Re: Listing Agreement Cancellation - Posted by Tim Fierro (Tacoma, WA)
Posted by Tim Fierro (Tacoma, WA) on January 04, 2003 at 20:56:30:
Asked and answered many times in varying forms of discussions, now we have a search subject to send folks to; Listing Agreement Cancellation.
‘Most’ listings are exclusive which means the ‘broker’ will have earned the commission no matter who brings in the buyer for the time limit of the agreement.
In ‘most’ agreements, there is also a time period of after the listing agreement that remains in effect so that if any buyer that found out about the property through the previous labor of the ‘broker’, the ‘broker’ is still due the commission.
In my state, and possibly others, brokers are the only ones who can accept payment for services. Each agent however can work out a payment structure with a broker for a cut of all earned commissions. I just wanted to point out that the broker is the one who gets to receive the money, and the broker will have to pay the agent.
A seller is obligated under the terms of the agreement they sign. If they look at all their options and choose to sign a contract with an agent, then they are bound by those terms. If they later call a bandit sign or in some way decide to continue their search for a buyer and find one, they may still be bound by the agreement already signed when it is an exclusive listing agreement.
Definitive answer? Yes, it is written in the agreement for what is due. You are also correct that with an existing agreement, there is no formal obligation on the part of the agent (really ‘broker’) to cancel the agreement. Not only would the agent need the request of the client (seller), but then also the approval of the broker, who really is the one in charge of the listing and the one who will not get paid from one of his/her agents work in procurring the listing.
Yes, “in some cases”, a listing may be cancelled by a broker without charging a fee. These ‘cases’ are all independent of each other. Some brokers may not care, some may not negotiate well, some brokers rely on the statements of their agents and the agent is not knowing the whole picture, etc… etc… There are many different scenarios for which a cancellation could happen, and you mention one of a listing period that has almost ran it’s course.
Oh yeah, then you mention about a contract signed just a week ago. Another one of those ‘cases’/scenarios that has to be dealt with. Will the broker release the listing? This is where it is up to the seller to deal with his agent who will deal with the broker. It is their agreement, not yours. Should the seller worry, sure. The seller has signed an agreement to pay and now has decided he might get away without having to pay, found a better deal either in terms and or timing, or any of a dozen reasons to cancel. It is a touchy subject and a wise agent will want to know why a seller would want to cancel after only 1 week. Even if the agent doesn’t dig deeper into the situation, the broker should have the smarts to find out what is going on.
You have to be careful in your discussions with the seller as you don’t want to be interfering with the seller and the broker’s right to the listing. I can’t remember the term right now, but your interference to the earnings of the broker has consequences. That is why you want to be careful.
Ed, if you are reading this, what is the term above that I am thinking of? Also, can you give a broker’s view on the info below as I am sketchy on how far an investor can go without interfering.
With that said, it is not unheard of to discuss the situation with the seller and his/her agent. This is a part that I disagree with from what John has said. He suggests going to the broker, where I suggest talking to the agent instead. The agent took the listing and knows the situation up to the point where you come into the picture. While I doubt any competent agent (or broker) would willingly let a new listing go, it is possible. So the way I would suggest is talking to the seller and their agent.
Assuming you have come to terms on a deal, and the listing agreement is the only thing in the middle, then sit down with the seller and the agent and ‘negotiate’. You have to first go in with seeing if a cancellation can happen; you move up from there with your comfort level. You may be ok with giving an agent $500, $1000, $2000, or whatever. You also might want to look at profit margin should the agent get 1/2 of the commission due since a split won’t be necessary. All negotiating skills at this point. Everything worked out here is still contingent upon approval of the broker to release the listing upon whatever conclusion you come to in negotiating.
Now this is still a fine line here, I am using your situation as an example only that the seller called you from one of your signs and sought you out. You come to terms about the deal and you as the problem solver now have the seller’s concern over a listing fee. If you can work something out without interfering, then great. The above 2 paragraphs would sit ok with me, as an agent, and I would be fine negotiating; but I don’t know at what point the line can be crossed by the investor, if any, that would be considered interfering on the rights of the broker. I really can’t think of that term now and how it is applied.
You are trying to “express” that you have an offer on the table and that it may not work because of any listing agreement that may be in place, but that is what you can offer. Only you can assess whether or not the topic of settling/negotiating will work. I really can’t put into words this situation without it looking like interfering, yet only approaching the subject to offer the solution.
So without getting the wrath of Ed, small pun; let me give you an example of what I have done. I am an agent, but Ed is a broker, so what I have done is from an agent’s perspective. I also don’t have a broker who does splits, I have overhead and keep 100% of earned commissions.
Had a seller where no deal was there to my liking, so I took a listing instead. A seller’s concern was what happens if we need to get out of the listing. I said we can usually work something out. A month goes by and this seller is having major financial problems and they mention a brother would take over the house. I said fine and negotiated a deal for me to get $2100 for my trouble. I negotiated as an agent, and then because of state law, have to get the broker’s ok even though I am working 100% on my own. Remember, the broker is the one responsible for the listing and I am working on his behalf in the field as a licensed agent. The only reason I can negotiate is that is the setup I have with this broker. It could very well turn out that another agent maybe working 50% splits for a broker will have no say so in negotiating some form of settlement, or release of a listing.
But notice it is not the same as one from an investor’s view and getting in the middle of things. That is why I am trying to convey the relationship of the agent/seller and that you can’t get in the middle, but can judge the agent on what can be done. If I didn’t have a license, I would probably follow closely to the above to get a feel for the situation before I could tell if I can get involved.
Yes, this is long, but I wanted to use the opportunity to write down everything that was crossing my mind as I read the subject. I knew that we could in the future refer people to the archives and they will get this thread of a lawyer, a broker, an agent, and an investor; all sounding off on the subject.