02-Jun-2005

A recent Tennessee Court of Appeals decision affirmed prior Tennessee case law and ruled that without an express agreement, buyers are not liable to real estate brokers for a real estate commission, even if the buyer works with the agent and a sale results from the agent’s work.

In Harris v. Harris (Tenn. App. Jan. 4, 2002), the buyer was introduced to the property by the plaintiff real estate broker. The buyer never signed a contract with the plaintiff broker. The broker was the listing agent and had signed a listing contract with the seller. The defendant buyer found out the house was subject to foreclosure and purchased the note and deed of trust that were in default. The foreclosure sale was performed and the defendant buyer was the successful purchaser of the property at the foreclosure sale.

The court found that there was no written contract between the broker and the buyer and recognized a Tennessee case that holds there was no implied contract as a theory of recovery, stating:

When the agent has an expressed contract with the seller for full compensation, the law will not raise an implied contract in a third person, to pay for the same service.

The court went on to state that a cause of action might be available by the listing broker against the seller who was foreclosed on, but left that question unresolved.

The moral of the story: Unless you have a written agreement with your buyers stating that they will pay you a commission, the buyers owe you nothing, even if they buy the property you introduced them to