Coldwell Banker has been found in violation of Massachusetts law regarding the holding of escrow funds.
Summary of the case from Jonathan M Zang vs. NRT New England Incorporated:
On January 4, 2006, Neil Bradford (seller) and Coldwell Banker executed an “Exclusive Right to Sell Agreement” (the listing agreement) to sell his condominium on Phillips Street in Beacon Hill (property). The listing agreement required the seller to pay Coldwell Banker “a fee for professional services of 5% of the gross sales price” and authorized Coldwell Banker to “pay all commissions payable no later than the closing date” and “retain any deposits held in escrow and apply said deposits against commission due.” The listing agreement further provided that “Coldwell Banker’s usual and customary practice is to compensate cooperating brokers acting as a buyer’s agent in the amount of 2.5% of the contract price . . . .” Zang (the buyer) was not a party to that contract, and he would never become a party to that contract. On January 20, 2006, Zang called, had his first direct communication with the seller about the property, and attended an open house two days later. Alan Fincke, a sales associate affiliated with Coldwell Banker’s Boston office was present. On January 25, 2006, after contacting Fincke, Zang again viewed the property and submitted an offer to purchase the property, which was originally listed at $1,349,000, for $1,200,000. Zang provided a $1,000 check to hold the offer, which Coldwell Banker accepted but did not deposit.
After three days, negotiations reached an impasse because Coldwell Banker rejected Zang’s request that it reduce its commission in order to close the gap between Zang’s final offer and Bradford’s counteroffer of $1,225.000. Zang then retained William Wendel of the Real Estate Café as his agent (buyer’s agent) to represent him in further negotiations. In exchange for his services, the buyer’s agent agreed to be compensated for his services at an hourly rate of one hundred dollars (minimum fee of $3,000) and to rebate to Zang any commission he received from the seller in connection with the purchase of the property.
Coldwell Banker declined to release the escrow funds in full. It held back five percent as the commission it believed it earned acting as both seller’s and buyer’s agent.
In the first ruling , the court sided with Coldwell Banker. Upon appeal the court reversed the findings and ruled in favor of the plaintiff Jonathan Zang.
Massachusetts Supreme Judicial Court ruling:Jonathan M Zang vs. NRT New England Incorporated