QUESTION: We are having a discussion in our real estate office over whether a potential home seller who has entered into a listing agreement with our firm has the right to terminate that listing before the expiration of our 90-day exclusive right to sell. What do the laws say? If we find a buyer during the 90-day period, are we entitled to a commission even if the seller has attempted to cancel our listing?
ANSWER: While there is a principle (or theory) of law on this subject, you must look at each and every case when applying those legal doctrines. Without any more facts from you, I cannot give a definite answer, but I will attempt to outline the legal principles involved.
A broker earns a commission when he or she produces a buyer who is ready, able and willing to buy on the terms specified by the seller and the broker. This contract (called a "listing agreement") is the most important document between the seller and the broker, and should be read carefully by both parties before it is signed. This listing agreement creates an "agency" relationship between the broker and seller.
From a lawyer's point of view, it is a question of fact whether the prospective purchaser is ready, willing and able. Fact questions are decided by a judge or jury if the matter goes to court.
Thus, the courts have determined that a broker is entitled to a commission when the deal falls through because:
* The seller's spouse refuses to sign the contract or deed.
* The seller is unable to turn the house over to the buyer in a reasonable time.
* The seller insists on additional terms and provisions not mentioned in the listing contract.
* The seller and buyer get together to cancel a signed contract.
Unless the employment relationship between the broker and seller is canceled, the broker still can earn a commission if a ready, willing and able buyer is produced.
Generally, a listing agreement can be terminated by a seller upon proper notice to the broker, but only before the broker has spent any money or time on the listing. The seller also can terminate the listing agreement if the broker is not complying with its terms.
If the listing is non-exclusive, the "agency" may be terminated by the seller without any notice to the listing broker.
How can a real estate agent best protect a listing agremeent and his or her commission? Clearly, it is in the agent's best interest to begin advertising and showing the listed property just as soon as the agreement has been made. This fulfills a contractual obligation, and is also a good public relations and business move. Too many agents tend to drop a seller once the listing agreement has been signed.