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35. Is the broker entitled to any payment?
In accordance with the listing agreement, the broker promptly took reasonable steps to market the home, incurring expenses for her efforts. Five months into the listing period, without involving the broker, the homeowner accepted an offer to purchase from his cousin. The broker learned of the contract only when the sale of the home to the cousin closed, one month after the listing period had expired.
A homeowner listed his home for sale with a real estate broker. The written six-month exclusive- right-to-sell listing agreement provided for the payment of a commission if the home sold.
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The «selling broker,» by contrast, has an ongoing relationship primarily with the BUYER, and any relationship between the selling broker and seller is indirect. A selling broker will meet with a potential buyer, show her various properties, and receive compensation out of the listing broker's commission on the sale. The selling broker's fiduciary duty, however, is also to the SELLER, even though the selling broker shows properties to the buyer. This is because a selling broker is essentially a sub-agent of the listing broker in the overall deal. In other words, both the selling and listing brokers owe a fiduciary duty ONLY to the seller.
An exclusive right-to-sell listing is a commonly-utilized instrument in real estate sales. It gives the broker the exclusive right to earn a commission by representing the owner and bringing in a buyer, either through another brokerage or directly. The owner pays both the listing and selling broker fees. The owner cannot sell the property himself without paying a commission unless an exception is noted in the contract.
By contrast, in a non-exclusive open listings, an owner may sell his homes by himself. The owner is under no obligation to use one particular listing broker, and he pays only the selling broker who brings the buyer who makes the offer that the owner accepts. A major advantage to an open listing is that the owner is unrepresented (i.e., no listing broker), so the owner only pays a commission to a selling broker, which is about one-half of the typical fees. And, if the owner finds the buyer himself, the owner will not owe anyone a commission. Closing costs and fees for a real estate attorney still apply, but no brokers will receive payment.
Historically, a broker earns his commission when there is a «ready, willing, and able» buyer who wants to purchase the property, even if the sale falls through.
D is correct. The contract between the homeowner and the broker was an exclusive-right-to-sell agreement. The terms stated that if the home sold within six months, the broker would receive a commission. The broker abided by the agreement by undertaking reasonable marketing efforts. By selling the home to his cousin before the six-month listing agreement had expired, the homeowner owes the broker a full commission.
A is incorrect. The contract between the homeowner and the broker stated that there would be «payment of a commission if the home sold.» There was no provision requiring the broker to negotiate with a buyer as a condition to receiving a commission. Under an exclusive right-to-sell agreement, the homeowner may not sell the property himself without having to pay the commission unless a specific provision says otherwise. No such provision existed here. If the homeowner had wanted to contract for the ability to sell it himself or to require the broker's affirmative involvement in negotiations, he would have had to include that in the original contract.
B is incorrect. Even though the actual closing occurred one month after the listing period had expired, the homeowner entered into the agreement with the buyer to purchase the home just five months into the listing period. This is dispositive in determining whether the homeowner owes a commission to the broker. It is consistent with the traditional rule that a broker earns a commission as soon as he discovers a «ready, willing, and able» buyer, even if the deal later falls through.
C is incorrect. This answer is only partially correct. The broker is entitled to more than just reimbursement for her expenses. The original terms of the contract will apply, as explained above, and the broker will recover her full commission, not just her expenses.