Question:

We are a real estate company and for several weeks we have been helping a Frum client who is looking to buying a property. We entered a signed contract agreement of 2% of the sale price in the event that the sale would go through in which the buyer would pay us this 2%. After many, many, hours of time in searching for a home, we finally found him a home of his liking, and he agreed to go through with the purchase, which we settled would take place on Sunday with the signing of the sale purchase agreement and sales contract with the seller. In the meantime, on Motzei Shabbos he discovered another property for sale through a different broker, and decided to cancel our agreement, and go through with the second property. My question is regarding if this individual is obligated or at least encouraged to compensate us for all of our time that we invested in finding him a property, and the fact that he canceled the agreement the night before the signing the next morning? He feels very bad as well that he messed us over and also would like to know what his obligations are.

Answer:              

From a purely legal [both civil and Halachic] standpoint, the buyer is exempt from paying you any amount, being that he had yet to sign the sales agreement which is the only agreement that makes him liable to pay a fee, and you never signed a brokerage agreement with him which dictates anything to the contrary [such as dictating a retainers fee for time spent even if the sales don’t go through]. Nonetheless, if he wants to do an act of Chesed to compensate you for the amount of time you spent with him and perhaps money you spent driving etc., and he feels bad that he backed out in the last minute, then he may do so purely voluntarily and not as an obligation, giving him whatever amount he feels he can afford or wants to give. As a side note if I may mention: Agents often spend significant time on clients who don’t end up buying, which explains their commission of between 2-4% from successful sales, a generally very high amount when compared to actual hours spent on a single client. This percentage compensates for those efforts of missed sales. Also, if you find it worthwhile for your business, and doing so will not detract the flow of customers, then you can have a retainers fee policy which the client agrees to in exchange for your services irrelevant of whether a sale takes place.

Sources: See Hayashar Vehatov 5 p. 19 [Rav M.M. Shpern] in great length; Chukei Chaim [Freidman] Tivuch See regarding that there is no need to pay broker’s fee if a cancellation occurs prior to the deal being closed: Rama C.M. 185:10; Or Zarua 3:257; Terumas Hadeshen; Shaar Efraim 185:50; Aruch Hashulchan C.M. 185:11; See regarding no need to pay broker’s fee unless the agreement was signed: Hayashar Vehatov 5 p. 36; Chukei Chaim 1:26 footnote 13 and ; 3:2; Chavos Yair 154;  See regarding the halachic requirement to pay for the fee even if a brokerage agreement was not signed: Rama 185:6 regarding a Sarsur; Gr”a C.M. 185:13