REFERRAL FEE AGREEMENTS

This explanation was an actual occurrence. Broker asked a Realtor(S), on his staff to represent one of his buyers or clients since the Developers stipulation was to have a minimum of three per Realtor, on a new development to be constructed. The Realtor represented the Buyer as the Priority Purchaser's Broker, license in Hawaii, so therefore he represented the Buyer through the process of the Limited Priority Reservation Agreement. Realtor registered the Buyer to buy a unit and upon the Deposit of $20,000 in a non-interest bearing account, the reservation was agreed upon. Total purchase price was $1,675,000.00, with two payments scheduled in the amount of the Initial deposit of $167,000 and a second deposit of $167,500. Buyer paid both deposits. The balance to be deposited with Escrow, no later than four (4), days prior to Closing of Escrow. Broker, then decides to close his Realty Office, but maintaining an active Realty at a different address. The agreement between the Broker and Realtor is verbal at a compensation of $2,000, then corroborated by email for validation. No Referral Fee Agreement form RR404, was executed.

Later on, the Broker gets paid by the Developer or Seller on the 50% commission earned on the construction of the condominium. Realtor finds-out on his own accord and diligence that Broker got paid and he did not. Broker decides not to pay the Realtor until the Close of Escrow. Asks Realtor if he gets paid the $2,000 will he be able to return the money if there is a default by the Buyer. Realtor, has no problem in returning the funds. Still Broker does not pay Realtor. Several years go by and the Realtor has not been paid by the Broker. Buyer has not executed the contracts final agreement and is in default, decides to join a lawsuit against the developer. Realtor contacts the Developer's new sales team and asks what is the status of the lawsuit. Per the Director of Sales representing the Seller, the Buyer was in Default, joining the lawsuit would be frivolous and unfruitious, the remainder of the Buyers money would go into liquidated damages. Finally, the developer would not go after the 50% commission paid to the Broker.
Although the Realtor appealed this case with RAM, through an Arbitration Panel, previously to this findings, nothing came-out-of-it. The moral of the story, do not trust that your broker is going to have integrity,moral values and proffesional decency. Always fill out form RR404 and pay close attention to the "Other Terms" section and make sure to cover all the "ifs" possibilities. Do not do a flat fee, a percentage is better. Thank you.