broker protection clause Show When is the expiration date for a listing agreement? The expiration date also depends on the real estate market and the comparable homes in the area. If every comparable home in the area has sold in less than 60 days, you may want to sign up for a two-month contract. Ultimately, the expiration date of the agreement can be negotiated with your real estate agent. When do you need a Washington listing agreement? Washington listing agreements are required documents that are used when a real estate broker is engaged by a client to sell a piece of real estate. Can a real estate agent end a listing agreement?It is possible to end a listing agreement with a real estate agent — and the terms of doing so should be laid out in your contract with the real estate agent. Your listing agreement is likely a bilateral contract — meaning the agent and the seller must both perform. What is the protection period in a listing agreement? What Is the Protection Period in a Listing Agreement? The protection period in a listing agreement is specifically there to protect the real estate agent. For a certain amount of days after the contract expires, if any of the potential buyers that the seller’s agent brought in actually buy the home, then you will still owe them the commission. Washington listing agreements are required documents that are used when a real estate broker is engaged by a client to sell a piece of real estate. The expiration date also depends on the real estate market and the comparable homes in the area. If every comparable home in the area has sold in less than 60 days, you may want to sign up for a two-month contract. Ultimately, the expiration date of the agreement can be negotiated with your real estate agent. It is possible to end a listing agreement with a real estate agent — and the terms of doing so should be laid out in your contract with the real estate agent. Your listing agreement is likely a bilateral contract — meaning the agent and the seller must both perform. What Is the Protection Period in a Listing Agreement? The protection period in a listing agreement is specifically there to protect the real estate agent. For a certain amount of days after the contract expires, if any of the potential buyers that the seller’s agent brought in actually buy the home, then you will still owe them the commission. Real estate brokers work hard to earn their commissions. And they use specialized training and experience to secure the right buyer for the seller’s unique property. As a result, brokers deserve to be justly compensated for the value they bring to each transaction. Most commonly, brokers negotiate with sellers to be paid through the standard exclusive right to sell listing agreement (the “listing agreement”). Put simply, the listing agreement requires the seller to pay a commission to the broker if the broker is the procuring cause of a sale during the listing term. Per the National Association of Realtors® (NAR), procuring cause is the “uninterrupted series of causal events, which results in a successful transaction.” Common law defines procuring cause as “a broker’s activity which originates a series of events which, without break in their continuity, result in accomplishment of the prime objective of employment of the broker-producing a purchaser ready, willing and able to buy real estate on the owner’s terms.” Hurley v. Kallof, 2 Ariz. App. 446, 449, 409 P.2d 730, 733 (1966) (quoting Clark v. Ellsworth, 66 Ariz. 119 at 122, 184, P.2d 821, at 822 (1947)). If a broker was the efficient, proximate, and procuring cause of the sale of real estate listed with him, he was entitled to his commission even though the transaction was handled and closed by another broker. Bowser v. Sandige, 74 Ariz. 397, 401, 250 P.2d 589, 591 (1952) (citing Fink v. Williamson, 62 Ariz. 379, 383, 158 P.2d 159, 161 (1945)). The court has also defined “procuring cause” with the terms: “One who is the immediate and efficient cause of the sale.” Fink, 62 Ariz. at 383, 158 P.2d at 161. Importantly, whether a broker is the procuring cause of a sale of property listed with him or her is, usually a question of fact. Clark v. Ellsworth, 66 Ariz. 119, 122, 184 P.2d 821, 822 (1947). Three apparent factors in the factual analysis are:
Per statute, listing agreements must have a definite duration, including a definite expiration date. So, what happens if due to the broker’s marketing efforts, a buyer brings a full price offer to the seller just days or weeks after the listing expires? To protect brokers in this instance, most listing agreements have what is known as a “broker protection clause,” also known as an “extension clause” or “tail provision.” The broker protection clause provides that if the owner contracts to sell the property with a buyer who was procured by the broker within a specified period of time after the expiration of the listing (such as 90 days), then the full commission is owed. This prevents the unjust situation where due to the broker’s marketing efforts, a buyer contracts to purchase the property after the listing expires, and the broker receives no compensation for his or her services. The broker protection clause, however, creates a potential economic problem for the seller who immediately enters into a new listing agreement with a second broker. In that case, the seller may expose him or herself to payment of two commissions. To prevent this problem, most listing agreements provide the following important exception to payment of commission to the original broker: “unless the seller lists the property on an exclusive basis with another broker.” Thus, per the above exception, if the seller enters into a new listing agreement with another broker, even if the seller contracts to sell the property to a buyer who was procured by the original broker, the seller will only owe a commission to the new broker and will have an affirmative defense to any claim for a commission brought by the original broker. In the above situation, the original broker is not without remedy. As long as the original broker can show that he or she was the procuring cause of the buyer, then the original broker should have a claim for the co-broke commission offered by the new listing broker in the Multiple Listing Service (MLS). And per the MLS Clear Cooperation Policy, “Within one business day of marketing a property to the public, the listing broker must submit the listing to the MLS for cooperation with other MLS participants.” See https://www.nar.realtor/about-nar/policies/mls-clear-cooperation-policy. As a result, the original listing broker should be protected from forfeiting their commission even after the expiration of the listing agreement, as long as they can demonstrate that they were the procuring cause of the closing. To avoid any confusion and to protect imperfect memories, at the conclusion of every listing term, the broker should provide the seller with a written list of all buyers whom the broker delivered to the seller during the listing term. And the broker should request in writing that the seller provide this list to any future brokers they decide to hire. If you or anyone you know have questions concerning real estate listing agreements or commission issues, contact Mr. Charles at Provident Law. Our real estate attorneys represent parties on either side of real estate and financing transactions, including buyers, sellers, landlords, tenants, lenders, borrowers, trustees, guarantors, shareholders, partners, and others. We advise, structure, negotiate, and document a variety of real estate and financing transactions, including leases, purchase and sale agreements, financing agreements, and development agreements for a variety of commercial and residential projects. Contact us today and learn how we can help. Christopher J. Charles is the founder and Managing Partner of Provident Law®. He is a State Bar Certified Real Estate Specialist and a former “Broker Hotline Attorney” for the Arizona Association of REALTORS® (the “AAR”). Mr. Charles holds the AV® Preeminent Rating by the Martindale-Hubbell Peer Review Ratings system which connotes the highest possible rating in both legal ability and ethical standards. He serves as an Arbitrator and Mediator for the AAR regarding real estate disputes; and he served on the State Bar of Arizona’s Civil Jury Instructions Committee where he helped draft the Agency Instructions and the Residential Landlord/Tenant Eviction Jury Instructions. Christopher teaches continuing education classes at the Arizona School of Real Estate and Business. He can be reached at or at 480-388-3343. Listing agreements are employment contracts between the sellers of real estate and real estate brokers for the professional services of the broker. The listing agreement creates an agency and fiduciary relationship between the seller and the broker, with the seller being the principal and the broker as his agent. The broker usually has salespeople working for her to provide the services, consisting mainly of finding buyers for the property. However, the salespeople work for the broker and not the seller. Only the broker represents the seller. Most states require that listing agreements be in writing and are usually based on standardized forms. Types of Listing AgreementsThere are several types of listing agreements that vary according to the exclusivity of the agreement. The exclusive-right-to-sell listing allows only the broker and her agents to represent the seller. With this listing, the broker is entitled to a commission even if the seller sells his property on his own without using the services of the broker. Because the broker is more certain of payment with this type of agreement, she will generally work harder in representing the principal. In an exclusive-agency listing, only 1 broker has the right to represent the seller, but the seller has the right to sell his property without the broker and without paying a commission. There is no exclusivity to an open listing — any number of brokers or agents can represent the seller. The commission is paid to whomever finds a buyer for the property. If the seller sells it on his own, then he does not have to pay a commission. The listing agreement may have a multiple listing clause, which allows the broker to list the property on the Multiple Listing Service (MLS), which is both an association of brokers and a database of real estate properties provided by the brokers participating in the multiple listing service. Only properties that a broker has an exclusive right to sell or is the exclusive agent can be listed on the MLS. All brokers have the right to sell any property on the MLS regardless of who listed it. The listing broker is the broker who signed an exclusive-right-to-sell or an exclusive-agency listing, whereas the selling broker is the broker who finds a buyer for the property. Brokers who belong to the Multiple Listing Service agree to split the commission between the listing and selling broker. Brokers who are members of the MLS must list any newly acquired properties in the MLS within a specific time, typically 5 days. Brokers also use the MLS database to do a competitive market analysis as a means to determine the best price range to offer the property. There are 2 other forms of listings that, due to potential conflicts of interest, are illegal in many states or that are generally frowned upon — the net listing and the option listing. A net listing specifies that the seller will receive a predetermined amount of money from the sale of the property with the rest going to the broker. The broker can offer the property for any amount above the net going to the seller. However, because the broker often suggests the selling price to the seller, this can create a conflict of interest, since the broker will be motivated to get the seller to accept a lower selling price so that his own profit can be maximized. An option listing gives the broker the right, but not the obligation, to purchase the property within a specified time, after which the option expires. Since this, like a net listing, creates a conflict of interest, the broker must get the seller's consent in writing for the option, and must tell the seller his profit. Termination of Listing AgreementsAs contracts, listing agreements can be terminated in the same way that any contract can be terminated:
Common breaches of contract include abandonment, when the listing broker does little to try to sell the property, or the seller does not go through with the sale when a buyer is found who is willing to pay the asking price. Almost all listing agreements have expiration dates, when the agreement is terminated if there is no sale by then. If the broker offers a contract without an expiration date, in most states, the broker's real estate license can be suspended or revoked. Some contracts have automatic extension clauses, that automatically extends the listing period by a specified amount, such as 30 days, as long as there is no sale. Automatic extension clauses create a contract with no real expiration date, and are not in the seller's best interest, since the broker is not motivated to sell the property within a reasonable time. Hence, in many states, extension clauses are illegal, and most standardized real estate forms do not have the clauses. Listing contracts may also have a broker protection clause, which entitles the broker to a commission if the property is sold to a buyer who was introduced by the broker within a specified time after the listing agreement expired. The time period for broker protection clauses is frequently the same length as the time period for the listing agreement. The Listing ContractBesides specifying the seller-agent relationship, and the duties of both, the listing contract will have details of the property itself. One of the most important details of the property is the listing price, which is set by the seller, often based on the advice of the broker. There are 2 main methods of setting a listing price: a competitive market analysis and a formal appraisal. A competitive market analysis determines the price range of a property by comparing the property to recently sold properties of the same type of construction, location, and other factors. A formal appraisal uses a professional real estate appraiser to determine the market value of the property, which is the probable price that a buyer, in an arm's-length transaction, would pay. A formal appraisal is often required when the property is unique, making it difficult to find comparable properties that were sold recently. While the seller is not restricted to any price determined by a competitive market analysis or even a formal appraisal, the broker will have little interest in trying to sell a property with a price significantly higher. A price set too high will be difficult or impossible to sell before the listing agreement expires, and brokers, like most people, don't want to work for nothing. The listing agreement specifies in detail what the broker is authorized to do to sell the property. This includes:
The listing contract will also have:
The listing agreement will also have tentative dates for the closing and the buyer's possession, as well as the details of the closing, such as the title and escrow company that will be used for the closing, and which party will handle specific aspects of the closing, such as completing the settlement documents, filing the required forms, and disbursing the funds. The listing agreement will also have certain warranties by the owner, such as that the real estate will be in the same condition when sold as when it was presented; that specified repairs or alterations were made, and that the real estate complies with zoning and building codes. Buyer Agency AgreementsA buyer agency agreement is — like a listing agreement — an employment contract, but the broker represents the buyer — the principal — as his agent and fiduciary. Either the buyer or the seller may pay the buyer's agent when the buyer buys property. The fee can be a flat fee, an hourly rate, or a commission equal to a percentage of the purchase price of the property. Frequently, the buyer's agent and the listing broker split the commission. However, the agent may want a retainer to compensate for expenses when the agreement is signed. Before signing the buyer agreement, the buyer's agent should explain the options available to the buyer, and the agent must get detailed financial information about the buyer and the type of property that he is looking for. The method and amount of the compensation will also be negotiated. There are 3 types of buyer agreements that mirror the 3 types of listing agreements that define the exclusivity of the agreement:
Most people begin looking for a house in early spring, so naturally, there will be more competition for available houses and potentially more offers for houses listed in the spring. When buyers see more competition, they become more competitive — and faster — in their offers. So it is only natural that studies, such as this study by Zillow, find that the best time to list is in the early spring. Not only do houses sell for higher prices, but they also sell faster. Additionally, most people will view a listing when it is first listed, so it is usually better to list right before the start of the weekend, when many people have the time to check houses. Pocket ListingsPocket listings are private listings of real estate for sale that are not advertised or recorded in public networks like the Multiple Listing Service. These listings have proliferated during the Covid-19 pandemic and remain common. Pocket listings are also a way to evaluate prices before listing it publicly. Many of these properties are listed as “coming soon”. Pocket deals occur when the seller tells a broker that a property is for sale but does not sign a listing contract. The broker will be paid a commission if they sell the property, but there are no online listings, open houses, or advertising of property. The seller prefers to be paid in cash to close the deal quickly. Sellers choose pocket deals to avoid lowball offers, to avoid having to keep the home constantly for show, to avoid buyers who do not have ready financing, and to avoid any embarrassment if the property fails to sell or if it takes a long time to sell. Buyers looking for multimillion dollar homes are more likely to use pocket deals, since many expensive properties are not listed in public databases. However, buyers may pay a higher price since the seller can easily set a price higher than market value. Real estate agents like pocket deals because they do not have to split the commission. Brokers use WhatsApp, Discord and Telegram apps to privately share listings. Although the National Association of Realtors prohibits this practice for its members, violations are only subject to small fines. Pocket deals make it easier to violate fair housing laws, such as discriminating against minorities. Many brokerages now offer buyers online access to pocket listings. Some companies specialize in pocket listings.
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What type of clause allows a broker to collect a commission for some of time after the listing expires?
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