Q: A real estate agent holds an exclusive right to sell my home. The listing agreement will expire next month. I have failed to see any signs of sales activities on the part of the agent, and although I understand that times are bad, I am growing very impatient.
While the exclusive listing is in force, may I legally take steps to find a buyer? If I find a buyer, should settlement be postponed until after the expiration of the listing? What are my legal obligations to the real estate brokerage firm?
A: Generally speaking, there are three kinds of real estate listing agreements:
* Open listing: Under this kind of arrangement, the owner of property gives a real estate broker authorization to sell the property, but there are no prohibitions on the owner -- or other brokers with similar open listings -- to sell the property. A commission is owed only if the broker is the "procuring cause" of the actual sale.
Most real estate brokers are unwilling to take an open listing because they may do a lot of work -- and spend a lot of money in advertising -- and not get a commission.
* Exclusive agency: Here, the broker is given an exclusive listing, and no other brokers can be given a similar listing during the term of that agreement. However, under such an agreement, the owner retains the right to sell the house through his or her own effort. If the owner is successful, the exclusive agency automatically comes to an end, and no commission is owed the broker.
* Exclusive right To sell: This is the typical agreement that most real estate agents favor. It gives the broker the exclusive right to sell your property, and even if you sell it yourself while the agreement is in effect, you will be obligated to pay a commission to the broker.
Thus, in most circumstances under an "exclusive right to sell" listing, even if you, the homeowner, find a buyer during the term of that listing agreement, you would be legally obligated to pay a commission to the agent -- even though the agent was not the "procuring cause."
However, a very recent case has just been handed down by the Third Circuit Court of Appeals. This court covers some mid-Atlantic states and the Virgin Islands, and while not binding as law in the Washington area, may be very persuasive to our courts.
In the recent case (Lockhart v. Holiday Homes of St. John Inc.), the court analyzed a listing agreement that gave the real estate brokerage firm the "exclusive right to sell." According to the court of appeals, since the listing agreement did not include a provision dealing with the question of the owners' right to sell through their own efforts, the court ruled that the mere phrase "exclusive right to sell" was ambiguous. Therefore where the landowners sold the house themselves during the term of an "exclusive right to sell" listing agreement, the homeowner owed no commission to the real estate firm.
According to the court of appeals:
"Though the contract thus explicitly made it clear that no other real estate agent could be engaged, it was silent as to the question of whether the owners relinguished as well their right to sell their property through their own efforts."
Thus, if your listing agreement does not contain language that you will owe a commission even if you sell the house yourself, it can be argued that you have the right to sell the house yourself and owe no commission.
However, I would not rely exclusively on this court case. It might not become law in this area, and even if it does, you do not want to wait for a court opinion nor to pay the legal fees involved with such a case.
You might, however, consider terminating the agency relationship. The real estate broker is your agent. Like most agency relationships, if the principal is dissatisfied with the services of the agent, the agency relationship can be terminated. If there is such an exclusive right to sell, it can be terminated by the seller upon proper notice to the broker -- but only before the broker has spent any time or money involved on the listing.
I suggest that you sit down with your broker and discuss the entire matter. The broker may be unaware of your concerns, and it may also be that the broker has spent time and effort on your house. If you are dissatisfied, and if the broker has not put in the time, feel free to cancel the listing by giving the broker written notice.
When sellers enter into real estate listing agreements, they should recognize that these are legal and binding obligations. If there is any uncertainty as to the meaning of the language, discuss it with the real estate agent before you sign that agreement.
Additionally, if you have individuals who have previously expressed an interest in your house exclude them from the coverage of the listing agreement so that there will be no question in the future that if any of those individuals purchase your house, you will not owe a commission to the agent.