My real-estate agent wants 1.25% of commission (half of his typical
2.5%) on a $235,000 property in Chicago, IL, USA that I plan to buy
that he did not find for me (I found it on my own). This works out to
be $2937. This is significantly more then I expected to pay per our
"gentlemen's agreement" I detail below. I had an amount of $1000 or
less in my head. I'm sure that this agent would be very unhappy with
me if I paid him $1000 or less. Unfortunately, the agent and I never
discussed any numbers or percentages or set any other quantitative
expectations when we made our "gentlemen's agreement." I'm realizing
now that this was a key mistake on my part.

Yes indeed. My understanding is that in general, contracts related to real
estate must be in writing or they have no force. However, you'd have to
check with a lawyer to know for sure.

I decided to employ an agent to see what else was available on the
market. The agent and I orally made a "gentlemen's" agreement wherein
I would pay him (the agent) standard commission (2.5% of the sale) if
I bought a property that he introduced to me, and something
substantially less then that if I bought the original property owned
by my friend

But you didn't agree on an amount, and don't have anything in writing to
back up your claim. Right?

I took my agent to visit the property being sold by my
friend to have him evaluate its worth and to show him what I liked. (I
also wrote a substantial document outlining my real-estate goals and
preferences and requirements.) Since this agent also has an
appraiser's license, I gave him the offer, if he agreed that my deal
on my friend's property was good enough, to do a formal appraisal
right there on the spot and start the process of my friend and I
cutting a deal...and I would pay this agent the same amount I would
for an appraiser's fee (even if that wouldn't be the last formal
appraisal done).

What would be the normal appraiser's fee?

My agent advised me to look at other properties. After a significant
search that involved approximately 10-12 property visits spread over 2
different showing days, my agent and I decided that the original
property being sold by my friend was the best property available for
me and my requirements. We also agreed that the $235k asking price my
friend had was competitive and reasonable.

I have decided to not seek any help from my agent for any further work
with my purchase of my property (the original property I found myself
through my friend). I am arranging all the lawyer, inspector, etc work
to close the sale myself.

I am not comfortable paying the $2900 my agent seeks. Furthermore, it
may be difficult or impossible for me to drive this expense into my
mortgage loan, because my seller is not that interested in doing it.
This makes for a considerable out-of-pocket expense for me. All in
all, I'm fairly unhappy.

Putting that expense into the mortgage loan would have exactly the same
effect as reducing your down payment by a corresponding amount.

On the flip side, I am quite sensitive to honoring my agreement with
this agent. He seems good, and I was considering having a long-term
relationship with this gentlemen. I have to admit that I'm not yet
certain that I am as interested in a long-term bond with agent after
these discussions have been as uncomfortable for me as they have been
thus far.

But apparently you and he do not agree on what the agreement is, even if we
ignore the lack of a written agreement.

Here's my take on the situation:

1) You have no written agreement, so you don't owe the agent anything.
That is, if you decide to give him nothing, he has no legal recourse.

2) On the other hand, you want to do the right thing, whatever that
might be.

3) On the other other hand, you and the agent don't agree on what the
right thing is. Moreover, you haven't told us what you think the right
thing is, or why; you've just told us that the agent thinks the right thing
is to ignore the part of the agreement that says that you will pay
substantially less if you buy your friend's property?

So what do you think is right, and why? In particular, does the agent agree
with you that your deal was for you to pay substantially less if you bought
your friend's property?