the estate agent) becomes the estate agent's primary goal. This is why lawyers and conveyancers are forced to deal with desperate agents who push and pester for the release of deposits from the moment the contract is signed - not because they want to help the vendor, but because they want to help themselves to the cash. The Cash-Strapped Estate Agent Why would an estate agent pay for a factoring service? Factoring is often used to solve cash-flow problems. But the factoring solution is expensive in itself. It may be concluded that a factoring service would be a last resort, as most estate agents would avoid factoring expenses if they could. Some Serious Questions About Factoring Does the "need" to resort to factoring rise in proportion to inability of the estate agent or agency to generate enough income? If an estate agent is forced to consider factoring, would he or she also be forced to consider improper methods of generating additional income? Where an estate agent has been paid in advance, how impartial and client focussed can he or she be if one party or the other is considering cancellation before settlement? Is factoring itself a symptom of a very greedy and selfish industry? Someone Wake The Regulator Does it occur to those whose job it is to regulate the industry that there is a problem when commission-driven desperates think of their clients' deposits as their own? Perhaps the regulator should come out of hibernation and have look at this dangerous development in the real estate industry. To post your comment on this item, please return to
Legal Notice
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